Court File and Parties

COURT FILE NO.: 10-48988 DATE: 2016/05/09

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Hussein Mroue and Imad Mroue Plaintiffs – and – Issam Mroue Defendant

COUNSEL: Ernest G. Tannis, for the Plaintiffs, Responding Parties John MacDonell and Christopher S. Spiteri, for the Defendant, Moving Party

HEARD: March 29, 2016

REASONS FOR JUDGMENT

C. MCKINNON J.

1The question to be resolved in this case is whether legal proceedings conducted before an arbitrator schooled in Sharia Law and conducted in the City of Qom, Iran, finally disposed of the monetary issues between the parties and cannot be the subject of further litigation in the province of Ontario.

2The legal proceedings in Ontario have been described as “torturous” and been pursued for 6 years. By direction of Case Management Master MacLeod, this dispute was to be disposed of by a mini-trial consisting of affidavits, cross-examinations thereon, and submissions. The affidavits, exhibits and cross-examinations fill a banker’s box of material.

3Notwithstanding the bulk of material generated in Ontario, the issue to be resolved is not complex, namely whether the purported arbitration conducted by the arbitrator constitutes a binding decision on the parties.

Background

4The Plaintiff Hussein Mroue and the Defendant Issam Mroue are brothers. The Plaintiff Imad Mroue is the son of Hussein Mroue. Hussein Mroue lives in Abidjan, Ivory Coast and conducts business in the Ivory Coast and in Lebanon with a number of his siblings and relatives. The defendant, Issam Mroue, has at various times lived in Lebanon and in Abidjan, Ivory Coast and conducted business in those parts. At the present time, he lives in the City of Ottawa. His nephew Imad, Hussein’s son, lives and works in the City of Ottawa.

5Hussein and Issam jointly owned land in Lebanon and agreed to sell it. On January 20th, 2010, the property was sold for $900,000 USD. The sale price was agreed between Hussein and Issam. All documents were executed in Lebanon in accordance with the laws of Lebanon. Hussein granted a power of attorney to Issam so that he could conclude the sale of the property.

6The proceeds of sale were disbursed by Issam Mroue as follows:

1. Hussein Mroue: $102,201
2. Hassan Mroue: $113,908
3. Youseff Safiddine: $95,375
4. Issam Mroue: $564,204
5. Commission and Expenses: $24,222

Total: $900,000

7Hassan Mroue and Issam Mroue, together with Yousseff Safiddine, who is married to a sister of Hussein and Issam, were shareholders of a related family-owned company and involved in various business ventures with Hussein Mroue, both jointly and separately, in Lebanon and Ivory Coast. The distribution of the proceeds of the sale addressed outstanding moneys owed to them by Hussein in their family-owned business.

8Hussein objected to the manner of distribution of the sale proceeds, maintaining that they should have been divided equally between himself and Issam because they were joint owners of the property and the family-owned business was separate and apart.

9After Issam made the distribution, Hussein objected and demanded one half of the sale proceeds. Issam refused to comply.

10A series of discussions ensued between Hussein, Issam and certain members of the Mroue family in order to resolve the disagreement. Hussein was anxious to have the matter resolved by way of a binding process. He retained Mr. Tannis in order to have him negotiate an arbitration agreement with his brother Issam. Issam retained Mr. Spiteri. Mr. Tannis and Mr. Spiteri began exchanging emails with respect to a proposed arbitration agreement. The final email between Mr. Tannis and Mr. Spiteri is dated April 21st, 2010, and states that the parties “are getting close to an acceptable process…” An agreement was never finalized.

11Based upon the affidavit evidence and cross-examinations, it is clear that both Hussein and Issam became convinced that it would be preferable to have their dispute resolved under Sharia Law because they were brothers and believed that resort to the civil law courts would bring shame on the family. With the assistance of members of their family, and in particular their sister Layla, an arbitrator was chosen. The arbitrator was a learned scholar and Imam, Sayed Mohamed Mohsen El Husseini, of the City of Qom, Iran. This Shia scholar was known to the family. Sheik Yeyah, a brother of Hussein and Issam, had studied with him. Imad Mroue, Hussein’s son, had asked him for advice on a number of occasions. I find as a fact that this scholar was acceptable to both parties as being an appropriate person to arbitrate their dispute in accordance with Shia Sharia Law.

