CITATION: Maracle v. Miracle, 2017 ONSC 5876

COURT FILE NO.: CV-13-0284-00/16-2262

DATE: 2017/10/10

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ANDREW MARACLE III and JASMIN JOHNSON

Applicants

– and –

SIR ANDREW CLIFFORD MIRACLE

Respondent

Danesh Rana, for the Applicants

Ian Collins, for the Respondent

HEARD: September 12, 2017 at Belleville

REASONS FOR JUDGMENT

KERSHMAN J.

Introduction:

[1] This is an application brought by the Applicants to set aside the decision of the arbitrator, John Curtis, pursuant to s. 19(2), s. 46(1), 6 and 8 of the Arbitration Act, 1991, S.O. 1991, c. 17 ("Act").

Factual Background:

[2] The Applicant, Andrew Maracle III ("Andy") is the son of the Respondent, Andrew Clifford Miracle ("Clifford"). The Applicant, Jasmin Johnson ("Jasmin") is the wife of Andy and the daughter-in-law of Clifford.

[3] The Court will use the first names of the parties to identify them. In the normal course the Court would identify the parties by their last names, however due to the names involved, for ease of reference the Court has decided to refer to them by their first names. The references to first names is not intended to be a sign of disrespect.

[4] Clifford and Andy became partners in a gas bar operating in Tyendinaga, Ontario, and entered into a written Partnership Agreement ("Partnership Agreement") dated July 15, 2004, under the name of "Smokin' Joe's".

[5] Clifford sued Andy and Jasmin and the Canadian Imperial Bank of Commerce ("CIBC") in an action commenced in Toronto in Court File # CV-11-442364. A Statement of Defence and Counterclaim were filed by the Defendants. The action commenced by Clifford is against Andy and Jasmin for an accounting of all monies and properties from the partnership business, payment of all sums found to be due to Clifford on taking the above accounts, the tracing of funds paid to the Defendants that the Plaintiff claims are his money, together with damages for conversion and breach of contract and conspiracy.

[6] The substantive claim against CIBC is for 2 million dollars for damages for conversion, breach of contract, breach of fiduciary duty, breach of banking authority and unauthorized release of funds.

[7] In addition, the Plaintiff seeks punitive damages against all three Defendants.

[8] The Action was subsequently moved to Belleville, Ontario, and given Court File #CV-13-0284-00. On May 9, 2016, a pretrial was held before Scott J. On consent it was ordered that, among other things:

[T]he Plaintiff, Clifford, and the Defendants, Andy and Jasmin would attend a binding arbitration in Kingston, Ontario, to be completed by August 31, 2016. The Defendant, CIBC, did not have to participate in the binding arbitration.

[9] The parties retained John Curtis as the Arbitrator. An Agreement to Arbitrate dated October 7, 2016, was signed by all the parties in counterparts. The following are two excerpts from the Agreement to Arbitrate, dated October 7, 2016:

1.1 The Plaintiff and the Defendants agree to proceed to an Arbitration of their dispute in accordance with the provision with the Arbitrations Act of Ontario and the ADRIC Rules of Arbitration (as reproduced here . . . where applicable).

1.2. The Parties have agreed to engage in mediation efforts with the Arbitrator acting as a Mediator on the same day as set for the Arbitration, prior to the commencement of the Arbitration. Said Mediation to be conducted in accordance with the terms and provisions of the Agreement to Mediate attached hereto as Appendix "A" which shall be binding on the parties signing this Agreement to Arbitrate.

[10] Included with the Agreement to Arbitrate was an Agreement to Mediate, which was to be held prior to the Arbitration. The evidence is that the parties did have a Mediation prior to the commencement of the Arbitration.

[11] The Mediation and the subsequent Arbitration spanned a period of four days, being October 13, 14, 31 and November 1, 2016. A written Decision was issued on November 24, 2016 ("Arbitration Decision" or "Decision"). That Decision found, among other things, that Andy was required to pay Clifford the sum of $11,486,238.00, as Clifford's share of the undistributed profits of the jointly owned business known as Smokin' Joe's. The amount was to bear interest at the post-judgment rate of interest as set out in the Courts of Justice Act, R.S.O. 1990, c. C.43.

