CITATION: 1552955 Ontario Inc. v. Lakeside Produce Inc., 2017 ONSC 4933

COURT FILE NO.: CV-15-23140

Lakeside Produce Inc. v. 1552955 Ontario Inc.

COURT FILE NO.: CV-16-23279

1552955 Ontario Inc. v. Lakeside Produce Inc.

COURT FILE NO.: CV-16-23483

DATE: 20170914

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

CV-15-23140

1552955 Ontario Inc. o/a JAG Worldwide Imports Inc.

Applicant

– and –

Lakeside Produce Inc.

Respondent

Lakeside Produce Inc.

Applicant

– and –

1552955 Ontario Inc. o/a JAG Worldwide Imports Inc.

Respondent

1552955 Ontario Inc. o/a JAG Worldwide Imports Inc.

Applicant

– and –

Lakeside Produce Inc.

Respondent

Kimberley Wolfe, for the Applicant

James Cooke, for the Respondent

CV-16-23279

James Cooke, for the Applicant

Kimberley Wolfe, for the Respondent

CV-16-23483

Kimberley Wolfe, for the Applicant

James Cooke, for the Respondent

HEARD: March 2, 2017

REASONS FOR JUDGMENT

Verbeem J.:

Overview

[1] In competing applications before the court, Lakeside Produce Inc. (“Lakeside”) seeks an order recognizing and enforcing an international commercial arbitral award of arbitrator Mr. Robert E. Goldman, dated November 30, 2015, and 1552955 Ontario Inc. o/a JAG Worldwide Imports Inc. (“JAG”) seeks an order setting it aside. The award obligates Lakeside to pay JAG the total amount of $45,516.95 USD for breach of a contract pursuant to which Lakeside agreed to purchase a substantial amount of fresh tomatoes from JAG, which were vine grown in Mexico, and destined for retail sale in the United States. The award is significantly less than the $998,700.73 USD amount JAG claims it was owed as a result of the breach.

[2] In disposing of the parties’ dispute, the arbitrator was required to determine the terms of the parties’ one year oral contract obligating JAG to supply tomatoes to Lakeside in the United States. Both JAG and Lakeside carried on business in Ontario and maintained their respective head offices in Leamington, Ontario. The tomatoes were to be delivered to Lakeside’s warehouse in Taylor, Michigan. From there Lakeside intended to distribute the tomatoes, as supplied, to various Walmart facilities for consumer sale. Owing to the parties’ conflicting evidence, the arbitrator had to determine, among other things, the grade (quality) of tomatoes that JAG was required to deliver in accordance with the contract and whether for the purpose of evaluating compliance with the contractual grading terms, the tomatoes were to be graded at Laredo, Texas, where they entered the United States, or at Lakeside’s warehouse in Taylor, Michigan.

[3] The parties were members of the Fruit and Vegetable Dispute Resolution Corporation (the “DRC”) and, as a result, they were required to arbitrate their dispute in accordance with the Operating Rules of the DRC. On a pre-hearing motion, the arbitrator accepted JAG’s position that the provisions of the International Commercial Arbitration Act, R.S.O. 1990, c. I.9 (ICAA) applied to the subject matter of the arbitration. In doing so, he rejected Lakeside’s position that the provisions of the Arbitration Act, 1991, S.O. 1991, c. 17, applied. An evidentiary hearing was held before Arbitrator Goldman on May 21, 2015 and the parties delivered written submissions thereafter. On November 30, 2015, the arbitrator released the award and his reasons for it. JAG then brought an application before the arbitrator for an “amendment, clarification and an additional award”, which was dismissed by the arbitrator for reasons dated December 23, 2015.

[4] For reasons that remain unclear, JAG then brought an application to this court seeking leave to appeal the award and an order setting it aside pursuant to the provisions of the Arbitration Act. In doing so, JAG expressly rejected Lakeside’s position that any review of the arbitral award by a domestic court in Ontario was limited to the grounds permitted by the ICAA and Model Law applicable to international commercial arbitrations. Although it did not expressly claim relief under the ICAA in its notice of application, in its oral submissions JAG now requests an order setting aside the arbitral award in accordance with the provisions of the ICAA and Article 34(2)(b)(ii) of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (Model Law), on the basis that it is in conflict with the public policy of Ontario.

[5] Through its adoption of the Model Law, the ICAA provides limited grounds for setting aside an award on application to a domestic court and further prescribes that such an application must be brought within three months of the parties’ receipt of the award. A domestic court does not have jurisdiction to extend that time period.

[6] Conceding that it did not expressly claim relief pursuant to the ICAA and Model Law in its notice of application, JAG submits that its residual pleaded claim in a basket clause for “such further and other relief” is sufficient to provide notice of its newly asserted claim under the ICAA.

[7] Lakeside resists JAG’s application for two reasons. First, it submits that JAG’s application is styled as an appeal and a request for leave to appeal or to set aside the award pursuant to the provisions of the Arbitration Act. JAG’s freshly asserted claim for relief pursuant the provisions of the ICAA amounts to an attempt to assert a new cause of action after the expiration of the applicable limitation period (three months after the parties’ receipt of the arbitral award). Second, there is no basis to set aside the arbitrator’s award pursuant to the provisions of the ICAA and Model Law and in particular, there is no reason to conclude that the arbitral award is in conflict with the public policy of Ontario. Therefore, Lakeside submits that its application to recognize and enforce the award, which has already been satisfied, should be granted.

[8] For the reasons set out below, I find that in all of the circumstances JAG is not in a position to advance a remedial claim pursuant to the ICAA and Model Law in the context of its application before this Court. I further find that in the event that JAG is entitled to claim such relief in the context of its application, there is no basis to set aside the arbitral award pursuant to Article 34(2)(b)(ii) of the Model Law and the ICAA. As a result, JAG’s application is dismissed and Lakeside’s application is allowed. I will explain.

(i) JAG’s Claim for Relief Pursuant to the ICAA and Model Law

(a) Nature and History of the Proceedings

[9] In order to evaluate JAG’s position that it is entitled to advance a remedial claim pursuant to the ICAA in the context of its application for relief under the Arbitration Act, some contextual background is necessary.

[10] The parties’ dispute over the arbitrator’s award resulted in three applications to this Court:

(a) Application numbered CV-15-3140, with JAG as the applicant and Lakeside as the respondent, commenced December 29, 2015, in which the applicant seeks to set aside the award and for leave to appeal the award on errors of law pursuant to ss. 45(1) and 46(1) of the Arbitration Act;

(b) Application numbered CV-16-23279, commenced February 3, 2016, with Lakeside as the applicant and JAG as the respondent, in which Lakeside seeks an order for enforcement of the arbitral award made on November 30, 2015 pursuant to Article 35(1) of the Model Law adopted by s. 2(1) of the ICAA and a declaration that the Lakeside has satisfied the terms of the award;

(c) Application numbered CV-16-23483 commenced March 29, 2016 with JAG as the applicant and Lakeside as the respondent, in which JAG sought an order pursuant to Article 34 of the Model Law setting aside the award. This application was never formally served on Lakeside and for reasons set out below, JAG has abandoned it.

[11] In the context of its original application (CV-15-13140), JAG asserts that the arbitrator erred in law when he determined that the subject matter of the arbitration was governed by the ICAA. However, during submissions, JAG’s counsel concedes that the arbitration was appropriately conducted pursuant to the provisions of the ICAA, as the arbitrator ruled on March 18, 2015. Unlike the Arbitration Act, the ICAA and Model Law do not provide for an appeal of an arbitrator’s award. At the application’s hearing, JAG conceded that it is not entitled to seek leave to appeal the award and it no longer does so. Instead, it now advances a remedial request to set aside the award pursuant to the provisions of the ICAA and Model Law.

[12] Conversely, in its application Lakeside seeks an order recognizing the award in accordance with the ICAA and Article 35 of the Model Law, the latter of which provides:

(1) An arbitral award, irrespective of the country in which it was made, shall be recognized as binding and, upon application in writing to the competent court, shall be enforced subject to the provisions of this article and of article 36.

(2) The party relying on an award or applying for its enforcement shall supply the duly authenticated original award or a duly certified copy thereof, and the original arbitration agreement referred to in article 7 or a duly certified copy thereof. If the award or agreement is not made in an official language of this State, the parties shall supply a duly certified translation thereof into such language.

[13] Article 36 of the Model Law specifies limited grounds for refusing recognition or enforcement of an arbitral award made pursuant to the Model Law, as follows:

(1) Recognition or enforcement of an arbitral award, irrespective of the country in which it was made, may be refused only:

(a) at the request of the party against whom it is invoked, if that party furnishes to the competent court where recognition or enforcement is sought proof that:

(i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made, or

(ii) the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case, or

(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced, or

(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place, or

(v) the award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, that award was made; or

(b) if the court finds that:

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or

(ii) the recognition or enforcement of the award would be contrary to the public policy of this State [which is defined as Ontario pursuant to s. 1(6) of the ICAA] [Emphasis added.]

