CITATION: 2249492 Ontario Inc. v. Donato, 2017 ONSC 4974 COURT FILE NO.: CV-16-11394-CL CV-17-578440-CL
DATE: 20170822
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
2249492 ONTARIO INC.
Applicant/ Appellant in Appeal
– and –
PAUL DONATO, ANDREA DONATO, 2258823 ONTARIO INC. and any affiliated bodies corporate and their shareholders, 1573091 ONTARIO INC. and any affiliated bodies corporate and their shareholders, 1592722 ONTARIO INC. and any affiliated bodies corporate and their shareholders, 1683794 ONTARIO LIMITED and any affiliated bodies corporate and their shareholders and 2249487 ONTARIO LIMITED d.b.a. BALLROOM
Respondents/ Respondents in Appeal
Arthur Hamilton and Ted Frankel, for the Applicant/Appellant in Appeal
Gerald L.R. Ranking and Kimberley Potter, for the Respondents/Respondents in Appeal
HEARD: August 11, 2017
Cavanagh J.
Reasons for judgment
Introduction
[1] The Applicant (and Appellant on this appeal), 2249492 Ontario Inc. (“224”), appeals the decisions of the Honourable Donald Cameron, Q.C. (the “Arbitrator”) (a) dated March 24, 2017 and released on April 3, 2017 (the “First Decision”); and (b) dated June 8, 2017 (the “Reconsideration Decision” and, together with the First Decision, the “Confidentiality Decision”).
[2] The Confidentiality Decision granted the motion for confidentiality and related injunctive relief brought by the Respondents (and Respondents on this appeal) Paul Donato (“Donato”), Andrea Donato, 2258823 Ontario Inc. (“225”), 1573091 Ontario Inc., and 1592722 Ontario Inc. (collectively, the “Donato Respondents”).
[3] The issue on this appeal is whether the Confidentiality Decision should be set aside and, in its place, an order made dismissing the confidentiality motion.
[4] For the following reasons, I have concluded that the appeal should be dismissed.
Background Facts
[5] By Notice of Arbitration dated August 31, 2016, 224 commenced the arbitration proceeding (the “Arbitration”) against the Donato Respondents pursuant to an arbitration clause in a shareholders’ agreement (the “Shareholders’ Agreement”). The Arbitration related to a restaurant and entertainment business carried on in Toronto by 2249487 Ontario Limited using the name Ballroom (“Ballroom”). 224 and the respondent 225 were two of three founding partners and shareholders of Ballroom. The matter had started as an application to the Commercial List in which a monitor was appointed of Ballroom’s business (the “Court Application”).
[6] On August 25, 2016, ADR Chambers transmitted by email to the parties a draft arbitration agreement. Counsel for 224, Cassels, Brock & Blackwell LLP (“Cassels Brock”), subsequently exchanged correspondence with counsel for the Donato Respondents, Scarfone, Hawkins LLP (“Scarfone”) regarding rights of the appeal from an award by the Arbitrator. Cassels Brock then sent a letter to ADR Chambers concerning the parties’ agreement that the Arbitrator’s award may be appealed on questions of law, questions of fact and/or questions of mixed fact and law without leave of the court. ADR Chambers circulated a revised draft arbitration agreement to Scarfone and Cassels Brock.
[7] On the confidentiality motion, 224 tendered evidence that Cassels Brock advised Scarfone that (i) the “boilerplate clauses” of ADR Chambers regarding confidentiality of arbitration were not required because the Shareholders’ Agreement did not require that the arbitration hearing be confidential, and (ii) 224’s position was that the Arbitration hearing itself need not be open to the public and that the normal rule excluding witnesses should be put in place. 224’s evidence is that, as a result, amendments to the ADR and draft were prepared to remove the confidentiality mechanisms that were initially proposed by ADR Chambers, and to re-write the provision addressing who could be present at the hearing.