12The written submissions were conveyed to the arbitrator by Layla Mroue. Although in his affidavit Issam deposed that he had made oral submissions to the Imam in Lebanon, it is clear from his cross-examination that his oral submissions were made to his sister Layla who reduced them to writing and submitted them to the arbitrator in Iran. It is further clear from the cross-examination of Imad Mroue, Hussein’s son, that Hussein’s written submissions set out his position correctly.

13The submissions of Hussein and Issam Mroue were made on May 17th and 18th, 2010, respectively. The judgment of the arbitrator was issued on May 29th, 2010. The judgment reveals that a specific question was considered, phrased as follows:

Is it allowed for one party to seize the share of his partner’s money from the sale of a piece of land that was jointly owned by the two of them, and use that money, because he believes that the second party is taking control of his funds and the funds of other partners in a different business that belongs to the two parties together with other partners? (Translation from Arabic)

14Hussein Mroue’s position is clearly stated, namely that Issam Mroue had no right to seize the money and pay off the debts owing to him and other partners involved in the family-owned business. Issam Mroue’s position is also clear, namely that Hussein defaulted on his obligations to his partners in their family-owned business and that the right of set-off should prevail with respect to Hussein Mroue’s share of the proceeds. He submitted that when the family-owned business merged with another venture he chose to sell his share in the company. The new company agreed to pay the purchase price through a series of instalments over time; Hussein Mroue was the managing director of the newly-created company and although he acknowledged the debt owed to Issam, he failed to authorize payment of the debt, as a result of which Issam was not paid for his share. The payment of $348,000 to Issam Mroue was in satisfaction of the debt owed by the new joint-venture company to him, including Hussein Mroue’s share of the costs involved in selling the property in Lebanon.

15The learned arbitrator determined, in a very brief decision, that:

The person responsible for paying off the debt is the one in control of the company, not the other partners. If the majority of partners are of the opinion that the company director has been negligent and that he failed to carry out his duties and delivering the dues to the shareholders, then it is legal, according to the Sharia, to collect this amount from the director’s moneys, using all possible means. I consider Sheikh Yeyah as my representative with regards to determining the losses and damages, and his decision for settling this dispute shall be final and legally binding, as he will consult with the experts. Sheikh Yeyah is the only one with the authority to interpret this letter, and his decision is binding, and shall not be contradicted or disobeyed by anyone. (Translation from Arabic)

16Essentially, the judgment confirmed the propriety of the distribution of the proceeds of sale made by Issam.

17On May 31st, 2010 Sheikh Yeyah reported to the parties that he was in the process of investigating the position of the partners in the business regarding the failure of Hussein in his management of their jointly owned company and his failure to pay debts owing.

18On June 22nd, 2010, Sheikh Yeyah reported that he had consulted with experts and that the experts and opinions were varied, some setting damages as high as 30%, but all agreeing that damages should not be less than 10%. In his written submissions to the learned arbitrator, Issam had asked for damages in the amount of 50%. Sheikh Yeyah decided that damages would be set at the lowest scale, in the amount of 10%, and that all the affected partners would be beneficiaries according to their shares, in addition to the 10% in damages.

19There is no evidence before me as to what these “damages” related to, but the issue of the distribution of the funds in the amounts calculated by Issam, and the “damages” set by Sheikh Yeyah are not raised as issues in the Ontario Statement of Claim. Furthermore, the issue of entitlement to damages was raised in the submissions made by Issam Mroue to the arbitrator and was thus a live issue for determination in the arbitration.

20The judgment was conveyed to Hussein Mroue by his sister Layla.