(b) Limited Grounds To Set Aside An Award Pursuant To The [ICAA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-i9/latest/rso-1990-c-i9.html)/Model Law

[14] By its terms, the Model Law, which applies in Ontario pursuant to s. 2(1) of the ICAA, provide very limited grounds for court intervention with respect to matters governed by the Model Law. Specifically, Article 5 of the Model Law states:

In matters governed by this Law, no court shall intervene except where so provided in this Law.

[15] Article 34 provides that an application for setting aside an award is a party’s exclusive recourse against an arbitral award made pursuant to the Model Law. Article 34(1) states:

(1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this article.

[16] Article 34(2) specifies the grounds upon proof of which, a domestic court may set aside an award made pursuant to the Model Law. Those grounds effectively mirror the grounds for refusing recognition or enforcement of an award as set out in Article 36(1)(a) and (b) above. In its submissions, JAG specifically relies on Article 34(2)(b)(ii), which states:

An arbitral award may be set aside by the court specified in article 6 only if . . . the court finds that . . . the award is in conflict with the public policy of this State. [Emphasis added.]

(c) JAG’s Application To Set Aside The Award Pursuant To The [ICAA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-i9/latest/rso-1990-c-i9.html)/Model Law Is Not Timely

[17] A party seeking to set aside an award made pursuant to the ICAA/Model Law must do so in accordance with Article 34(3) which provides:

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 [for correction and interpretation of an award or an additional award], from the date on which that request had been disposed of by the arbitral tribunal. [Emphasis added.]

[18] The parties agree that the three-month period prescribed by Article 34(3) cannot be extended by court order.

[19] The arbitral award was made on November 30, 2015. JAG subsequently filed an application to “amend and clarify the arbitral decision”. The arbitrator disposed of that application through an “arbitration order denying claimant’s application” dated December 23, 2015, which was provided to the parties, through counsel, on that date. JAG concedes that it was required to bring an application to set aside the award pursuant to the ICAA and Model Law on or before March 23, 2016. It did not do so until March 29, 2016, when it issued its notice of application in CV-16-23483. JAG concedes that its application for express relief pursuant to the ICAA/Model Law was not commenced within the time prescribed by Article 34(3) of the Model Law. That does not end the matter.

(d) JAG Seeks Remedy Pursuant to the [ICAA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-i9/latest/rso-1990-c-i9.html)/Model Law in the Context of its Original Application

[20] JAG now contends that the scope of the relief it requested in its original application (CV-15-3140) ostensibly brought pursuant to the provisions of the Arbitration Act, is broad enough to encompass a claim to set aside the arbitral award pursuant to Article 34 of the Model Law, despite the absence of an express claim for that relief. JAG first advanced this position at the hearing of the applications. It did not provide advance notice to Lakeside of its intent to do so. Based on the history of the proceeding numbered CV-15-23140, which I will address below, Lakeside was surprised by JAG’s position.

[21] JAG’s original notice of application in CV-15-23140 claims the following relief:

a. An order pursuant to sections 45(1) and 46(1) of the Arbitration Act, S.O. 1991, c. 17 setting aside the awards of Mr. Robert E. Goldman arbitrator dated November 30, 2015, as a judgment of this court;

b. Costs of this application on a substantial indemnity scale together with HST; and

c. Such further and other relief as counsel may advise and this Honourable Court may permit. [Emphasis added.]

[22] Originally, the grounds for the application were stated as follows:

a. This matter arises out of a dispute between the Applicant (hereinafter “JAG”) and Lakeside Produce Inc. (hereinafter “Lakeside”) regarding an alleged breach of contract for the purchase of produce.

b. Sections 45 and 46 of the Arbitration Act, S.O. 1991, c. 17.

c. The factual grounds as set out in the affidavit of Gino Joseph DiMenna, sworn December 28, 2015.

d. Such further and other grounds as counsel may advise and this Honourable Court may permit. [Emphasis added.]

[23] Then, under the heading “Background” JAG pleads that on October 1, 2013 it entered into a contract with Lakeside for the purchase of tomatoes. The contract specified the tomatoes to be purchased by Lakeside would be “U.S. No. 1 in Laredo (10-5-2) [total damage/serious/very serious]” and good delivery standards upon delivery to Lakeside. On October 3, Lakeside e-mailed JAG a copy of Lakeside’s contract dated September 30, 2013, the terms of which did not materially differ from the previous JAG contract. The term of the contract was one year. The term “F.O.B. Laredo” was present and essential in all versions of the contract exchanged and accepted between the parties.

[24] Next, JAG alleged that Lakeside breached the terms of the contract and on November 4, 2014 JAG filed a claim against Lakeside. The parties are both members of the Fruit and Vegetable DRC and as such agree to arbitration pursuant to its Operating Rules.

[25] Under the heading “The Arbitration” JAG alleged that on May 21, 2015 the parties attended at an arbitration pursuant to the DRC rules, in order to resolve the dispute between them.

[26] In its original notice of application JAG expressed the nature of its challenges to the arbitral award, as follows:

8. JAG respectively takes the position that the arbitrator, Mr. Robert E. Goldman, erred in ignoring or refusing to acknowledge the F.O.B. Laredo term, an essential term of the contract, and instead substituting a “U.S. No. 1 standard”.

9. The failure to find that the F.O.B. Laredo term was an essential term of the contract, and the erroneous substitution of the U.S. No. 1 term, caused an unfair and improper decision and JAG, with respect, takes the position that the arbitrator lost jurisdiction due to this failure.

10. By ignoring the F.O.B. Laredo term in the contract documents between the parties, and creating a new and unheard of delivery standard based on what the arbitrator deemed should be the delivery standard in violation of DRC rules, which prohibit an arbitrator from substituting his intent for that of the parties.

11. On November 30, 2015, the Applicant was awarded $54,196.53 USD pursuant to the decision of the arbitrator and under the Rules of the Fruit and Vegetable Dispute Resolution Corporation.

12. JAG retained Corrent & Macri LLP to bring this Application at its soonest ability.

13. It was always the intent of JAG appeal [sic] the decision of the arbitrator (emphasis added).

[27] In its notice of application in CV-15-23140, JAG does not specify that it sought “leave to appeal” on the questions of law it raised as its asserted grounds for the application and it did not specify which of the grounds enumerated in s. 46(1) of the Arbitration Act, if any, it was relying upon to set aside the award. JAG’s notice of application does not allege that the arbitral award was in conflict with the public policy of Ontario.

[28] Lakeside’s counsel advised JAG’s counsel in early January 2016 (within approximately one week of the issue of the notice of application referred to above) that the Arbitration Act had no application in this instance and the only recourse to review the arbitral award was prescribed by the ICAA and Model Law. Nonetheless, JAG’s counsel was not dissuaded from pursuing relief pursuant to the Arbitration Act.

[29] During submissions on these applications, without objection form JAG’s counsel and in response to JAG’s previously undisclosed position that the application it brought pursuant to the Arbitration Act was broad enough to encompass relief under the ICAA/Model Law, counsel for Lakeside referred to the following e-mail exchange, which is evidenced by an affidavit filed in the context of a prior motion brought by JAG in these proceedings :

a) Counsel for JAG e-mailed counsel for Lakeside on December 27, 2015, stating:

I’ve been retained to challenge the decision of the arbitrator in the above reference lined matter [JAG v. Lakeside].

Will you accept service of the application on behalf of your client and if so, when is the best time to serve?

I look forward to hearing from you at your soonest ability.

b) Counsel for Lakeside replied on January 4, 2016 as follows:

[I] have instructions to accept service of whatever material you may have to serve. This is an arbitration governed by the International Commercial Arbitration Act and the UNCITRAL Model Law. There is no appeal and very limited grounds to set aside an award. If your client proceeds my client will be seeking full indemnity costs. [Emphasis added.]

c) Counsel for JAG replied on January 4, 2016 stating:

I’ve found caselaw on point dealing with a very similar matter. The appeal is governed by the Arbitration Act and not the International Commercial Arbitration Act. Please see: [hyperlink omitted]

The appeal is dealt with as an application before the VA [sic] Superior Court to be filed within 30 days of the decision.

I filed it on December 29, 2015.

I will serve you tomorrow. [Emphasis added.]

d) Lakeside’s counsel replied on January 5, 2016 stating:

Adam, I’m aware of the case. It was presented in these proceedings. The arbitrator decided this issue and I trust you have his decision in this regard. If not I’m attaching it. The matter is res judicata and in that regard I’m attaching a couple of cases; there are many, many more.

I want to make it very clear we intend to seek full indemnity costs should your client insist on proceeding. If your client insists on proceeding under the Arbitration Act I’ll bring a motion to strike that on the basis that the matter is res judicata. Please know your client took the position this was governed by the ICAA in the arbitration. Secondly, we will seek full indemnity costs should your client seek a review under the ICAA as there is absolutely no basis to do so.

I write this with prejudice. I intend to refer to this e-mail and my previous one should this matter proceed. [Emphasis added.]

[30] Despite that e-mail exchange, JAG proceeded with its application pursuant to the Arbitration Act, and it appears that it was primarily focussed on “appealing” the arbitral award after expressly rejecting that the ICAA and Model Law applied.