[8] According to 224’s evidence, the Donato Respondents’ counsel did not raise objections to any of the proposed amendments and, accordingly, Cassels Brock emailed its proposed revisions to the draft arbitration agreement to Scarfone on September 23, 2016, including a “blackline” showing Cassels Brock’s proposed changes. The changes are reproduced below:
Confidentiality
- ~~All written and oral communications made in the course of the arbitration will be treated confidential. Therefore, the parties to this agreement agree that communications and documents shared or disclosed in the arbitration will not disclosed to anyone who is not a party thereto, unless:~~The arbitration will not be open to the public. During the discussion or taking of evidence, and during the submissions to the Arbitrator, the only persons permitted to attend the hearing will be the Arbitrator, representatives of the parties to the arbitration and their respective counsel.
a) The person has signed this Agreement to Arbitrate or is an officer, director, or employee of a party;
b) the information is otherwise public; or
c) the person to whom the information is disclosed is a legal or financial advisor to a party to this agreement.
Everyone signing this document, whether or not a party to the dispute, agrees to be bound by the confidentiality provisions of this agreement. Any individual signing on behalf of a corporation represents that he or she has authority to bind the corporation and its agents, officers, directors, and employees to the confidentiality provisions in this agreement.The particular rules regarding the presence of a court reporter and the exclusion of witnesses are set out, respectively at paragraphs 18 and 20 below.
Cassels Brock requested that Scarfone advise of their position in respect of the proposed revisions and Scarfone did not respond to that September 23, 2016 email.
[9] The Donato Respondents also filed affidavit evidence on the confidentiality motion from a lawyer at Scarfone concerning confidentiality of the Arbitration.
[10] On October 17, 2016, a document entitled Agreement to Arbitrate and Terms of Appointment Re Arbitration (the “Arbitration Agreement”) was executed.
[11] Paragraph 6 of the Arbitration Agreement provides:
The parties agree to be bound by the ADR Chambers Arbitration Rules, as amended from time to time, which the parties agree treat the parties equally and fairly, and give the parties an opportunity to present a case and to respond to the other party’s case. Any procedural question or controversy on which the parties are not agreed may be resolved by the application of the Arbitrator’s discretion.
[12] Rule 2.1 of the ADR Rules provides:
2.1 These Rules apply to the arbitration administered by ADR Chambers, subject to such modification as the Parties may agree upon.
[13] Rule 16 of the ADR Chambers Rules provides:
- PRIVACY AND CONFIDENTIALITY OF ARBITRATION
16.1 Subject to Rule 16.2, all arbitrations held under these Rules are private and confidential. The Parties and their Representatives may attend at the arbitration. Other persons may attend only with the consent of the Arbitral Tribunal. The Arbitral Tribunal may require the sequestering of any witness or witnesses during the testimony of other witnesses.
16.2 No information concerning the existence of the arbitration or anything which occurs or is disclosed within the arbitration shall be disclosed or used outside of the arbitration proceedings or for any other purpose by a Party except:
a. for the purpose of conducting the arbitration itself including, where necessary and appropriate, interviewing and preparing witnesses, obtaining document and other support services, and the administration of the arbitration;
b. in connection with an application to a court for interim relief or to set aside, recognize or enforce an award;
c. where a Party is required to do so by law or by a court or competent regulatory body; or
d. for educational purposes, provided the disclosure does not indicate the names of any Party or sufficient facts to allow the listener to determine the identity of a Party or identify the dispute.
16.3 Where a Party makes disclosure as permitted by Rule 16.2 it shall only do so:
a. by disclosing no more than what is legally required;
b. by obtaining, where possible, and undertaking or order of confidentiality consistent with the Rules; and
c. by furnishing to the Arbitral Tribunal and to the other Party, if the disclosure takes place during the arbitration, or to the other Party alone, if the disclosure takes place after the termination of the arbitration, details of the disclosure and an explanation of the reasons for it.
[14] The Arbitration proceeded in October 2016, with closing arguments in November 2016.