21Unhappy with the judgment, Hussein Mroue launched the present proceedings in Ontario, demanding that one half of the proceeds of sale of the land be paid to him. Joining him in his lawsuit against his brother Issam is his son Imad, claiming the same one half of the proceeds.

22I have concluded that Hussein Mroue’s son Imad never had any interest in the land. He testified that his father had promised to pay him certain moneys as a gift once he had obtained his half of the sale proceeds. In addition, Imad, who had previously enjoyed a happy relationship with his uncle Issam, had financed Issam’s trip to Lebanon in the amount of $20,000 in order to close the agreement of purchase and sale of the land in Lebanon. That amount was repaid to him, with interest, by his uncle Issam. With respect to the distribution of the proceeds of sale, it is clear that Imad has no standing to challenge the distribution.

23Hussein Mroue takes the position that at all times he believed the submission of the question to the learned arbitrator in Iran was merely to seek an “advisory opinion” and never to obtain a binding award. However, the documentation placed before the arbitrator clearly indicates that Hussein meant to be bound by the judgment. Specifically, Hussein acknowledged that it is his signature that appears on the original documents. Following his signature are the words “who accepts the Sharia based judgment”. He does not dispute the English translation of the documents. His son Imad testified that the submission of his father was correctly set out in the written material.

24The documents admitted to be signed by Hussein Mroue clearly and unambiguously establish that he sought out a process whereby his dispute with his brother would be determined according to Sharia Law and that he was prepared to accept the judgment of the arbitrator as being binding upon him.

25One must ask whether, had the decision of the learned arbitrator been in his favour, Hussein Mroue would now insist that it was simply an “advisory opinion”.

Legal Considerations

26Following the judgment of the arbitrator, Hussein Mroue and his son Imad Mroue issued a Statement of Claim in the Ontario Superior Court of Justice against Issam Mroue demanding one half of the proceeds of the sale of the jointly owned property in Lebanon. That Statement of Claim gave rise to the “torturous” proceedings culminating in the “mini-trial” before me.

27Previously, summary judgment was sought by the defendants, which failed. Security for costs was ordered to be paid by the Plaintiff Imad Mroue, which remains unpaid because his Ottawa dwelling is mortgaged to the limit. There have been numerous motions brought, appearances before Masters, orders made, motions to compel answers arising out of cross-examinations on affidavits, re-attendances in order to answer questions: put simply, a significant amount of litigation arising out of the decision of the arbitrator with respect to the distribution of the proceeds of sale.

28The moving party, Issam Mroue, asks the Court to declare that the doctrine of res judicata be applied to recognize the decision of the arbitrator as being final and binding on the parties, stopping them from re-litigating the issues before him.

29The purpose of res judicata, or issue estoppel, is to put an end to litigation and ensure that no party be subject to a multiplicity of proceedings for the same cause. The doctrine of issue estoppel prevents a party from raising an issue that has already been decided in a previous proceeding. Issue estoppel exists to protect the finality of adversarial litigation and to bar a defendant from effectively being exposed to civil double jeopardy: Penner v. Niagara (Regional Police Services Board), 2013 SCC 19, [2013] 2 S.C.R. 125, at para. 88.

30The Supreme Court of Canada has established a two step analysis for issue estoppel. First, the preconditions to the operation of issue estoppel must be established. Secondly, if successful, the court must determine whether the issue estoppel ought to be applied: a residual discretion not to apply issue estoppel exists in any individual case: Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, at para. 33.

31There are three preconditions to the operation of issue estoppel:

1. whether the same question has been decided;
2. whether the judicial decision which is said to create the estoppel is final;
3. whether the parties to the decision or their privies were the same in both proceedings. (Penner, at para. 92)

The same question has been decided

32If a material fact has been found by a decision maker of competent jurisdiction through evidence or admissions, a party cannot re-litigate the same issue in further proceedings between the same parties. This estoppel applies to questions of fact, law or mixed questions of facts and law: Danyluk, at para. 44.

