Court File and Parties
COURT FILE NO.: CV-12-1240 DATE: 20160922 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
MARY PALMIERI and ANTONIO PALMIERI a.k.a. TONY PALMIERI Applicants – and – GIUSEPPE ALAIMO Respondent
Counsel: Eric Gionet, for the Applicants Igor Ellyn, for the Respondent
HEARD: June 3, 2016
AND:
ONTARIO SUPERIOR COURT OF JUSTICE
BARRIE COURT FILE NO.: CV-13-0263
BETWEEN:
GIUSEPPE ALAIMO Applicant – and – MARY PALMIERI and TONY PALMIERI Respondents
Counsel: Igor Ellyn, for the Applicant Eric Gionet, for the Respondents
HEARD: June 3, 2016
VALLEE J.
[1] In my decision dated July 3, 2015, I concluded that Mr. Alaimo was bound by the arbitration agreement; however, the Award was deficient because it did not state the reasons on which it was based. I remitted the Award back to the arbitrator with directions. The Award, which the arbitrator amended on July 27, 2015 pursuant to my directions, has now been filed. I conclude that it complies with my directions and the requirements of the Arbitration Act, 1991, S.O 1991, c. 17.
[2] The application is before me again. The Award states that the value of the fair cost of designing and constructing the dwelling is $656,000. According to a letter from TD Canada Trust dated October 1, 2015, the amount of the mortgage as of September 1, 2011 is $398,490.68. The Palmieris request an order that Mr. Alaimo pay to them the difference being $257,509.32 plus costs fixed by the arbitrator in the amount of $5,232.15. Mr. Alaimo opposes this and states that a trial is required. The court ought to hear evidence from the parties regarding the agreement before the matter can be determined.
The Issue
[3] Is a trial required to determine whether Mr. Alaimo is required to pay $257,509.32 to the Palmieris pursuant to the arbitration agreement?
Applicable Legal Principles
[4] Section 50 of the Arbitration Act states that the court shall grant judgment to enforce an award.
[5] Rule 1.04 of the Rules of Civil Procedure states “These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.”
[6] Rule 14.05(3)(d) provides that proceedings may be brought by application where the relief claimed is the determination of rights that depend on the interpretation of a contract.
[7] Where there is a significant conflict on material issues, the court may order a trial on these issues. (See Thunder Bay (City) v. Canadian National Railway, 2016 ONSC 469, par 54)
[8] In determining whether a matter should proceed by application or action, the court should consider whether or not the “forensic machinery of a trial” is required for a fair and just process. (See Niro v. Caruso, 2015 ONSC 7446, par 53)
[9] The court may be able to find the facts necessary to resolve a dispute and allow for a fair and just process by reviewing the materials filed, including transcripts. (See Blackberry Ltd. v. Marineau-Mes, 2014 ONSC 1790, par 2)
Mr. Alaimo’s Position
[10] Mr. Alaimo states that the Palmieris wish to enforce the Award but it does not provide for any payment mechanism. It states the value of the fair cost of designing and constructing the dwelling and requires that Mr. Alaimo pay only the arbitration costs, being $5,232.15, to the Palmieris. The Palmieris are attempting to obtain a “back door payment order.” The Palmieris should have referred to Rule 14.05(3)(d) in their notice of application (rather than simply Rule 14.05). Aside from the costs, the arbitration agreement does not require Mr. Alaimo to pay any money to the Palmieris. The Palmieris made their full case in 2015 and did not indicate that there would be an enforcement issue. The Palmieris are overstepping and requesting an order that was never contemplated.
[11] Mr. Alaimo states that Schedule A to the arbitration agreement sets out the jurisdiction of the arbitrator. He was only to value fair cost of designing and constructing the dwelling (the “value”). The arbitrator does not have the power to make a dispositive award regarding payment, nor did he make one. There is a significant difference between the court’s attempting to streamline the disposal of issues between parties in contrast to providing them with a hearing regarding entitlement.
[12] Mr. Alaimo questions the amount of the mortgage and how it should be determined. It may include amounts that are for the benefit of both parties. There must be an opportunity to consider what is included in it. There is a question of fraud. The mortgage amount may not be justified. This issue has to be considered.
[13] Mr. Alaimo states that there must be a determination of a contractual issue pursuant to the agreement. Evidence from the Palmieris is required. They did not swear any affidavits in these proceedings. Rather, Adam Wainstock, a lawyer from Mr. Drudi’s office, swore the affidavit in support of the Palmieris’ application. He stated that the information in his affidavit was based on personal knowledge; however, on cross-examination, he stated that he had not spoken with the Palmieris. The court should not condone this.
[14] Mr. Alaimo states that if he is required to pay $257,509.32, the result will be unintended and unconscionable. Certain issues existed prior to the date when the parties signed the arbitration agreement; however, they were not known at that time. Mr. Alaimo alleges that there was some fraudulent activity on the part of the Palmieris which has affected the amount of the mortgage. Viva voce evidence, in the context of an action, is required to determine whether the result is unconscionable. A contract cannot be enforced without evidence of the contract before the court. If a court were to enforce the Award, Mr. Alaimo would be precluded from being able to argue the other issues such as fraud. Mr. Alaimo relies on Srebot v. Srebot Farms Ltd., 2011 ONSC 4512, in which the court declined to enforce a settlement because the result was unconscionable.