[15] 224 tendered evidence on the Confidentiality Motion that on at least three occasions, Scarfone failed to seek confidentiality or sealing orders in respect of the Court Application. According to 224’s evidence, on these three occasions (i) Scarfone agreed on August 25, 2016 that it was not necessary to have the court file sealed, (ii) Scarfone did not seek to have a draft report of the court-appointed monitor (the “Monitor”) sealed on or about September 27, 2016 when an attempt was made to file it in the court file, and (iii) Scarfone did not request that the final First Report of the Monitor (that was previously filed in the Arbitration and that was judicially approved on November 29, 2017 and publicly filed with the Commercial List) be sealed.
[16] On or about January 25, 2017 when the arbitral award (the “Arbitral Award”) was released by the Arbitrator, Cassels Brock published a press release regarding the Arbitral Award on its website (the “Press Release”). The Press Release included a link to the Arbitral Award.
[17] On March 2, 2017, the Donato Respondents learned that a link to the Arbitral Award had been posted online. They contacted their current legal counsel who, in turn, contacted Cassels Brock, counsel for 224. Cassels Brock took the position that the Arbitral Award was public, but removed the Press Release and the link to the Arbitral Award from its website.
[18] On March 3, 2017, counsel for the Donato Respondents served their clients’ Notice of Appeal with respect to discrete aspects of the Arbitral Award. The covering letter stated that the Donato Respondents intended to seek a confidentiality and sealing order before the appeal is perfected. 224 later delivered a Notice of Cross-Appeal with respect to the Arbitral Award.
[19] On March 4, 2017 Cassels Brock advised counsel for the Donato Respondents that 224 would commence an application to a judge of the Commercial List that week for an order recognizing and enforcing the Arbitral Award, which application would include filing a copy of the Arbitral Award. The Donato Respondents then brought an urgent motion before the Arbitrator seeking, among other things, a declaration that the Arbitral Award was confidential, a declaration that the ADR Chambers Rules form part of the Arbitration Agreement, and a permanent injunction enjoining 224, and those it instructs, including Cassels Brock, from bringing a court application to recognize and enforce the Arbitral Award without first obtaining a confidentiality order. This motion was heard on March 15, 2017.
[20] On March 24, 2017, the Arbitrator released the First Decision and granted the motion brought by the Donato Respondents.
[21] Subsequently, 224 brought a motion seeking an order that the Arbitrator reconsider the First Decision. The Reconsideration Motion was heard on May 16, 2017 and the Reconsideration Decision was released on June 13, 2017.
Analysis
[22] The following issues arise on this appeal:
a. What is the applicable standard of review on this appeal?
b. Did the Arbitrator err in concluding that the confidentiality provisions in the Arbitration Agreement are unambiguous?
c. Did the Arbitrator err by failing to consider extrinsic evidence tendered by 224?
d. Did the Arbitrator err in finding that 224 and Cassels Brock breached the confidentiality provisions of the Arbitration Agreement?
e. Did the Arbitrator err in granting a permanent injunction?
[23] I address each of these issues, in turn.
a. What is the applicable standard of review on this appeal?
[24] 224 submits:
a. The Arbitration Agreement gives the appellate court the jurisdiction to review decisions of the Arbitrator that concern questions of law, questions of fact, and/or questions of mixed fact and law, without leave of the court.
b. The Confidentiality Decision engages questions regarding contractual interpretation of the Arbitration Agreement and the Supreme Court of Canada has held that matters of contractual interpretation are typically considered to be a question of mixed fact and law: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 52, at para. 53.
c. Some of the legal errors which may be made in the course of contractual interpretation include the application of an incorrect principle or standard, the failure to consider a required element of a legal test or the failure to consider a relevant factor, and such errors are subject to appellate review on a correctness standard.
d. Each of the errors committed by the Arbitrator was either an error of law or mixed fact and law which warrants appellate intervention, or was an error of fact which constituted a palpable and overriding error, which is likewise subject to review.