33As earlier noted, both parties made submissions to the arbitrator with respect to a specific question:

Is it allowed for one party to seize the share of his partners money from the sale of a piece of land that was jointly owned by the two of them, and use that money, because he believes that the second party is taking control of his funds and the funds of other partners in a different business that belongs to the two parties together with other partners?

34With respect to this question, Hussein Mroue made submissions that there was no such right and that he was entitled to one half of the proceeds of the sale and that his brother Issam was wrong in applying a portion of his share to pay off debts owed in relation to the family-owned company.

35For his part, Issam made submissions that he should have the right to set off a portion of his brother Hussein’s share in order to satisfy the debts owing by Hussein to the partners in the family-owned company. It was submitted that it would be unfair for the partners who had not created the debt to be responsible for the payment of it.

36The arbitrator determined that Hussein Mroue was responsible for paying off the debt as he was the one in control of the company when the debt was incurred.

37The judgment of the Sharia court made on May 17th, 2010, by Sayed Mohamed Mohsen El Husseini dealt with the exact same issues and facts that are the subject matter of the action brought in the Ontario Court, namely the appropriate distribution of sale proceeds of the property in Lebanon jointly owned by Hussein and Issam Mroue.

A Judicial Decision

38A judicial decision is one where the decision maker is of competent jurisdiction. It has been held in Canada that a court of competent jurisdiction is one having jurisdiction over the parties in question, over the subject matter, and having the authority to make the decision which is asked of it by one or more parties: R. v. Morgentaler, Smoling and Scott (1984), 48 O.R. (2d) 519 (CA), at para. 15.

39Courts in Canada recognize foreign courts of competent jurisdiction. In Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077, the Supreme Court of Canada held at para. 29:

… This, it was thought, was in conformity with the requirements of comity, the informing principle of private international law, which has been stated to be the deference and respect due by other states to the actions of a state legitimately taken within its territory. Since the state where the judgment was given had power over the litigants, the judgments of its Courts should be respected.

40The expert evidence tendered in this case establishes that Sharia Law prescribes certain conditions for arbitrations to have legal and binding authority. First, the parties involved in the dispute must agree to proceed by way of arbitration. Second, the chosen arbitrator must be qualified. Third, the subject dispute must fall within the jurisdiction of what may be resolved by way of arbitration. While there are variances between schools of Islamic laws as to the scope of an arbitrator’s jurisdiction, these schools of law are all unanimous in confirming that an arbitrator who is a learned and respected cleric has jurisdiction to rule on property disputes deriving from payment of money. The arbitrator must have sufficient substantive knowledge of the law which is applicable to the subject dispute and he must be neutral. Fourth, the parties must agree on the common question to be put to the arbitrator.

41If these conditions are fulfilled, any judgment rendered by the arbitrator is valid, binding and legal. In Sharia Law, the “Marj,i” who is the supreme authority, as well as any delegate representing him or acting on his behalf, can make decisions on a dispute. Other types of scholars, other than a Marj,i or his delegate can also make a ruling on a dispute if the parties agree to an individual.

42In this case, I find that all four conditions for a valid and binding ruling have been met. First, the parties agreed to proceed by way of arbitration and agreed to be bound by the arbitrator’s judgment. Second, I find that the arbitrator, Sayed Mohamed Mohsen El Husseini was possessed of the necessary qualifications to rule on the subject matter as he was a “learned cleric from a recognized centre of religious scholarship within the Twelver Shia Religious Community”. Third, as a respected and learned cleric, he was entitled to rule on matters involving the payment of money. Fourth, a common question was put before the arbitrator.

43The expert of the moving party was eminently qualified to offer his opinion on the qualifications of the arbitrator and the legality of the arbitration itself. Mohammad Fadel, of the City of Toronto, graduated in 1995 from the University of Chicago’s Department of Near-Eastern Languages and Civilizations with a Ph.D. and from the University of Virginia School of Law in 1999 with a J.D. He has published numerous works and articles on Islamic Law and is currently the Canada Research Chair in the Law and Economics Department of Islamic Law at the University of Toronto’s Faculty of Law. A review of his opinion and his cross-examination convinces me that the arbitration conducted by the learned arbitrator in Iran fit all of the essential elements required for a valid arbitration in accordance with Sharia Law.