[31] For reasons that are not clear on the record, on March 29, 2016 JAG commenced an independent application (CV-16-23483) in which it expressly sought relief under the ICAA and Model Law, claiming:

(a) An order pursuant to Article 34 of the International Commercial Arbitration Act, R.S.O. 1990, c. I.9 setting aside the awards [sic] of the [sic] Mr. Robert E. Goldman, arbitrator, dated November 30, 2015 as a judgment of the court;

(b) Costs of the application on a substantial indemnity scale together with HST;

(c) Such further and other relief as counsel may advise and this Honourable Court may permit.

[32] In its stated grounds for that application, JAG specifically pleads, among other things, its reliance on Article 34 of the Model Law pursuant to the ICAA, although it does not indicate which, if any, of the grounds specified in Article 34 that it was relying upon in order to set aside the award. The balance of the content that is pled under the headings “Background” and “The Arbitration” in JAG’s notice of application in CV-15-23140 (which is referenced above) is reproduced in its entirety in its notice of application in CV-16-23483.

[33] The notice of application in CV-16-23483 was never formally served on Lakeside. JAG acknowledges that its application in CV-16-23483 was not brought within the time mandated by Article 34(3) and, as a result, JAG is not pursuing relief in the context of CV-16-23483.

[34] The applications in CV-15-23140 (JAG’s Arbitration Act application) and CV-16-23279 (Lakeside’s Article 35 application) were originally scheduled for argument on June 20, 2016. They did not proceed at that time because JAG’s former counsel left private practice in late April, 2016. JAG’s current counsel, who was retained shortly before the June 2016 hearing date, brought an opposed motion to adjourn the applications that was ultimately granted on terms. As part of the adjournment order, JAG was granted leave to amend its notice of application in CV-15-23140, in order to include a remedial request for “leave to appeal” the arbitral award pursuant to the Arbitration Act. JAG’s amended notice of application does not specify a claim for relief under the ICAA or the Model Law and does not allege that the award is in conflict with the public policy of Ontario. It does, however, assert additional grounds for the relief it claims under the Arbitration Act, which include the following:

(b) The arbitrator made an error in law in finding that the International Commercial Arbitration Act, R.S.O. 1990, c. I.9 applied to the arbitration conducted rather than the Arbitration Act, 1991 S.O. 1991 c. 17.

(c) The terms of the contract were clear, understood and agreed to by the parties. There was no requirement that the contract be in writing. The contract was oral in nature and supported in writing by virtue of the exchange of correspondence between the parties.

(d) The arbitrator exceeded his jurisdiction in ignoring terms of the contract which the parties had agreed to and in substituting terms which were not agreed to by the parties to the contract;

(e) In substituting terms into the contract which were not agreed to by the parties to the contract, the arbitrator made a decision which was beyond the scope of the Fruit and Vegetable Dispute Resolution Corporation (hereinafter referred to as the “DRC”) arbitration rules;

(g) The provisions of the DRC’s mediation and arbitration rules. [Emphasis added.]

[35] JAG properly concedes that the legislative reliance plead in its amended notice of application is restricted to the Arbitration Act, however, it posits that its remedial request set out in a “basket clause” at para. 1(c) of its amended notice of application for “such further and other relief as counsel may advise and this Honourable Court may permit” is broad enough to accommodate the relief it now requests. JAG characterizes the grounds it asserted in support of the relief it originally sought pursuant to the Arbitration Act as being “the same grounds” that it relies upon to set aside the award pursuant to the Model Law, on the basis of the award’s “conflict with the public policy of Ontario”. As a result, it says that Lakeside is not prejudiced by its fresh remedial request.

[36] In support of its position JAG relies on the following authorities:

(a) NWAC v. Canada, [1994] 3 S.C.R. 627, 1994 CanLII 27, where the Court held that the Federal Court of Appeal had jurisdiction to make a declaration that related directly to the parties’ dispute notwithstanding that the respondent’s remedial request at trial was for an order of prohibition. The Court held, at pp. 647-648:

The argument at trial focused on whether there was a breach of the respondents’ freedom of expression or equality or their Aboriginal and treaty rights. Thus, the determination of whether the rights of the respondents were violated was necessarily ancillary to the granting of an order of prohibition. The declaration that was ultimately granted by the Federal Court of Appeal hinged on the violation of Charter rights that was specifically argued at the Trial Division. It cannot be said that the appellant was taken by surprise or prejudiced in any way. Nothing different could have been argued by the parties had the declaration specifically been sought.

The Court also observed that in its pleadings, the respondent included a “basket clause” requesting “such other relief as to this honourable court may seem just” which, in all of the circumstances, was found to be sufficient to permit the appellate court to exercise its discretion to grant a declaration even though it was not specifically pled;

(b) Atzori v. Janasz, 2016 ONSC 615, 2016 CarswellOnt 1230 (WL Can), in which the court allowed the plaintiff to rely upon a basket clause in its amended notice of motion seeking “such further and other relief as counsel may advise and this Honourable Court may permit” as its basis to request leave to file an amended statement of claim set out in an appendix to its factum, even though an order for that relief was not expressly requested in its notice of motion. The court then granted leave, in circumstances where none of the asserted claims were barred by the expiration of a limitation period;

(c) Nextgate v. Sedona, 2009 CanLII 56742, 2009 CarswelOnt 6378 (SC), in which the defendants brought a motion seeking specified relief in the form of an order determining questions of law raised by the pleadings. The defendants’ factum echoed the same remedial request. However, in submissions, one of the defendants advanced the position that the statement of claim should be struck, despite not claiming that relief in his notice of motion or factum. To do so, he relied on a basket clause in the notice of motion for “such further and other relief as counsel may advise and this Honourable Court may permit”. It appears that the court then received submissions from all parties with respect to striking the pleading, but that relief was not granted.

(d) Blazek v. Blazek, 2009 BCSC 1693, 2009 CarswellBC 3361, and Coulson Aircrane Ltd. v. Pacific Helicopter Tours Inc., 2006 BCSC 961, 57 B.C.L.R. (4th) 226, both of which considered, in part, the impact of the inclusion of basket clauses seeking “such further and other relief” in notices of motion brought by defendants challenging the court’s jurisdiction, simpliciter. In Coulson, the court held that in the context of the motion before it, the basket clause could not be used by the moving defendants to seek relief on the merits of the subject matter of the litigation, and therefore, the claim to “such further and other relief” was not an act of attornment, although other factors resulted in that finding.

[37] In Lakeside’s submission, given the context and history of this proceeding, it would be inappropriate and an error of law to read the “basket clause” in JAG’s notice of application as incorporating a request that the arbitral award be set aside pursuant to the provisions of the ICAA and Article 34 of the Model Law. In support of its position, Lakeside advises that UNCITRAL publishes a searchable case law digest related to judicial application of the Model Law, in order to encourage harmonized international interpretation of the Model Law. Lakeside submits that the decided international cases do not support JAG’s position on the scope of its basket clause.

[38] In support of its position, Lakeside relies heavily on the Singapore High Court’s decision in ABC Co. v. XYZ Co. Ltd., [2003] Sing.L.R. 546, S.G.H.C. 107 (Singapore) (ABC Co.), in which the court addresses the nature of a judicial review of an international arbitral award, pursuant to Article 34 of the Model Law. At para. 3, the court states:

Article 34 of the Model Law deals with the recourse that a party to an arbitration has when he is not satisfied with an arbitral award. The title of this article is “Application for setting aside as exclusive recourse against arbitral award” and the Article, by para (1) makes it clear that recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with para (2) and para (3) of the article. Paragraph (2) amplifies para (1) by enumerating the grounds which the applicant has to prove in order to succeed in his application to set aside an award. The Model Law provides six such grounds and s.24 of the Act [International Arbitration Act (Cap 143A, 2002 Rev Ed)] provides two extra grounds for parties to an international arbitration in Singapore. Paragraph (3) of art 34 sets out the time limit for the making of an application to set aside.

[39] After reproducing the text of Article 34(3) the court affirms that an application to set aside an arbitral award pursuant to Article 34 of the Model Law cannot be brought more than three months after the arbitration award is received and that time cannot be extended by order of a domestic court, stating:

This interpretation is supported by material relating to the discussions amongst the drafters of the Model Law. It appears to me that the court would not be able to entertain any application lodged after the expiry of the three-month period as art 34 has been drafted as the all-encompassing, and only, basis for challenging an award in court. It does not provide for any extension of the time period and, as the court derives its jurisdiction to hear the application from the article alone, the absence of such a provision means the court has not been conferred with the power to extend time.

[40] At para. 10, the court holds that an applicant claiming to set aside an arbitral award pursuant to Article 34 must state its specific grounds for challenging the award in the application, specifically:

Secondly, the article [34] does not say that the ground on which the award is being challenged has to be stated in the application. I think, however, that this requirement must be inferred since it is plain from art 34(2) that only proof of one or more of the grounds enumerated in that paragraph will entitle a court to set aside an award. The proper interpretation of art 34(3) must be, therefore, that a party seeking to set aside an award must, within the three-month period, file an application which states the ground or grounds he intends to rely on. [Emphasis added.]