[25] The Donato Respondents submit that the standard of review for an arbitral award is reasonableness. In support of this submission, the Donato Respondents cite the decision of the Supreme Court of Canada in Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 at paras. 74-75 where Gascon J., for the Court, wrote:
75 In an arbitral context like this one, where the decision under review is an award under the Arbitration Act, Sattva establishes that the standard of review is “almost always” reasonableness (para. 75). This preference for a reasonableness standard dovetails with the key policy objectives of commercial arbitration, namely efficiency and finality. In Sattva, Rothstein J. emphasizes that in “commercial arbitration, where appeals are restricted to questions of law, the standard of review will be reasonableness unless the question is one that would attract the correctness standard” (para. 106). He suggests that this may arise only in rare circumstances, such as where a constitutional question or a question of law of central importance to the legal system as a whole and outside the adjudicator’s expertise is at issue (paras. 75 and 106).
76 It follows that the nature of the question under review - i.e. legal, factual or mixed - may inform whether one of those circumstances is present, but it is not dispositive, in itself, of the applicable standard of review. For instance, it would be an error to claim that all statutory interpretation by an arbitrator demands correctness review simply because it engages a legal question. While statutory interpretation is a legal question [citations omitted], the mere presence of a legal question does not, on its own, preclude the application of a reasonableness review in a commercial arbitration context. Sattva is clear in this regard.
[26] The Donato Respondents also rely upon the decision of the Ontario Court of Appeal in Ledore Investments Limited (Ross Steel Fabricators & Contractors) v. Ellis-Don Construction Ltd. where the Court of Appeal addressed the standard of review on an appeal from a commercial arbitration:
The first contextual point is recognition that there is an important link between the fact of a private consensual arbitration and the need for judicial deference to the result of the arbitration. As explained by Doherty J.A. in Popack v. Lipszyc, 2016 ONCA 135 (Ont. C.A.), at para. 26:
In addition to the generally applicable principles that urge deference in the review of all discretionary decisions, the nature of the specific order under appeal can also enhance the deference rationale. The application judge exercised her discretion in the context of a review of an award rendered in a private arbitration before a panel chosen by the parties to determine the dispute between them. The parties’ selection of their forum implies both a preference for the outcome arrived at in that forum and a limited role for judicial oversight of the award made in the arbitral forum. The application judge’s decision to not set aside the award is consistent with the well-established preference in favour of maintaining arbitral awards rendered in consensual private arbitrations. (Emphasis in original)
[27] In this case, the parties agreed that this dispute would be resolved by private arbitration. I do not agree with 224’s submission that the statements in Sattva and in Teal Cedar that support a preference for a standard of review of reasonableness in appeals from arbitral awards should not be followed because, in this case, the appeal rights are broad ones conferred by contract, and not by statute. The important factor is that by agreeing to arbitration, the parties must be taken to have (i) expressed a preference for the outcome arrived at by that forum, and (ii) accepted a limited role for judicial oversight of an arbitral award.
[28] Based upon the authorities I have cited, in my view, the proper standard of review for the appeal of the Arbitrator’s Confidentiality Decision is reasonableness.
b. Did the Arbitrator err in concluding that the confidentiality provisions in the Arbitration Agreement are unambiguous?
[29] 224 submits that the Arbitrator erred in holding that the Arbitration Agreement was not ambiguous in respect of the question of confidentiality and that this error led him to err by excluding consideration of objective evidence of the surrounding circumstances that, 224 submits, shows that confidentiality was excluded from the Arbitration Agreement.
[30] 224 submits that because of the changes the parties agreed to make to paragraph 1 of the ADR draft (to provide for full appeal rights) the Arbitration Agreement could not incorporate by reference either Rule 16 or Rule 17 of the ADR rules. 224 relies upon the decision in Spina v. Shoppers Drug Mart, 2012 ONSC 5563 in which Perell J. wrote, at paras. 141-142:
Where contracting parties expressly incorporate terms into a contract, the court must make two interrelated interpretive decisions. First, because the incorporated language will be read into the contract, the court must determine the extent of the incorporation by reference. Second, the court must eliminate wording that is inconsistent or insensible with the pre-existing language of the contract.
224 submits that regarding privacy and confidentiality, there are clear inconsistencies between the “host” Arbitration Agreement and ADR Rule 16 and that the Arbitrator’s failure to consider whether the terms purportedly incorporated by reference were inconsistent with the host agreement was an error in law.