[12] The Decision dissolved the Smokin' Joe's partnership and provided for other relief.

[13] Through their counsel, Andy and Jasmin issued a Notice of Application for Judicial Review ("Notice of Application") to the Divisional Court for judicial review of the Arbitration Decision. The Notice of Application was filed in Ottawa, Ontario, in Court File #16-2262. The Notice of Application was served by Mr. John Ferris, then counsel for Andy and Jasmin, by email on Mr. John Bogue, counsel for Clifford, on January 26, 2017. Mr. Bogue did not acknowledge Mr. Ferris' email serving the documents nor did he or reply to it.

[14] On February 15, 2017, Mr. Bogue brought an Application in Court File #CV-13-0284-00 to turn the Arbitration Decision into an enforceable Court Order. That Application was put over until February 28, 2017, at which time Justice Tausendfreund endorsed the Application that the matter was adjourned to May 15, 2017. The matter was subsequently adjourned to May 26, 2017, at which time Justice Tausendfreund made an Endorsement on the record that stated, in part:

In the face of an Application for a Judicial Review by the Respondents, Maracle III and Johnson, Application adjourned to date to be set by the trial coordinator at the request of counsel.

It is clear that in the face of Application for Judicial Review of Arbitration Decision filed in Ottawa on December 21, 2016, and that the Applicant knew about at least over the last three weeks when Mr. Rana requested consent for the adjournment the Application did not proceed today - yet consent not given for the adjournment. Therefore the costs of today the Respondents, Maracle III and Johnson, fixed at $500.

[15] Tausendfreund J. issued a second Endorsement on May 26, 2017. The following is the Endorsement:

"The following is a summary of our discussion concerning the scheduling of the judicial review to be heard at Belleville:

1. As both sides agree, I will arrange for a transfer of the Application to Belleville.

2. A date to which both sides agree for a hearing of this matter has been set for September 12^th, 2017, at Belleville at 2:00 p.m. for three hours.

3. I will confirm with both sides once the transfer from Ottawa to Belleville has been accomplished.

4. Mr. Rana will file an amendment to confirm that this Application for Judicial Review will be heard in Belleville by a single judge of the Superior Court and not by the Divisional Court.

5. Affidavits with additional evidence may be filed on consent. Absent of consent, a Motion must be brought no later than June 30, 2017.

6. The Applicant is to file Factum and Books of Authority by July 31, 2017, the Respondent by August 18, 2017, with a Reply, if any, by August 31, 2017."

[16] Thereafter counsel for Andy and Jasmin did issue an Amended Notice of Application for Judicial Review ("Amended Notice of Application"). The Amended Notice of Application amended the original Notice of Application by stating that the matter was to be heard by a single judge of the Superior Court in Belleville, Ontario, on September 12, 2017, pursuant to the Order of Tausendfreund J.

[17] Another amendment was that the matter was to be In The Matter of the Arbitration Act, 1991, as opposed to In The Matter of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1.

Issues:

[18] The following are the issues:

1. Did Andy and Jasmin comply with the deadline and formality requirements for filing the request for Judicial Review of the Arbitrator's Decision?

2. Did Jasmin's non-attendance at the Arbitration constitute a procedural irregularity that would render the Arbitrator's decision procedurally unfair?

3. Does the amendment of the style of cause made by the Arbitrator and the removal of Jasmin as a Defendant at the Arbitration constitute a procedural irregularity that would render the decision procedurally unfair?

4. Was there a reasonable apprehension of bias on the part of the Arbitrator at the Arbitration?

5. Did the non-use of the then existing rules of the Canadian Arbitration Association as being the governing rules for the arbitration as set out in the Partnership Agreement, and use of the provisions of the Arbitration Act and the ADRIC Rules of Arbitration constitute a procedural irregularity that would render the Arbitrator's Decision procedurally unfair?

6. Were the irregularities with respect to the expert testimony sufficient to result in the rendering of the Arbitrator's decision procedurally unfair?