[41] The court then considered whether an application pursuant to Article 34 of the Model Law can be “amended” to assert a new ground to set aside the award, after the expiry of the three-month period prescribed by Article 34(3). The court found that the matters enumerated in art 34(2) subparas. (a)(i) to (iv) and (b)(i) to (ii) are descriptions of factual situations or situations of mixed fact and law which, if established, would entitle a party to an arbitration to have the award set aside by the court. The court held that the enumerated grounds set out in Article 34(a)(i) to (iv) and (b)(i) to (iv) are distinct statutorily created causes of action, which were designed to confer on parties to international arbitrations specific (although strictly delimited) rights to challenge arbitral awards in a domestic court system, recognizing that in the various circumstances contemplated by Article 34(2) it would not be “just to” enforce the arbitration award against the parties. In that context, the court reasoned that a proposed amendment to an existing application brought pursuant to Article 34, asserting a new ground to set aside the arbitral award more than three months after the award was made, was akin to asserting a new cause of action after the expiry of the applicable limitation period.

[42] The court specifically rejected the analogy urged by the applicants before it, that an application to amend a notice of application to set aside an arbitral award by adding additional grounds should be treated in the same manner as an application to amend a notice of appeal. The court drew a clear distinction between the nature of an appeal and the nature of an application to set aside an arbitral award pursuant to Article 34. In the result, the court dismissed the applicants’ motion to amend the application to assert additional grounds to set aside the award pursuant to Article 34(2), more than three months after the challenged award was made.

[43] A similar result was reached by the High Court of New Zealand in Downer-Hill Joint Venture v. Fiji, reported at court file numbers CIV 2002-485-210 and CIV 2003-485-876.

[44] In accordance with the foregoing authorities, Lakeside submits that through the use of its remedial basket clause, JAG is attempting to affect “a wholesale amendment” to the application by asserting a new and separate cause of action for setting aside the arbitral award, namely conflict with the public policy of Ontario, after the expiration of the three-month period prescribed by Article 34(3).

[45] For the following reasons, I accept Lakeside’s position that in the totality of the circumstances of JAG’s Arbitration Act application (and the related applications,) JAG’s request for “such further and other relief as counsel may advise and this Honourable Court may permit” in its notice of application (CV-15-23140) cannot be invoked to advance a fresh claim to set aside the arbitration award pursuant to the ICAA and Article 34(2)(b)(ii) of the Model Law, on the basis that the award conflicts with the public policy of Ontario.

[46] First, I find the reasoning of the Singapore High Court in ABC Co. to be exceptionally persuasive and I adopt it. In my view, each of the potential grounds to set aside an arbitrator’s award pursuant to Article 34(2)(a) and (2)(b) constitutes a distinct cause of action, which must be asserted with specificity in the originating process seeking an order to set aside an international commercial arbitral award, which itself must be brought no later than three months after the award is made. JAG did not expressly seek relief pursuant the provisions of the ICAA or Article 34(2) of the Model Law in either its original or amended notice of application in CV-15-23140, nor did it allege as a matter of fact or mixed fact and law, that the arbitrator’s award was in conflict with the public policy of Ontario. Instead it pursued what primarily appears to be an appeal under the Arbitration Act and sought an order to set aside the award on unspecified grounds, pursuant to that legislation.

[47] JAG now invites the court to grant relief pursuant to the Model Law, which it did not expressly seek and which is not inevitably ancillary to the relief it did seek in its amended notice of application in CV-15-23140. A broad and ambiguous basket clause should not be relied upon to compensate for deficiencies in the pleadings: see H.C. v. New Brunswick (Minister of Family and Community Services), 2003 NBQB 196, [2003] N.B.J. No. 190 (QL).

[48] Second, JAG’s position on the scope of the basket clause is premised on its assertion that it is relying on the “exact same grounds” to set aside the arbitral award pursuant to the ICAA that it did when it sought leave to appeal and/or to set aside the award pursuant to the Arbitration Act. I disagree.

[49] I am mindful that s. 46 of the Arbitration Act provides the court with jurisdiction to set aside a domestic arbitral award on grounds that are analogous to some of the grounds set out in Article 34 of the Model Law. JAG did not plead any of those grounds as a basis to set aside the award nor did it plead that the award conflicted with the public policy of Ontario. Instead, in both its original and amended notice of application, JAG specified errors of law as its grounds for challenging the award through an appeal. Recall in its original and amended notice of application, JAG alleges that it always intended to “appeal” the award.

[50] JAG’s newly asserted claim to set the award aside pursuant to the ICAA and Model Law “because it conflicts with the public policy of Ontario,” engages distinct legal principles that differ from those applicable to a review premised on an error of law, which I will address later in these reasons. In short, JAG’s freshly asserted ground to set aside the award is not “exactly the same” as its previously stated grounds.

[51] Third, JAG’s position that the basket clause encompasses a remedial claim under the ICAA is contrary to its stated position and other actions in the context of CV-15-23140, since its inception.

[52] Prior to receiving a copy of the original notice of application, Lakeside’s counsel specifically advised JAG’s counsel that: the arbitration was governed by the ICAA and Model Law; the award was not subject to appeal; and it could only be set aside on very limited grounds. In response, JAG’s counsel maintained that the proceeding was governed by the Arbitration Act, not the ICAA, and the arbitrator’s award was subject to appeal. Again, Lakeside’s counsel correctly advised him that the proceeding was governed by the ICAA and Model Law and the Arbitration Act did not apply. Counsel’s exchange took place within one week of the notice of application’s issue, and within the three-month period contemplated by Article 34(3). Despite that exchange, JAG did not amend its notice of application to advance a claim for relief pursuant to the ICAA.

[53] After the expiry of the three-month period prescribed by Article 34(3), JAG commenced a fresh application seeking relief pursuant to the ICAA. Objectively, its conduct in that regard evidences that consistent with the position it previously adopted, JAG was not advancing a claim for relief pursuant to the ICAA in application CV-15-23140. Subjectively, had JAG viewed its remedial request in CV-15-23140 as being adequate to do so, as it now asserts, its subsequent application for that specific relief would have been unnecessary and redundant.

[54] Even in its amended notice of application JAG does not allege that the arbitrator’s award is in conflict with the public policy of Ontario nor does it expressly seek remedial relief pursuant to the ICAA or the Model Law. Instead, JAG alleges, among other things, that the provisions of ICAA do not apply to the subject matter of the arbitration and that the arbitrator erred, in law, when he made a finding to the contrary. It is difficult to read “the basket clause” in JAG’s amended notice of application to include a claim to set aside the award pursuant to the very legislation that within the same document JAG alleges is inapplicable.

[55] For the foregoing reasons, I am not persuaded that relief pursuant to the ICAA is consistent with or ancillary to, the position advanced and the relief requested by JAG in its amended notice of application in CV-15-23140. In all of the circumstances, I find that it would not be “just” to permit JAG to advance an ad hoc claim to set aside the arbitral award pursuant to the provisions of the ICAA and Article 34 of the Model Law in the context of application CV-15-23140.

[56] Therefore, I find that JAG’s application is restricted to its remedial request pursuant to the Arbitration Act, which it now concedes does not apply to the arbitral award at issue. This court lacks jurisdiction to award relief pursuant to the Arbitration Act in relation to an international commercial arbitration award that is subject to the ICAA. As a result, JAG’s application is dismissed.

[57] In the event that I have erred in the exercise of my discretion by not permitting JAG to advance a claim to set aside the arbitral award pursuant to the provisions of the ICAA, I will provisionally dispose of that issue below.

(ii) Provisional Determination of Whether the Arbitral Award Conflicts with The Public Policy Of Ontario

(a) Nature of Relief Sought

[58] JAG seeks to set aside the international commercial arbitral award of Mr. Robert E. Goldman dated November 30, 2015 which found that Lakeside owed JAG $45,516.93 for breach of a contract pursuant to which Lakeside agreed to purchase fresh tomatoes from JAG over the course of one year.

(b) The Nature of the Parties’ Dispute

[59] Consistent with the Operating Rules, JAG brought two claims to arbitration. JAG claimed the sum of $111,143.88 USD from Lakeside with respect to certain delivered loads of tomatoes from Mexico, claiming that Lakeside withheld full payment for the produce. JAG claimed the further sum of $887,556.85 USD resulting from Lakeside’s cancellation of 49.5 truckloads of tomatoes that it otherwise contracted to purchase.

[60] Through its arbitration pleadings delivered January 29, 2015, Lakeside defended both claims, and alleged, among other things, that the tomatoes supplied by JAG consistently failed to meet the applicable grading standards agreed to by the parties. As a result, it claimed that it was entitled to withhold payment, and ultimately to terminate the contract.

[61] During the course of the arbitration, the parties agreed that they entered into an oral contract pursuant to which JAG agreed to provide tomatoes, grown in Mexico, to Lakeside at a specified location in the United States. They disputed the grade that the tomatoes had to meet and the location they were to be graded.

[62] JAG posited that the tomatoes had to meet a “USDA1 grading standard” in Laredo, Texas, where the tomatoes crossed the Mexican border into the United States. Lakeside asserted that the tomatoes had to meet that grading standard when they arrived at Lakeside’s warehouse in Taylor, Michigan. Although various writing passed between the parties during their negotiations, they did not mutually execute a document evidencing the contractual terms to which they agreed. It fell to the arbitrator to determine the disputed terms of the contract.