[31] 224 submits that it is clear that Rule 17.4 which provides that an award or interim award “shall not be subject to any appeal to the courts or otherwise” cannot be incorporated because it conflicts with paragraph 1 of the “host” agreement, the Arbitration Agreement, that provides for an appeal of the award without leave of the court. 224 submits that, in addition, the inclusion of paragraph 1 of the Arbitration Agreement that provides for full appeal rights means that Rule 16.2 of the ADR Rules cannot be incorporated into the Arbitration Agreement because, 224 submits, an appeal to the court would require that the award and the record of proceeding in the arbitration would be public and this would be inconsistent with a confidentiality provision. 224 points to the language in Rule 16.2 b. of the ADR Rules that provides for an exception to the rule providing for confidentiality “in connection with an application to a court for interim relief or to set aside, recognize or enforce an award” and submits that this language does not contemplate an appeal of the award and is inconsistent with the full appeal rights provided for in paragraph 1 of the Arbitration Agreement.
[32] I agree that when terms are incorporated by reference into a contract, the court must determine the extent of the incorporation by reference. I do not agree, however, with 224’s submission that the inclusion of paragraph 1 of the Arbitration Agreement that provides for full appeal rights leads to the conclusion that Rule 16 and Rule 17.4 of the ADR Rules cannot be incorporated into the Arbitration Agreement by reference, and that inclusion of a provision for full appeal rights brings the “open court principle” into the arbitration proceedings.
[33] Rule 17.4 of the ADR Rules expressly accommodates the parties’ agreement that the award might be subject to appeal because it includes the words “unless the parties have otherwise agreed” [to rights of appeal]. In addition, Rule 2.1 of the ADR Rules provides that the rules apply “subject to such modifications as the Parties may agree upon”. There is nothing inherently inconsistent with the parties agreeing that (i) the award may be appealed and, at the same time, (ii) the arbitration will be private and confidential as provided for by Rules 16.1 and 16.2 of the ADR Rules. If, following release of the award, a party appeals to the court, the confidentiality to which the parties had agreed may be lost. This, however, is a risk that would have been apparent to the parties to the Arbitration Agreement when it was made.
[34] The interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine the intent of the parties and the scope of their understanding. To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning. While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement. The evidence that can be relied upon under the rubric of “surrounding circumstances” should consist only of objective evidence of the background facts at the time of the execution of the contract, that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting: Sattva Capital Corp. v. Creston Moly Corp., [2014] S.C.R. 633 at paras. 47, 57, and 58.
[35] In my view, applying these principles to the Arbitration Agreement, it was open to the Arbitrator to conclude that Rules 16.1, 16.2 and 16.3 (which unambiguously provide that the arbitration is private and confidential) remain in the Arbitration Agreement. This conclusion was not unreasonable and, in my view, it was correct.
c. Did the Arbitrator err by failing to consider extrinsic evidence tendered by 224?
[36] In his reasons for the Initial Decision, the Arbitrator quoted from the affidavit delivered by one of the lawyers for the Donato respondents on the arbitration and commented that the deponent was not cross-examined on his affidavit. In his Reconsideration Decision, the Arbitrator wrote that this affidavit “was unchallenged at the hearing on March 15, 2017”, and that paragraphs 6 and 8 thereof were key pieces of evidence upon which he relied for his decision.
[37] 224 submits that this affidavit included statements of the deponent’s subjective understanding and that, as such, this evidence was irrelevant and inadmissible. 224 also submits that by referring to this evidence, the Arbitrator acknowledged that the Arbitration Agreement was ambiguous and that he erred by not referring to the “objective” evidence tendered by 224 that, 224 submits, supports its interpretation of the Arbitration Agreement.
[38] I agree that the affidavit evidence given by the former lawyer for the Donato Respondents of his subjective understanding of the Arbitration Agreement, standing alone, would not be admissible evidence that would aid in the interpretation of the Arbitration Agreement. The deponent also included in his affidavit evidence that he did not agree “explicitly or implicitly” that the Arbitration would not be confidential, “there was no agreement that the Arbitral Award would be public”, “there was no discussion or correspondence dealing with that issue”, and “[a]t no time during negotiations did the Applicant or its counsel suggest or assert that the Arbitral Award be public”. Evidence of outward expressions of intent, as opposed to subjective expressions of intent, would not be inadmissible.