44Even the expert put forward by the responding parties, Sayed Nabil Hussein Abbas, confirmed that the name “Sayed” denotes a learned individual tracing his roots back to the Prophet Mohammed and having standing to rule on the dispute. He confirmed that any scholar other than the Supreme Authority, being the Marj,i or his delegate, may rule on a dispute and such ruling would be valid and binding provided that the parties agreed to have such a scholar rule on the dispute. He also agreed that a scholar’s ruling has the same status as the Marj,i or his own representative.

45With respect to the delegation of the calculation of damages to Sheikh Yeyah, Professor Fadel testified that Sheikh Yeyah was essentially engaged in fact finding on behalf of the arbitrator. To the extent that the parties consented to the appointment of the arbitrator they implicitly signified their trust in the arbitrator, which would permit delegation of fact finding. Conflict would only arise if the decision of the fact finder profited the fact finder. In this case, no funds were paid to Sheikh Yeyah and therefore he was not acting in a conflict of interest.

46The decision rendered by the arbitrator is a “judicial decision”. The Supreme Court of Canada, commenting on the issue of whether or not a decision is a judicial one within the doctrine of issue estoppel stated:

As long as the hearing process in the tribunal provides parties with an opportunity to know and meet the case against them, and so long as the decision is within the tribunal’s jurisdiction, then regardless of how closely the process mirrors a trial or its procedural antecedence, I see no principled basis for exempting issues adjudicated by tribunals from the operation of issue estoppel in a subsequent action: Danyluk, at para. 44.

47In this case, the parties had an opportunity to know and meet the case against them. They both had the opportunity to provide their submissions to the arbitrator. The arbitrator considered both submissions and made a decision. The arbitrator’s decision on a monetary dispute was within his scope of jurisdiction pursuant to Sharia Law.

48Although the arbitrator gave no reasons for his decision, and the decision would not meet the Canadian test requiring reasons (R. v. Sheppard, 2002 SCC 26, [2002] 1 S.C.R. 869, at para. 55), to impose such a requirement would offend the notion of comity. Moreover, neither expert commented on the reasons for the decision, nor were they asked any questions about that aspect of the decision. The parties sought a decision in accordance with Sharia Law and received one, and cannot now complain.

49I find on all the evidence that the judgment rendered by Sayed Mohamed Mohsen El Husseini on May 17th, 2010 was rendered by a decision maker of competent jurisdiction and has met the test annunciated by the Supreme Court of Canada in Penner.

The Decision is Final

50In his Judgment, Sayed Mohamed Mohsen El Husseini appointed a representative, Sheikh Yeyah, to quantify the losses and damages and indicated that Sheikh Yeyah’s decision is final and legally binding and that his decision “shall not be contradicted or disobeyed by anyone”. Foreign judgments are final if deemed final by the foreign court that rendered it, regardless of any right of appeal associated with the decision: Monteiro v. Toronto Dominion Bank (2006), 206 O.A.C. 281 (Div. Ct.), at para. 27.

51In this case, the language used by the arbitrator and the acknowledgement by the parties that they agreed to abide by the “Sharia based judgment” confirm the final nature of the judgment.

The parties to the judgment are the same in both proceedings

52The May 17th, 2010 judgment rendered by Sayed Mohamed Mohsen El Husseini involved both Hussein and Issam Mroue. Although the plaintiff Imad was not a party to the dispute ruled upon in Iran and is now a party to the action in Ontario, he has no connection to the dispute whatsoever. It seems clear that he was added to the statement of claim as a plaintiff in an attempt to create a jurisdictional connection to Ontario in order to allow Hussein Mroue to have a second hearing on the merits of his case. The connection of this dispute to Ontario is highly tenuous. The land is in Lebanon. The moving party lives in Ivory Coast. The corporate interests and partners are in Lebanon and Ivory Coast.