Analysis
[15] The Palmieris did not make their full case in 2015. At that time, their counsel specifically stated that other issues remained to be determined.
[16] Mr. Alaimo is correct that in this matter, the arbitrator does not have the power to make a dispositive award regarding payment. This is because the parties agreed that his role was to determine the value. The parties had already agreed on a mathematical calculation to determine the amount owing by Mr. Alaimo based on the value.
[17] The Palmieris referred to Rule 14.05 in their notice of application. If they are entitled to have the Award enforced based on an interpretation of the contract, the fact that they failed to specifically refer to Rule 14.05(d) does not preclude this court from granting that relief. In the notice of application dated November 15, 2012, paragraphs 1(a) and (b), the Palmieris specifically request “an order enforcing the Arbitral Award…” and “an order that the Respondent pay to the Applicants $662,232.15 less the proper deduction.”
[18] While it may be argued that the recitals to an agreement do not form part of the agreement itself, in this matter the recitals set out how the parties agreed to resolve the dispute and the value that had to be determined. They agreed on a mathematical calculation to resolve the dispute. Recital B (3) states, “The principal amount of the mortgage… registered on the property, as of September 1, 2011 shall be deducted from the fair value of construction of the dwelling” and the “Respondent [Mr. Alaimo] will pay to the Claimant [the Palmieris] the difference between the two within 30 days from the Arbitral Award.” The only number that had to be determined was the value. They agreed on the arbitrator as a neutral party to determine the value.
[19] With respect to the mortgage, the recitals simply say that the principal amount owing on the mortgage as of September 1, 2011 shall be deducted from the fair cost of designing and constructing the dwelling. There is no indication that the parties agreed to revisit the amount of the mortgage and consider whether it was justified.
[20] Mr. Alaimo makes a vague allegation of fraud. Fraudulent conduct, if any, may not have been known when the arbitration agreement was signed; however, it is not pleaded. Mr. Alaimo’s application was issued in November, 2012. There is no basis for this court to consider allegations of fraud. Enforcement of the arbitration agreement does not necessarily deprive Mr. Alaimo of any cause of action he might have in that regard. Any allegations of fraud that were not known prior to Mr. Alaimo’s signing the agreement might be the subject of separate proceedings. I am not making any finding in this regard.
[21] Subsequent to the hearing of this application, Mr. Alaimo alleged that the Palmieris did not obtain the proper building permit to construct the dwelling. Even if the allegation is true, it is not before me. These types of allegations might be the subject of separate proceedings. I am also not making any finding in this regard.
[22] Mr. Alaimo states that if he is required to pay $257,509.32 the result will be unconscionable. He relies on Srebot. It can be distinguished from this matter because it concerned enforcement of a settlement. There is a significant difference between a settlement and a signed arbitration agreement. Furthermore, there is no evidence in these proceedings that if the agreement is enforced, the result will be unconscionable.
[23] Although this is not a motion for summary judgment, the test in Hyrniak v. Mauldin, 2014 SCC 7 provides guidance as to whether a trial is required. The Palmieris did not swear the affidavit in support of their application; however, their evidence is not required for this court to determine the contractual issue. Both parties had counsel when the arbitration agreement was drafted. Mr. Drudi, counsel for the Palmieris at that time, prepared the draft agreement. Mr. Rovazzi, counsel for Mr. Alaimo at that time, reviewed it and recommended it to his client. The parties signed it. Both counsel were cross-examined regarding the agreement.
[24] The affidavits, the cross-examination evidence and the terms of the agreement, are adequate for this court to make the necessary findings of fact and apply the law to them. Based on this evidence, the court can reach a fair and just determination of the contractual issue. I conclude that the “forensic machinery of a trial” is not required. A trial would not be the just, most expeditious and least expensive determination of this proceeding on its merits.
Conclusion
[25] For the reasons stated above, I conclude the following: (a) The Arbitral Award of Mel Yungblut dated September 13, 2012 as amended on July 27, 2015 is a proper arbitration award to which the Arbitration Act applies and is binding on Mr. Alaimo. (b) Mr. Alaimo shall pay to the Palmieris the sum of $257,509.32. This amount is determined by deducting the principal amount of the mortgage, as of September 1, 2011, being $398,490.68, from the value, being $656,000. (c) Mr. Alaimo shall pay the Palmieris the sum of $5,232.15 being the costs of the arbitration in accordance with the Amended Arbitral Award.
Costs
[26] If the parties cannot agree on the amount of costs for these proceedings or who should pay them, they may provide written submissions. The text of the submissions shall be a maximum of 5 pages, not including a bill of costs, with 1.5 spacing, regular margins and 12 point font. The Palmieris shall serve and file written submissions within 20 days of the date of this endorsement. Mr. Alaimo shall serve and file responding submissions within a further 10 days. The Palmieris may serve and file reply submissions, if they wish, within a further 10 days.