[39] I do not agree with 224’s submission that the Arbitrator, having relied upon evidence from counsel for the Donato Respondents, erred by not considering evidence from 224’s counsel that former counsel for the Donato Respondents failed to take steps to preserve confidentiality on at least three occasions, and that this is objective evidence that supports 224’s interpretation of the Arbitration Agreement.
[40] Actions taken or not taken to preserve confidentiality before the Arbitration Agreement was made would not, in my view, be relevant to the proper interpretation of the Arbitration Agreement because there would have been no contractual obligation to keep information confidential until the Arbitration Agreement was made.
[41] Actions taken or not taken to preserve confidentiality after the Arbitration Agreement do not form part of the factual matrix or surrounding circumstances that are admissible to interpret a contract: Sattva, at para. 58. There are dangers associated with reliance on evidence of subsequent conduct, and evidence of subsequent conduct should be admitted only if the contract remains ambiguous after considering its text and its factual matrix. One of these dangers is that evidence of subsequent conduct may itself be ambiguous. For example, the fact that a party does not enforce strict legal rights does not necessarily mean that he never had them: Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912, at paras. 39-50.
[42] In my view, applying these legal principles, it was not unreasonable for the Arbitrator not to consider evidence tendered by 224 of conduct subsequent to the Arbitration Agreement when he interpreted the Arbitration Agreement.
[43] 224 submits that the most powerful objective facts that are relevant to the interpretation of the Arbitration Agreement are those that reflect the changes to the draft agreement to include full appeal rights and to strike out portions of paragraphs 2 and 3 of the draft agreement to remove the provisions for confidentiality. 224 submits that, although the Arbitrator referred in paragraph 29 of the First Decision to the modifications to paragraphs 2, 3 and 4 of the draft agreement, he erred by not taking these changes into account in his interpretation of the Arbitration Agreement.
[44] The Donato Respondents submit that the removal of language from paragraph 2 of the draft agreement had the effect of ensuring privacy of the arbitration (and eliminating discretion on the part of the Arbitrator to decide otherwise), and that the language that was removed in respect of confidentiality was redundant because of the incorporation by reference of Rule 16 of the ADR Rules pursuant to paragraph 6 of the Arbitration Agreement.
[45] In Jones Collombin Investment Counsel Inc. v. Fickel, 2016 ONSC 6536 Penny J. addressed the evidentiary value of negotiations leading to a final agreement and drafts of the final agreement and wrote:
26 Prior drafts and evidence of the negotiations leading up to a final agreement are generally not considered part of the factual matrix and tend to be excluded from the interpretive process [citations omitted]. As I wrote in Actuate Canada Corp. v. Symcor Services Inc., 2015 ONSC 1667 (Ont. S.C.J.) at para. 68:
I have grave doubts that pre-contract negotiations form part of the factual matrix typically admissible in contract interpretation cases. Contract interpretation involves construing the bargain the parties made, not the bargain they wanted, or hoped, to make. Even if contract negotiations were admissible under the rubric of factual matrix, they should be treated with caution as inherently suspect as they necessarily involve an element of subjectivity. Positions in negotiations may be taken for purely strategic reasons. At best, they tend to show only what a party wanted, not what they got, in the ultimate bargain.
To this might be added an additional reason for treating evidence of negotiations as suspect; that a position deemed by a party to be acceptable at one stage of the negotiation might well be viewed by the same party as unacceptable at a different stage of the negotiation.
27 In some circumstances, however, the fact of an offer or counter-offer being made could constitute objective evidence within the knowledge of both parties before the final contract is made. In this sense, therefore, there may be some limited scope (where it is relevant) for evidence of the negotiations, provided it is objective (i.e., does not involve subjective intentions, opinion or argument) and is known to both sides before the final contract is made, see discussion of this topic in the Hall, Canadian Contractual Interpretation Law (2nd ed.) LexisNexis 2012, at pp. 29-30 and 80-81.