(c) The Arbitrator’s Original Award

[63] An oral hearing was held before the arbitrator on May 21, 2015 in Leamington, Ontario. Both parties presented documentary and viva voce evidence at the hearing and both parties submitted written briefs to the arbitrator after the hearing.

[64] The arbitrator provided written reasons for his award, dated November 30, 2015 in which he resolved the contractual dispute between the parties as follows at pp. 2-4:

The parties both testified that they had an oral agreement in which Claimant [JAG] was to supply Respondent [Lakeside] with truckloads of U.S. # 1 tomatoes for one year according to delivery dates and prices in a spreadsheet sent by Mr. Boutros [Lakeside’s commodities manager] to Mr. DiMenna [president of JAG] (referred to herein as the “Purchase Schedule”), and Respondent [Lakeside] was to pay Claimant [JAG] for the purchased tomatoes and for the cost of the transportation from Laredo, Texas, to Taylor, Michigan, if Claimant [JAG] contracted with the truck. [Footnote 1 Mr. Boutros acknowledged the parties had a supply contract for one year (Transcript, pp. 269 and p. 293). His admission makes the contract enforceable. U.C.C. § 2-201(3)(b). The Purchase Schedule is attached to Mr. Boutros’ e-mail to Mr. DiMenna dated October 30, 2013 (Claimants CX-8).] They disagree, though, on the issue of where the tomatoes had to grade U.S. #1. The resolution of that pivotal issue decides the other issues in this case.

The cardinal rule of contract interpretation is to determine the parties’ intent [Footnote 2: Respondent argues that Ontario law applies, and not Michigan law. The resolution of this dispute would be the same under either body of law, and so it is not necessary to determine that issue.] Here, it is undisputed that the parties intended that Claimant would supply Respondent with tomatoes to enable Respondent to satisfy its one year contract with Walmart, which called for suppling several D.C.’s [distribution centers] within a 12-hour drive of Respondent’s warehouse in Taylor, Michigan [Footnote 3: Mr. DiMenna testified that the parties were talking for a few months about a contract that Respondent needed to fulfil for Walmart (Transcript, p. 7). Mr. Martinez Lambarry of Bionatur, which grew the subject tomatoes, testified he knew the tomatoes were going to Walmart (Transcript, p. 171). Mr. Boutros testified that 100% of the loads were destined for Walmart (Transcript, p. 279), and that the Walmart D.C.’s were within 12 hours of Respondent’s warehouse (Transcript, p. 284).] The parties’ intent that the tomatoes would be delivered to Walmart D.C.’s in the vicinity of Taylor, Michigan, created an implied term in their agreement that the tomatoes had to satisfy Walmart’s arrival specifications for tomatoes in that vicinity [Footnote 4: Restatement 2d of Contracts, § 204 (“When the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court”).] It is undisputed that Walmart’s specifications were 10-5-1. [Footnote 5: Mr. DiMenna testified that “We go to them [Walmart] direct now and we know that it’s 10-5-1.” (Transcript, p. 290).] Thus, the parties’ intent is found to be that the tomatoes would satisfy a US #1 standard (i.e. 10-5-2) upon arrival at Respondent’s warehouse in Taylor, Michigan, if Claimant contracted for the truck, so that Respondent could in turn satisfy Walmart’s specifications.

The documents in this dispute do not alter this conclusion. Claimant sent a proposed contract to Respondent that provides for a 10-5-2 standard in Laredo, Texas. But it is unsigned. Claimant also sent Respondent its “pre-alerts”. But they do not identify the location where the tomatoes had to be grade USD #1 [sic]. As for its part, Respondent sent Claimant three types of documents that reference “FOB, Laredo”: (a) its proposed Appendix “A,” which provides that the “Contract price is $10 or $9.00 per case FOB, Laredo, Texas,” (b) the Purchase Schedule, which provides “Prices FOB Laredo” [sic] (CX-5, and CX-6), and (c) its “Purchase Order,” which provides that the sale terms are “FOB.” What did Respondent intend by referencing “FOB, Laredo”? Mr. Boutros testified that he intended the reference to concern the price only. His testimony is consistent with the parties’ oral agreement that the tomatoes would be priced in Laredo, and with his use of the phrase “Prices FOB Laredo” on the Purchase Schedule.

Claimant argues that application of the definition of “F.O.B.” in 7 C.F.R. § 46.43(i) to the Respondent’s documents mentioning “FOB, Laredo” requires a finding that the parties intent was that the tomatoes would satisfy a US #1 grade in Laredo. However, Mr. Boutros did not just use the term “F.O.B.” As mentioned above, he used the term “Prices FOB Laredo” [sic] in the Purchase Schedule, the document which was sent at the time of the parties’ formation of their oral contract. That choice of words leaves room for determining what the parties’ intended. The situation is analogous to when a party uses the term “F.O.B. inspection and acceptance arrival,” which is defined at § 46.43(dd) to mean “Such a sale is f.o.b. only as to price and is on a delivered basis as to grade, quality, and condition.” The parties’ intent will not be determined by a mechanical application of the definition of “F.O.B.” in a regulation where those letters were not used in isolation and where there is no evidence that the parties intended those letters to have the definition in the regulation.

The parties gave conflicting testimony on this issue. On the one hand, Mr. DiMenna testified that the parties verbally agreed that a load of tomatoes had to satisfy a US #1 standard of 10-5-2 in Laredo, and since the parties recognized that it would be a three day trip to Taylor, they agreed that a load had to satisfy a good delivery standard of 13-7-4 in Taylor (Transcript, p. 14, p. 71). On the other hand, Mr. Boutros testified that the parties verbally agreed that if Claimant contracted for the transportation to Taylor, then the tomatoes had to satisfy US #1 standard upon arrival in Taylor, and if Respondent had the tomatoes picked-up in Laredo, then the tomatoes had to satisfy a standard of good delivery standard of 15-8-5 in Taylor since Mr. DiMenna said “the only way he would accept the 10-5-2 was if he controlled the product” (Transcript, p. 249) and that way he could decide what trucking companies to trust (Transcript, p. 250; also transcript, p. 180, p. 227). The conflicting testimony does not provide clear evidence that would alter what otherwise appears to be the parties’ clear intent to satisfy Walmart’s arrival standards.

[65] After determining that the parties intended that the tomatoes would meet a U.S. No. 1 standard in Taylor, Michigan, the arbitrator concluded that Lakeside owed JAG a further sum of $45,516.93 USD, for the 13 accepted loads on account of which it had withheld certain amounts because of grading issues. In arriving at his finding, the arbitrator performed a detailed calculation based on the actual percentage of each of the 13 loads that did conform to the parties agreed upon U.S. No. 1 standard, in Taylor, Michigan.

[66] The arbitrator also found that Lakeside had the right to cancel the remaining 49.5 loads contemplated by the contract because nine of the ten previous loads it received failed to meet the agreed upon quality standard when the tomatoes arrived in Taylor, Michigan. The arbitrator concluded that the contract was substantially impaired by JAG’s repeated breaches, which entitled Lakeside to terminate the contract. Specifically after referencing several aspects of the evidence, the arbitrator found, at p. 7 of his reasons:

The first round of breaches from mid-April through mid-March caused one of Walmart’s DC’s to terminate acceptance of the grower Bionatur’s label [footnote omitted]. The second round of breaches involving 9 out of 10 consecutive loads created a substantial likelihood that Walmart would terminate the entire contract with the Respondent if the breaches continued, and so substantially impaired the value of the parties’ contract, giving Respondent the right to terminate the contract, which it rightfully did on August 23, 2014.

[67] At p. 8 of his reasons the arbitrator determined:

Claimant and its grower Bionatur knew, or at least should have known, that Walmart’s specifications called for an arrival standard of 10-5-1. If Claimant and Bionatur wanted to realize the contract price during the time of the year that it was substantially higher than the market price, then it was incumbent upon Bionatur to deliver tomatoes that were likely to satisfy a US #1 standard in Taylor, Michigan. That did not happen. Claimant and Bionatur’s misfortune does not change the fact that the Respondent had the right to terminate the contract when it did.

[68] Ultimately, the arbitrator made the following award at p. 8:

Claimant 1552955 Ontario Inc. d/b/a JAG Worldwide Imports, Inc., shall recover from Respondent Lakeside Produce, Inc., the sum of US $45,516.93 plus arbitration costs in the amount of $8,680.00 for a total of $54,196.93. Respondent Lakeside Produce, Inc., is hereby ordered to pay the Claimant 1552955 Ontario Inc. d/b/a JAG Worldwide Imports, Inc., US$54,196.93 no later than thirty (30) days from the date of this decision.