Should Estoppel Apply

53Notwithstanding these findings, a further step is required in the analysis of whether issue estoppel ought to be applied. As indicated in both Danyluk and Penner, the Court will exercise a limited residual discretion in deciding whether issue estoppel ought to be applied. In deciding that, the Supreme Court of Canada has indicated:

In exercising the discretion the court must ask – is there something in the circumstances of this case such that the usual operation of the doctrine of issue estoppel would work an injustice?... The discretion must respond to the realities of each case and not to abstract concerns that arise in virtually every case where the finding relied on to support the doctrine was made by a tribunal and not a court: Danyluk, at para. 64.

54In my opinion, there is nothing in the decision of the arbitrator that can be said to work an injustice. Hussein and Imad Mroue submit that Sheikh Yeyah was in a conflict of interest when he was appointed by the learned arbitrator to calculate the losses and damages. I disagree. To begin with, both Hussein and Issam Mroue were content with the selection of the arbitrator. They knew that their brother, Sheikh Yeyah, had been his student. He was not a recipient of any funds disbursed by Issam. He decided to set damages at 10%, which seems eminently fair, considering that Issam Mroue was seeking damages in the amount of 50%. I conclude that this alleged conflict is after the fact, and would never have been raised had Hussein Mroue been the successful party in the dispute.

55Although Hussein Mroue is now engaged in litigation with his brothers, including Sheikh Yeyah, in the Ivory Coast, this litigation arose after the arbitration in Iran. In my view, conflict of interest cannot operate retrospectively.

56In the result, I conclude that the cause of action brought in Ontario is subject to the doctrine of res judicata and that the dispute between the parties was finally dealt with in the decision of the learned arbitrator in Iran.

The International Commercial Arbitration Act

57Counsel for the responding parties submits that the arbitration award in this case is subject to the provisions of the International Commercial Arbitration Act, R.S.O. 1990, c. I.9 (ICAA), and in particular article 34 of the Act which provides for the setting aside of an arbitral award.

58I am unable to agree. Article 34(3) of the ICAA provides that:

An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the award or, if a request had been made under article 33, from the date on which that request had been disposed of by the arbitral tribunal.

59Simply put, the responding parties are out of time to challenge the arbitral award. The award in question was issued in May of 2010. The statement of claim brought by the responding parties was issued on July 26, 2010. There is nothing in the statement of claim that refers to the ICAA. It is simply a claim for one half of the net proceeds of the sale of the Lebanon property, punitive damages, aggravated damages and pre-judgment interest in accordance with the Courts of Justice Act and costs.

60As has been noted earlier in this decision, the parties never agreed to have their dispute dealt with by way of arbitration in Ontario. There were preliminary negotiations to that effect, which ultimately terminated without resolution.

61I find that even if the ICAA were to apply to the arbitral award in question, this would not be an appropriate case to set aside the arbitral award. An arbitral award will only be set aside in circumstances of “real unfairness and real practical injustice” flowing from the failure to conduct the proceedings in accordance with the proper procedure: Popack v. Lipszyc, 2016 ONCA 135, at para. 35.

62In Popack, a divorce arbitration was conducted by a New York Rabbinical Court. Without notice to either of the parties, the panel met ex parte with a Rabbi who has conducted a failed mediation session with the parties. There was no record kept of the ex parte meeting. The Ontario Court of Appeal held that notwithstanding the impropriety of holding the ex parte meeting with the Rabbi who conducted the failed mediation, it did not affect the reliability of the result or the fairness of the process.

63In the circumstances of the case at bar, were the provisions of the ICAA to be invoked, I would be inclined to find that any alleged improprieties in the procedures used by the arbitrator, in particular the appointment of Sheik Yeyah as the person to determine damages, did not result in unfairness.

Conclusion

64There shall be an order dismissing the statement of claim together with costs to the successful party.

65In the event the parties are unable to agree upon the issue of costs, they shall be entitled to make brief written submissions, not exceeding 10 pages in length, on a schedule agreed upon by counsel.