[46] In my view, having regard to these statements by Penny J., with which I agree, the removal of language providing for confidentiality in paragraph 2 of the draft arbitration agreement does not assist in the interpretation of the Arbitration Agreement. The confidentiality language in paragraph 2 of the draft arbitration agreement was unnecessary, given the incorporation by reference of the ADR Rules which include confidentiality language in Rule 16. For this reason, it was not unreasonable for the Arbitrator to interpret the Arbitration Agreement as he did without regard to the extrinsic evidence upon which 224 relies.
[47] I therefore conclude that the Arbitrator’s conclusion that Rules 16.1, 16.2 and 16.3 of the ADR Rules remain in the Arbitration Agreement, notwithstanding the evidence upon which 224 relies of extrinsic evidence of surrounding circumstances, is not unreasonable. In my view, the Arbitrator’s decision in this regard was correct.
d. Did the Arbitrator err in finding that 224 and Cassels Brock breached the confidentiality provisions of the Arbitration Agreement?
[48] 224 submits that the Arbitrator lacked jurisdiction to make findings that 224 and Cassels Brock breached the Arbitration Agreement and to grant a remedy, because the source of the Arbitrator’s powers is the arbitration clause in the Shareholders’ Agreement. This clause reads:
Any dispute or difference between the parties hereto concerning questions of fact, procedures, practices or standards relevant to this Agreement which cannot be resolved or settled by the parties shall be settled and determined by arbitration.
[49] I do not agree that the question of whether a party breached a confidentiality provision in the Arbitration Agreement is beyond the jurisdiction of the Arbitrator. In addition to the Shareholders’ Agreement, the Arbitration Agreement itself provides that the Arbitrator has the power to impose a remedy for breach of the ADR Rules. Rule 14 of the ADR Rules reads:
Where a party fails to comply with these Rules, or any order of the Arbitral Tribunal pursuant to these Rules, in a manner deemed material by the Arbitral Tribunal, the Arbitral Tribunal may fix a reasonable period of time for compliance and, if the party does not comply within the said period, the Arbitral Tribunal may impose a remedy it deems just, including an award on default.
[50] The parties agreed in paragraph 6 of the Arbitration Agreement to be bound by the ADR Rules, including Rule 14. I conclude that the Arbitrator had jurisdiction to make findings of breaches of the Arbitration Agreement and to grant the permanent injunction as a remedy.
[51] 224 also submits that the Arbitrator erred in finding that 224 and Cassels Brock breached the Arbitration Agreement on the grounds that (i) there is no evidence that 224 breached the Arbitration Agreement, and (ii) Cassels Brock was a non-party to the proceeding, and the Arbitrator erred in making such a finding against a non-party.
[52] The Donato Respondents submit that (i) it was open to the Arbitrator to find that the Press Release with a link to the Award was published on Cassels Brock’s web site with the authorization and approval of Cassels Brock’s client, 224, (ii) the Arbitrator acted within his authority to make a finding that Cassels Brock breached the Arbitration Agreement, where no relief was sought or granted against Cassels Brock, and (iii) Cassels Brock, on behalf of 224, advised of its intention to publicly file the Award on an application to the court for enforcement, and that this implicated both 224 and Cassels Brock and justified the injunctive relief that was granted.
[53] In my view, it was open to the Arbitrator to infer that Cassels Brock published the Press Release with a link to the Award on its web site with the approval and authority of its client. Therefore, in my view, it was not unreasonable for the Arbitrator to find that 224 breached the Arbitration Agreement.
[54] Cassels Brock was on notice of the allegation of breach of contract raised by the Donato Respondents, and took no action to intervene. Such a finding against a non-party does not directly impact the non-party, and the non-party is not bound by the finding and is free to argue in another proceeding that the finding is incorrect: Meridian Credit Union Ltd. v. Baig, 2016 ONCA 150, at paras. 50, 53, 56. In Meridian, the Court of Appeal, at para. 53, wrote that “the common law does not provide non-parties with the right to notice, to adduce evidence, or to make submissions whenever an adverse credibility finding may be made in judicial proceedings that involve them. Non-parties are limited to whatever procedural rights they have under the rules”.