(d) JAG’s Application to Amend and Clarify the Original Arbitral Award

[69] Subsequent to its receipt of the award and pursuant to the Operating Rules, JAG brought an “application to amend and clarify decision and include an additional award,” in which it raised a number of issues which are substantially similar to those set out in its amended notice of application and factum in CV-15-23140, and its submissions in the context of that application. In his reasons for dismissing JAG’s application, the arbitrator found that article 87 of the Operating Rules provided narrow grounds to amend an award, none of which applied. He then held:

The Arbitrator notes that he would not amend the Award even if he had the authority to do so. Claimant cites to UCC § 2-201(2) for the proposition that certain writings received by Respondent without objection created a contract between the parties which had a “F.O.B. Laredo” term, but that section merely says that a qualifying writing satisfies the statute of frauds, and it does not concern what the parties intended by a particular term. Claimant then cites to UCC § 2-202 for the proposition that the term “FOB Laredo” (which, as mentioned in the Award, was also referred in documents as “Price FOB Laredo”) could not be contradicted by evidence of a prior agreement, but the same section says that the prohibition only applies when there is “a writing intended by the parties as a final expression of their agreement with respect to such a term.” Here, there was no such finding. Baker v. DEC Int’l, 580 N.W.2d 894, 899 (Mich. 1998) (“When the parties did not regard their purchase order as the final expression of their agreement, parol evidence is admissible to establish what the agreement was”). Separately, the Award made clear that the finding of a substantial impairment of the value of the contract was based upon the likelihood of disruption to the business relationship between Respondent and Walmart, and not on the percentage of the contract that had already been performed. Finally, Claimant requests that the Arbitrator recuse himself, but no grounds are offered to support the request.

(e) JAG’s Asserted Challenge to the Arbitral Award

[70] Generally, JAG now submits that the arbitrator’s award should be set aside because it is in conflict with the public policy of Ontario. Its position is founded on the following assertions:

1. The arbitrator failed to determine the parties’ dispute in accordance with the “DRC’s Trading Standards”, as he was obligated to do in accordance with the “Operating Rules” and as the parties expected he would;

2. The arbitrator committed several “fundamental errors of law” in determining the terms of the oral contract. His findings in that regard were inconsistent with the written, albeit unexecuted, documents exchanged between the parties during their negotiations, and he exceeded his jurisdiction in determining the terms of the contract as he did;

3. The arbitrator exceeded the jurisdiction pursuant to the Operating Rules, by applying rules of equity to determine the parties’ dispute. Specifically, Article 85 of the Operating Rules mandates:

(1) In all cases, the arbitrator shall decide the dispute in accordance with the terms of the agreement of the parties and the [Operating Rules – Part 4] Trading Standards, the [Operating Rules – Part 5] Transportation Standards, the Rules and Regulations and the Policies of the Corporation.

(2) To the extent recourse to rules of law is required, the arbitrator shall apply the laws or rules of law designated by the parties as applicable to the dispute. Failing such a designation by the parties, the arbitrator shall apply such law or laws as it determines to be appropriate.

(3) In arbitrations involving the application of contracts, the arbitrator shall decide in accordance with the terms of the contract and shall take into account usages of the trade applicable to the contract.

(4) The arbitrator shall not decide as amiable compositeur or exaequo et bono unless the parties have expressly authorized it to do so.

[71] In support of its broad challenges to the arbitral award, JAG posits as follows:

1. Since the parties were members of the DRC, the contract between them must be interpreted in accordance with the Trading Standards, which, among other things, defines certain trade terms including the term “freight on board (“F.O.B.”) to mean:

[T]hat the produce quoted or sold is to be placed free on board the boat, car or other agency of the through land transportation at shipping point, in suitable shipping condition (definition omitted), and that the buyer assumes all risk of damage and delay in transit not caused by the seller irrespective of how the shipment is billed. The buyer shall have the right of inspection at destination before the goods are paid for to determine if the produce shipped complied with the terms of the contract at the time of shipment, subject to provisions covering suitable shipping condition: see s. 20.5 of the Fruit and Vegetable Distribute Resolution Trading Standards (Trading Standards) amended and enforced August 19, 2013.

Section 21 also provides that the Trading Standards shall apply to all transactions entered into by a member or associate member of the DRC. Accordingly, JAG submits that the definition of F.O.B. set out in the Trading Standards applied to its contract with Lakeside and the arbitrator erred in failing to interpret the contract in accordance with that definition. Instead, in JAG’s submission, the arbitrator unjustifiably “re-wrote” the terms of the contract by giving effect to a term “Price FOB” which was expressed in portions of the documentation sent by Lakeside to JAG during their negotiations.

2. In determining the parties’ contractual intention with respect to the location of the tomato grading, the arbitrator failed to consider which party paid for freight charges associated with transporting the tomatoes. JAG suggests that the evidence before the arbitrator established that it was responsible for the costs associated with transporting the tomatoes from Mexico to Laredo, Texas and Lakeside was responsible for the costs associated with transporting the tomatoes from Laredo to Taylor, Michigan, notwithstanding that JAG actually made the arrangements to transport the produce by truck, from Laredo to Taylor.

JAG submits the parties’ transportation arrangement is conceptually consistent with the tomatoes being “delivered” to Lakeside in Laredo because s. 20.3 of the Trading Standards define “delivered” or “delivered sale” to mean:

[T]hat the produce is to be delivered by the seller on board car or truck . . . at the market in which the buyer is located, or at such other market as is agreed upon, free of any and all charges for transportation or protective service. The seller assumes all risk of loss and damage in transit not caused by the buyer. For example, a sale of “U.S. No. 1 potatoes delivered Chicago” means that the potatoes, when tendered for delivery at Chicago, shall meet all the requirements of the U.S. No. 1 grade as to quality and condition.

While the parties did not use the trade term “delivered” in the documentation surrounding the formation of the contract, JAG submits that the parties relative responsibilities for the cost of freight/transport are consistent with the tomatoes being “delivered” to Lakeside at Laredo, Texas which, in turn, is consistent with the contract being “F.O.B. Laredo” within the meaning of the Trading Standards. As a result of the foregoing, the arbitrator ought to have found that the tomatoes were to be graded “U.S. No. 1” in Laredo, Texas and not Taylor, Michigan.

3. The arbitrator erred by equating the phrase “Price FOB Laredo” in Lakeside’s documents with the trade term “F.O.B. inspection and acceptance arrival”. The terms of the contract as found by the arbitrator are very close to the defined trade term “F.O.B. inspection and acceptance arrival” (a term referred to in the arbitrator’s reasons), which is defined in s. 20.8 of the Trading Standards to mean:

[T]he produce quoted or sold is to be placed by the seller free on board car or other agency of through transportation at shipping point, the cost of transportation to be borne by the buyer, but the seller is to assume all risks of loss and damage in transit not caused by the buyer, who has the right to inspect the goods upon arrival and to reject them if, upon such inspection, they are found not to meet the specifications of the contract of sale at destination. The buyer may not reject without reasonable cause. Such a sale is f.o.b. only as to price and is on a delivered basis as to grade, quality and condition.

JAG posits that the arbitrator erred by finding that the parties intended that the transportation and inspection terms contemplated by the trade term “F.O.B. inspection and acceptance arrival” applied to their contract because the parties did not specify that trade term in any of the documentation which passed between them during their negotiations. Instead, Lakeside used the term “Price FOB Laredo”, which is not a defined trade term in the Trading Standards.

4. The arbitrator erred by accepting that the parties intended to be bound by the undefined term “Price FOB”, which the arbitrator then defined himself, rather than the defined trade term “F.O.B.”, which JAG consistently used in its documentation. This error is even more egregious because Lakeside’s “advanced purchase agreement” includes a term that “prices shall be F.O.B. shipping . . . and protected by PACA and DRC regulations”. Instead of finding a common intention based on those terms, the arbitrator erroneously relied on appendix “A” and schedule “B” of Lakeside’s advanced purchase agreement to find that “Prices FOB Laredo” evidenced the parties’ common intention.

5. The arbitrator compounded the errors set out above by finding that the parties agreed that JAG would provide tomatoes graded on a “10-5-1” standard notwithstanding that the DRC “good arrival guidelines” mandate a grading standard of “10-5-2” for U.S. Grade 1 tomatoes grown on the vine. The arbitrator failed to consider that the “good arrival guidelines” placed an onus on Lakeside to prove that parties agreed to a grading tolerance other than the standard prescribed by the DRC “good arrival guidelines”.

6. Finally, in determining that the parties agreed to a “10-5-1” grading standard, the arbitrator erred by failing to consider that the applicable Perishable Agricultural Commodities Act Guidelines (PACA Guidelines) afforded an additional tolerance in grading to account for produce decay during transit from Laredo to Taylor.

JAG submits that even if the tomatoes were to be graded in Taylor, Michigan, the arbitrator erred by failing to consider and apply the provisions of the Trading Standards and PACA Guidelines and to his determination of whether “good delivery” was made at that location. Section 20.11 of the Trading Standards defines “good delivery” to mean “product shipped F.O.B., with no grade specified, will arrive at agreed destination without abnormal deterioration” [Emphasis added.]. JAG asserts that the arbitrator failed to consider whether the level of deterioration attributable to the three-day period of transit from Laredo to Taylor was equal to or less than the tolerance prescribed by the applicable PACA Guidelines and therefore he failed to properly assess whether “good delivery” had, in fact, been made.