7. Did the non-consideration by the Arbitrator of the post-arbitration financial information provided by Andy and Jasmin constitute a procedural irregularity that would render the Arbitrator's Decision procedurally unfair?

Issue #1: Did Andy and Jasmin comply with the deadline and formality requirements for filing the request for Judicial Review of the Arbitrator's Decision?

Andy and Jasmin's Position:

[19] Andy and Jasmin argue that they filed the Notice of Application for Judicial Review within the 30 days' time limit after the release of the Arbitrator's Decision, which was on November 24, 2016, with the Court in Ottawa on December 21, 2016. They argue that the Notice of Application only had to be issued within 30 days and not served within 30 days.

[20] They argue that Rule 16.05(1)(f) allows for service on the Solicitor of Record by email.

[21] Andy and Jasmin argue that service on Mr. Bogue on January 26, 2017, did not in any way prejudice Clifford. Furthermore, they argue that Clifford must show an actual prejudice, as opposed to a perceived prejudice. They rely on the case of Re Dunnington v. 656956 Ontario Inc. (1991), 9 O.R. (3d) 124, in the fourth paragraph (paragraphs not numbered).

[22] Andy and Jasmin argue that they are seeking a Judicial Review under the Act and not an Appeal from the Decision of the Arbitrator.

[23] Andy and Jasmin argue that they are exercising their rights under the Arbitration Agreement and rely on s. 46(1) of the Act, which reads as follows:

46 (1) On a party's application, the court may set aside an award on any of the following grounds:

1. A party entered into the arbitration agreement while under a legal incapacity.

2. The arbitration agreement is invalid or has ceased to exist.

3. The award deals with a dispute that the arbitration agreement does not cover or contains a decision on a matter that is beyond the scope of the agreement.

4. The composition of the arbitral tribunal was not in accordance with the arbitration agreement or, if the agreement did not deal with that matter, was not in accordance with this Act.

5. The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law.

6. The applicant was not treated equally and fairly, was not given an opportunity to present a case or to respond to another party's case, or was not given proper notice of the arbitration or of the appointment of an arbitrator.

7. The procedures followed in the arbitration did not comply with this Act.

8. An arbitrator has committed a corrupt or fraudulent act or there is a reasonable apprehension of bias.

9. The award was obtained by fraud.

10. The award is a family arbitration award that is not enforceable under the Family Law Act. 1991, c. 17, s. 46 (1); 2006, c. 1, s. 1 (7).

[24] They argue that they are not taking the position that there was an error in law or in fact made by the Arbitrator. Rather, they are arguing about the issues of:

1. Procedural fairness; and

2. Procedural irregularities and bias on the part of the Arbitrator.

Clifford's Position:

[25] Clifford relies on s. 47(1) of the Act, which reads as follows:

47 (1) An appeal of an award or an application to set aside an award shall be commenced within thirty days after the appellant or applicant receives the award, correction, explanation, change or statement of reasons on which the appeal or application is based.

[26] Under that section, an appeal of an award or an application to set aside an award must be commenced within 30 days after the award is received.

[27] Clifford relies on the Ontario Court of Appeal case in R&G Draper Farms (Keswick Ltd.) v. 1758691 Ontario Inc., 2014 ONCA 278. The Court in that case said at paragraph 19 that the Act does not contemplate a judicial discretion to extend the s. 47 time period.

[28] In Draper, at paragraph 20, the Court says that the Act does contemplate relaxation of time periods stipulated under the Act in certain circumstances (see e.g. s. 39 of the Act). However, there was no such provision existing under the Act with respect to the time limits set out in s. 47. They argue that the Court does not have the right to extend the time limit beyond the 30 days under s. 47 of the Act such that when the matter was dealt with by Justice Tausendfreund, in May 2017, the time limit was extended by him.

[29] Clifford also argues that the Notice of Application was filed in the wrong court in that it was filed in the Divisional Court of Ontario at Ottawa. They argue that when it was filed in the proper court, which was in Belleville, it was past the 30 days' time limit and based on the Draper case, the Court should not allow for an extension of time for the purpose of filing.