[55] In my view, it was not unreasonable for the Arbitrator to find that Cassels Brock, by publishing the Press Release with a link to the Award on its web site, acted in breach of the Arbitration Agreement.
e. Did the Arbitrator err in granting a permanent injunction?
[56] 224 submits that the Arbitrator erred in law by granting a permanent injunction and that permanent injunctive relief is available only when truly necessary to ensure that a party is not deprived of his or her rights. 224 submits, citing 1711811 Ontario Ltd. v. Buckley Insurance Brokers Ltd., 2014 ONCA 125, at para. 86, that even when injunctive relief is appropriate, the particulars of that relief must be determined so as to ensure a proper balancing of the parties’ respective interests. 224 submits that the Donato Respondents provided no direct evidence which could form the basis for injunctive relief and that the only evidence of “harm” was evidence provided on information and belief by a law student employed by counsel for the Donato Respondents.
[57] 224 also submits that the Donato Respondents accepted that damages is an appropriate remedy on the basis of an email written by their counsel to counsel for 224 after the First Decision was released which asked Cassels Brock to put its insurer on notice concerning a possible action for damages for breach of the Arbitration Agreement. This was raised before the Arbitrator on the motion for reconsideration. The Arbitrator did not conclude that, through this email, the Donato Respondents had agreed that there was no irreparable harm because damages is an appropriate remedy. It is not uncommon for a party to claim alternative remedies for breach of a contract and, if required, to make an election at the proper time as to the remedy sought. In my view, it was not unreasonable for the Arbitrator not to accept 224’s submission with respect to legal effect of this email.
[58] The Donato Respondents submit that by reason of the stated intention of 224 to take steps to publicly file the Award in court, permanent injunctive relief was an appropriate remedy.
[59] In the Initial Decision, the Arbitrator considered whether an injunction is an appropriate remedy and wrote that injunctive relief “is available where damages are difficult to quantify do not adequately protect the party’s interests in enforcing the contract”. The Arbitrator found that the Donato Respondents have suffered and will continue to suffer irreparable and immeasurable harm to their reputation, goodwill and future business ventures and the balance of convenience favours the Donato Respondents, and he granted the permanent injunction that was sought.
[60] The Arbitrator was in a position to consider the relevant facts and legal principles, including the content of the Award, and he was aware of the relevant legal principles because he cited the decision of the Court of Appeal in Buckley Insurance in his First Decision. The Arbitrator concluded in the First Decision and again in the Reconsideration Decision that there would likely be irreparable harm to the Donato Respondents if the Award was disclosed publicly. On the record before me, which does not include the Award, I am unable to conclude that the Arbitrator’s decision to grant permanent injunctive relief was unreasonable.
Disposition
[61] For the foregoing reasons the appeal is dismissed.
[62] If the parties are unable to resolve costs, the Donato Respondents may make brief written submissions with 20 days, 224 may make brief responding submissions within 15 days of receipt of the Donato Respondents’ submissions and, if so advised, the Donato Respondents may make brief reply submissions within 5 days thereafter.
Cavanagh J.
Released: August 22, 2017
CITATION: 2249492 Ontario Inc. v. Donato, 2017 ONSC4974 COURT FILE NO.: CV-16-11394-CL CV-17-0578440-CL
DATE: 20170822
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
2249492 ONTARIO INC.
Applicant/ Appellant in Appeal
– and –
PAUL DONATO, ANDREA DONATO, 2258823 ONTARIO INC. and any affiliated bodies corporate and their shareholders, 1573091 ONTARIO INC. and any affiliated bodies corporate and their shareholders, 1592722 ONTARIO INC. and any affiliated bodies corporate and their shareholders, 1683794 ONTARIO LIMITED and any affiliated bodies corporate and their shareholders and 2249487 ONTARIO LIMITED d.b.a. BALLROOM
Respondents/ Respondents in Appeal
REASONS FOR JUDGMENT
Cavanagh J.
Released: August 22, 2017