[72] Ultimately, JAG maintains that the foregoing errors combine to render the arbitral award in conflict with the public policy of Ontario. It says that members of the DRC attorn to the arbitration process in order to expeditiously resolve their disputes with other DRC members, in accordance with pre-determined industry standards and norms, which are specified in the DRC Trading Standards, the DRC good delivery guidelines and the PACA Guidelines. In order to ensure certainty and consistency in the result of arbitral disputes, arbitrators appointed pursuant to the DRC Operating Rules must apply those standards and guidelines. Here, the arbitrator rejected the predetermined industry standards and norms that he was obligated to apply and instead, he created and applied his own delivery standard – “the Walmart standard”. The arbitrator’s approach amounts to a fundamental error in both principle and law. In all of the circumstances, if the arbitral award is not set aside it will severely undermine the public’s confidence in the arbitration process as a whole and therefore, it would be in conflict with the public policy of Ontario.

(f) Disposition

[73] In my view JAG’s application to set aside the arbitral award pursuant to the ICAA and Article 34(2)(b)(ii) ought to be dismissed for the following reasons.

[74] First, I do not find that the errors which JAG alleges the arbitrator committed result in an award that is in conflict with the public policy of Ontario, as that concept is recognized in the decided cases. Second, I do not accept JAG’s characterization of the “erroneous” manner in which the arbitrator arrived at his award. Third, the arbitral award is entitled to considerable deference because it arises from an international commercial arbitration. I will explain further below.

[75] Since the arbitration involved “the application of a contract” the arbitrator was required by Article 85(3) of the DRC Operating Rules (set out above) to “decide” in accordance with the terms of the contract. Read as a whole, the arbitrator’s reasons clearly reveal that he approached the disposition of the parties’ dispute from that perspective. In order “to decide in accordance with the terms of the contract” the arbitrator first had to determine what the terms of the parties’ oral contract were, in the face of conflicting evidence on the point.

[76] JAG’s position that the award is in conflict with public policy is rooted in its suggestion that in determining the terms of the contract, the arbitrator jettisoned “usages of the trade applicable to the contract” and other related guidelines that he was otherwise required to apply, and instead created and applied his own trade terms, namely “Price FOB” and “the Walmart standard”. In doing so, JAG submits that he fundamentally undermined the certainty and integrity of the arbitration process, at large, to the point that reasonable members of the public will lose confidence in that process if the award is not set aside. I do not give effect to that submission.

[77] The Operating Rules mandate a procedurally fair process throughout an arbitration conducted pursuant to its provisions. There is no suggestion that that procedure was not followed in this instance. Indeed, pursuant to the Operating Rules, JAG: delivered pleadings; was represented by counsel; received notice of the arbitration hearing; participated in the arbitration hearing; adduced documentary and viva voce evidence on the arbitration; and made submissions to the arbitrator on: the issues in dispute; the evidence adduced; and the correct application of the relevant law. JAG was afforded procedural fairness throughout the arbitral proceeding. It had the opportunity to present its case in full, on the merits, and it did so. JAG was treated with equality and it was given a fair hearing.

[78] The Operating Rules contemplate that the arbitral award will determine the parties’ dispute with finality. Article 84(1) of the Operating Rules states:

Awards shall be made in writing, promptly by the arbitrator and shall be final and binding on the parties. The parties undertake to carry out any such award without delay [Emphasis added.]

[79] Similar to the ICAA and Model Law, the Operating Rules make no provision for an appeal of an arbitral award on any basis, including an error of law. Further, the limited grounds upon which an international commercial arbitral award may be set aside pursuant to the ICAA and Model Law are not primarily focused on the substance, correctness or reasonableness of the award or the arbitrator’s reasoning process.

[80] The limited role played by domestic courts in the review of international commercial arbitral awards under the Model Law accords with the objectives of facilitating predictability in the resolution of international commercial disputes and fostering consistency between jurisdictions in the resolution of such disputes.

[81] JAG correctly identifies that pursuant to Article 34(2)(b)(ii) an arbitral award made pursuant to the Model Law may be set aside by a domestic court if the award is in conflict with the public policy of “this State”. However, “the errors of law” that JAG asserts in its detailed submissions do not result in an award that is in conflict with the public policy of Ontario, as that concept is recognized in the applicable authorities. I will explain.

[82] The nature of the “public policy” ground in the Model Law was recently considered in Depo Traffic v. Vikeda International, 2015 ONSC 999, 2015 CarswellOnt 2282, where Chiappetta J. states, at para. 45:

Vikeda wishes to rely on a public policy defence to the recognition and enforcement of arbitral awards. Public policy is truly an exceptional defence. Courts have recognized that the defence of public policy must be construed narrowly in light of the overriding purpose of the Convention “to encourage recognition and enforcement of commercial arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate are observed and arbitral awards are enforced in the signatory countries”. In Schreter v. Gasmac Inc. 1992 CanLII 7671 (ON SC), [1992] O.J. No. 257] Feldman J. made the following remarks about the defence of public policy at paras. 47 and 48:

The concept of imposing our public policy on foreign awards is to guard against enforcement of an award which offends our local principles of justice and fairness in a fundamental way, and in a way which the parties could attribute to the fact that the award was made in another jurisdiction where the procedural or substantive rules diverge markedly from our own, or where there was ignorance or corruption on the part of the tribunal which could not be seen to be tolerated or condoned by our courts.

[83] Later, Chiappetta J., at paras. 46 and 47, states:

[46] In particular, Feldman J. cautioned against the re-determination of the merits of the claims under the guise of public policy and stated, at para. 49:

[I]f this court were to endorse the view that it should re-open the merits of an arbitral decision on legal issues decided in accordance with the law of a foreign jurisdiction and where there has been no misconduct, under the guise of ensuring conformity with the public policy of this province, the enforcement procedure of the Model Law could be brought into disrepute.

[47] This interpretation reflects the prevailing view on the scope of the defence of public policy. Professor McLeod notes that the public policy prohibition ought to be invoked only if the judgment involves an act that is illegal in the forum or if the action involves acts repugnant to the orderly functioning of the social or commercial life of the forum. An obvious example would be the enforcement of a gambling debt which would be illegal in Ontario: J.G. McLeod, The Conflict of Laws (Calgary: Carswell, 1983), at p. 61. Similarly, the Report of the United Nations Commission on International Trade Law on the work of its eighteenth session, June 3-21, 1985 provides guidance on the intended scope of the public policy ground for a court’s refusal to recognize or enforce an arbitral award. The Report states, at p. 63:

296. In discussing the term “public policy”, it was understood that it was not equivalent to the political stance or international policies of a State but comprised the fundamental notions and principles of justice

297. It was understood that the term “public policy”, which was used in the 1958 New York Convention and many other treaties, covered fundamental principles of law and justice in substantive as well as procedural respects. Thus, instances such as corruption, bribery or fraud and similar serious cases would constitute a ground for setting aside. It was noted, in that connection, that the wording “the award is in conflict with the public policy of this State” was not to be interpreted as excluding instances or events relating to the manner in which an award was arrived at.

[84] Similarly, in Corporacion Transnacional de Inversiones, S.A. de C.V. v. Stet International, S.p.A., 45 O.R. (3d) 183, 1999 CanLII 14819 (SC) aff’d 49 O.R. (3d) 414, 2000 CanLII 16840 (CA), Lax J. concluded at p. 192 that the applicable authorities prescribe that as a general rule of interpretation, the grounds for refusing recognition or enforcement of an arbitral award or challenging an arbitral award under the Model Law are to be construed narrowly. Lax J. further held in the context of a challenge to an arbitral award made pursuant to the Model Law, at p. 192:

An arbitral award is not invalid because, in the opinion of the court hearing the application, the Arbitral Tribunal wrongly decided a point of fact or law: Quintette Coal, supra, at p. 227. Where a tribunal’s jurisdiction is called into question as it is here, an applicant must overcome “a powerful presumption” that the Arbitral Tribunal acted within its powers: Quintette Co., supra, per Hutcheon J.A., at p. 223 citing with approval Parsons & Whittemore Overseas Co., Inc. v. Société Generale de L’Industrie du Papier, 508 F.2d 969 (2nd Cir. 1974).

The public policy ground for resisting enforcement of an arbitral award has also been narrowly construed. In Schreter v. Gasmac Inc. (1992), 1992 CanLII 7671 (ON SC), 7 O.R. (3d) 608, 89 D.L.R. (4th) 365 (Gen. Div.), Feldman J., as she then was, states at p. 623. [Quotation previously set out at para. 84, above.]

At p. 624 of Schreter v. Gasmac, supra, the court quotes with approval from the decision of the United States Court of Appeals Second Circuit in Waterside Ocean Navigation Co. v. International Navigation Ltd., 737 F.2d 150 (1984) at p. 152. It was held there that the public policy grounds for the setting aside of an award should apply only where enforcement would violate our “most basic notions of morality and justice”. In this jurisdiction, the Ontario Court of Appeal has emphasized the care which courts must exercise in relying upon public policy as a reason for refusing enforcement of a foreign award. In Baordwalk Regency Corp. v. Maalouf (1992), 1992 CanLII 7573 (ON CA), 6 O.R. (3d) 737 at p. 743, 88 D.L.R. (4th) 612 (C.A.), the court states:

The common ground of all expressed reasons for imposing the doctrine of public policy is essential morality. This must be more than morality of some persons and must run through the fabric of society to the extent that it is not consonant with our system of justice and general moral outlook to countenance the conduct, no matter how legal it may have been where it occurred.

Accordingly to succeed on this ground the awards must fundamentally offend the most basic and explicit principles of justice and fairness in Ontario, or evidence intolerable ignorance or corruption on the part of the Arbitral Tribunal. The applicants must establish that the awards are contrary to the essential morality of Ontario.

[85] In my view, the nature of the challenges to the arbitral award asserted by JAG are not of a kind or character that is consistent with the concept of an award that is “in conflict with the public policy of this State.” There is no suggestion that the arbitrator acted with mala fides or that he was motivated by corruption or some other improper purpose. JAG has not identified anything in the nature of the arbitrator’s award that is incompatible with the most basic notions of morality and justice in Ontario.

[86] Instead, the essence of JAG’s position is that the arbitral award is not “correct” because the arbitrator committed a number of errors in determining the parties’ intent and the resulting terms of their contract, some of which were errors of law and some of which were errors of mixed fact and law. Even accepting without deciding that JAG’s position is accurate, the errors that it asserts involve the misapplication or non-application of defined trade terms and delivery standards applicable to those actors in the produce sector who are members of the DRC. While the subject matter of the asserted errors may be of importance to the parties, they do not strike at the moral fabric of society at large. In my view, through its newly asserted claim to set aside the award pursuant to Article 34(2)(b)(ii), JAG mischaracterizes what is, in essence, a challenge in the nature of an appeal as a matter of public policy conflict. It is not.

[87] JAG’s challenge to the award under the guise of public policy is really an attempt to re-open the merits of the parties’ dispute on both factual and legal issues that fell within the arbitrator’s jurisdiction to determine. The errors that JAG identifies do not found the basis for a credible challenge to the arbitral award as one that is in conflict with public policy. For that reason alone, JAG’s application should be dismissed.

[88] I would, however, add that I do not share JAG’s characterization of the manner in which the arbitrator determined the arbitral award. JAG’s assertion that the arbitrator failed to properly apply the DRC Trading Standards and good delivery guidelines inherently assumes that the necessary factual pre-requisites that invoke the application of the specific provisions upon which JAG relies, actually existed. That assumption does not correspond with the factual findings made by the arbitrator.

[89] For example, JAG submits that the arbitrator failed to give proper effect to the term “F.O.B.” in accordance with its meaning in the Trading Standards when he found and interpreted the contract’s terms. However, the arbitrator did not accept that the documents in which the term “F.O.B.” was used in isolation, formed part of the parties’ contract or that those documents conclusively evidenced the terms of the oral contract between them. In the absence of such findings, JAG’s challenge on the point is spent. If the term “F.O.B.” was not part of the contract, the arbitrator could not have erred by failing to give that term its defined meaning in the Trading Standards. The arbitrator had jurisdiction to find that the documents referencing “F.O.B.” did not evidence the parties’ contractual intent pursuant to Article 76(4) of the Operating Rules which provides:

The admissibility, relevance, materiality and weight of the evidence offered by any party shall be determined by the arbitrator, provided that the arbitrator shall consider applicable principles of legal privilege.

[90] Therefore, in reaching his findings of fact, the arbitrator was entitled to accept all, some or none of a witness’ evidence and to accord differing weight to the evidence that he did accept, including the documentary evidence adduced by the parties.

[91] The arbitrator received contradictory viva voce evidence with respect to the terms of the oral contract between the parties and, in particular, the location where the tomatoes were to be graded. Various writing passed between the parties in which conflicting contractual terms were proposed. The arbitrator found that certain specified terms of some of the documentation passing between the parties evidenced their contractual intention. Based on all of the evidence before him, the arbitrator then made factual findings with respect to the terms of the parties’ oral contract. Whether this Court agrees with the factual findings or the related findings of mixed fact and law that were made at first instance, is of no import for the purpose of determining JAG’s application to set aside the arbitral award on the basis that it is in conflict with the public policy of this State.

[92] Similarly, JAG’s suggests that the arbitrator erred by failing to consider that the “good arrival guidelines” placed an onus on Lakeside to prove that the parties agreed to a delivery tolerance other than the standard prescribed by the PACA Guidelines. JAG’s position fails to account for the arbitrator’s factual finding that the parties did agree to a different tolerance, specifically that the tomatoes would be graded on USD #1 standard in Taylor, Michigan. The arbitrator explained, with reference to the evidence, how he arrived at that finding. With that finding, the specific provision of the good arrival guidelines upon which JAG relies, by its own term did not apply.

[93] In short, the arbitrator heard conflicting evidence about the terms of an oral contract. He resolved the evidentiary conflicts and made findings of fact thereafter. The arbitrator then applied the applicable law to the facts, as found, to arrive at the award. When the arbitrator’s reasons are read, as a whole, the manner in which he arrived at his factual determinations and the resulting award does not conflict with the public policy of this State.

[94] Finally, as a matter of public policy, in the context of commercial arbitrations, an arbitrator’s findings are generally afforded significant deference: see Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633 at para. 106. Even in the case of domestic commercial arbitrations, where parties have a limited appeal route available to them, a differential “standard of reasonableness” is afforded to a commercial arbitrator’s determination of questions of law, unless the question is one that would attract the correctness standard, such as constitutional questions or questions of law of central importance to the legal system as a whole and outside of the arbitrator’s experience. Those circumstances are not present in this case. As a result, the arbitrator’s findings and award are entitled to significant deference.

[95] For the foregoing reasons, had I found that the “basket clause” in JAG’s notice of application adequately operated to allow JAG to advance a claim pursuant to the ICAA and Article 34(2)(b)(ii) of the Model Law to set aside the arbitrator’s award as being in conflict with the public policy of this State, I would have dismissed the application on its merits.

Lakeside’s Cross-application

[96] Lakeside advances a cross-application for an order that the award be recognized by way of declaration that it is binding upon the parties and a declaration that the award has been satisfied by way of full payment by Lakeside to JAG.

[97] The parties agree that Lakeside has paid the amount due under the award. Consistent with Article 35(2) of the Model Law, Lakeside has provided this Court with:

(a) A duly certified copy of the original arbitration award;

(b) A duly certified copy of the arbitration agreement between Lakeside and JAG; and

(c) A duly certified copy of evidence of payment of the award by Lakeside to JAG.

[98] I find that there is no basis for refusing recognition of the award pursuant to article 36 of the Model Law and, therefore, Lakeside’s application is allowed.

Judgment

[99] As a result, judgment will go:

1. Dismissing application CV-15-23140;

2. Declaring that the arbitration award made by Robert E. Goldman dated November 30, 2015 in respect of DRC file numbers 19275/76 with 1552955 Ontario Inc. d/b/a JAG Worldwide Imports Inc. as Claimant and Lakeside Produce Inc. as Respondent whereby the Respondent Lakeside Produce Inc. was ordered to pay the Claimant 1552955 Ontario Inc. d/b/a/ JAG Worldwide Imports Inc. the total amount of $54,196.93 in lawful currency of the United States of America no later than 30 days from the date of decision is hereby recognized as binding upon the parties and shall be enforced accordingly;

3. This Court declares that Lakeside Produce Inc. has satisfied the arbitral award made November 30, 2015 in an arbitration between the parties and made by Robert E. Goldman, as further specified in para. 2 above.

[100] On the issue of costs, Lakeside was successful in both applications. Within 45 days, counsel for Lakeside may submit a costs outline with respect to the applications together with written submissions on costs of no more than seven pages, doubled spaced. JAG may deliver a costs outline and written submission on costs of no more than seven pages, doubled spaced, within 21 days of being served with Lakeside’s costs submissions. Lakeside may deliver a reply to JAG’s submission of no more than three pages, double spaced, within 21 days of being served with JAG’s costs submissions.

Original signed “Verbeem J.”

Gregory J. Verbeem

Justice

Released: September 14, 2017

CITATION: 1552955 Ontario Inc. v. Lakeside Produce Inc., 2017 ONSC 4933

COURT FILE NO.: CV-15-23140

Lakeside Produce Inc. v. 1552955 Ontario Inc.

COURT FILE NO.: CV-16-23279

1552955 Ontario Inc. v. Lakeside Produce Inc.

COURT FILE NO.: CV-16-23483

BETWEEN:

1552955 Ontario Inc. o/a JAG Worldwide Imports Inc.

Applicant

– and –

Lakeside Produce Inc.

Respondent

Lakeside Produce Inc.

Applicant

– and –

1552955 Ontario Inc. o/a JAG Worldwide Imports Inc.

Respondent

1552955 Ontario Inc. o/a JAG Worldwide Imports Inc.

Applicant

– and –

Lakeside Produce Inc.

Respondent

REASONS FOR JUDGMENT

Verbeem J.

Released: September 14, 2017