[30] Clifford's counsel argues that this was an Appeal from the Decision of an Arbitrator, which is different than Judicial Review under the Act.

Analysis:

[31] The evidence is that the Arbitration Decision was issued on November 24, 2016, and the Notice of Application for Judicial Review was issued on December 21, 2016. The Court finds that the Notice of Application was issued within the 30 day timeframe as set out in s. 37(1) of the Act.

[32] The evidence is that the Notice of Application was forwarded by Mr. Ferris, Andy and Jasmin's then counsel, to Clifford's counsel, Mr. Bogue, by email. Rule 16.05(1)(f) allows for service of documentation on the solicitor of record by email. Therefore, the Court finds that service of the Notice of Application by email was appropriate service.

[33] Some suggestion was made that Mr. Bogue was not the solicitor of record. The Court notes that Mr. Bogue was Solicitor of Record at the time of the Arbitration and was the Solicitor of Record in February 2017, when he brought an application to turn the arbitration award into an enforceable Court Order. There is no evidence that Mr. Bogue ever got off the record. Therefore, the Court finds that Mr. Bogue was Solicitor of Record, and service on him was proper service.

[34] Andy and Jasmin concede that the majority of the Notice of Application for Judicial Review is poorly prepared and alludes to arguments of both fact and law.

[35] However, the Court notes that the Notice of Application does seek a review based on the principles of justice and procedural fairness.

[36] Counsel for Andy and Jasmin acknowledged at the hearing of the Motion that they no longer relied on the other subsections that they claimed, being s. 46(1) sub. 3, 4, 5, 7 and 9.

[37] At the motion, Mr. Rana, counsel for Andy and Jasmin, specifically indicated that they were relying on s. 46(1), 6 and 8 only, which read as follows:

46 (1) On a party's application, the court may set aside an award on any of the following grounds:

6. If the ground alleged for setting aside the award could have been raised as an objection to the arbitral tribunal's jurisdiction to conduct the arbitration or as an objection that the arbitral tribunal was exceeding its authority, the court may set the award aside on that ground if it considers the applicant's failure to make an objection in accordance with section 17 justified.

7. Instead of setting aside an award, the court may remit it to the arbitral tribunal and give directions about the conduct of the arbitration.

[38] The Court finds that this is not an appeal from the Decision of the Arbitrator that involved mixed questions of facts and law. The Court finds this is a Judicial Review of the Arbitrator's Decision as set out in s. 46(1) of the Act.

[39] The Court has reviewed the wording of the Notice of Application for Judicial Review and the Amended Notice of Application.

[40] The Court finds that overall both documents are poorly worded and do allude to arguments of both fact and law.

[41] A closer look at the wording of the Notice of Application and the Amended Notice of Application show that Andy and Jasmin are seeking a review based on the principles of justice and procedural fairness. Therefore, on that basis, the Court finds that both the Notice of Application and the Amended Notice of Application do fall within the wording of s. 46(1) of the Act and therefore meet the necessary criteria of that section.

[42] The Court notes that the Notice of Application was issued in Ottawa to the Divisional Court. While issuing this document in Ottawa may not have been procedurally correct, the Court finds that in accordance with Rules 1.04 of the Rules of Civil Procedure, the formality of having issued the Notice of Application for Judicial Review is appropriate for the purpose of this matter.

[43] Clifford's counsel's argument that an extension of time was being sought by Andy and Jasmin in order to file their Notice of Application is rejected. The Court has found that the Notice of Application was issued within the 30 day period, as required under s. 47(1) of the Act. Therefore, there is no need to deal with the argument about the extension of time since no extension of time was sought or was necessary.

[44] Therefore, the Court finds that Andy and Jasmin have complied with the deadline and formality requirement for the Judicial Review.

Issue #2: Did Jasmin's non-attendance at the Arbitration constitute a procedural irregularity that would render the Arbitrator's decision procedurally unfair?

Andy and Jasmin's Position:

[45] Andy and Jasmin argue that as Jasmin was a Defendant in the main action, that she had the right to attend the Arbitration when Clifford presented his case and that since she was not present at that time because she was in a treatment facility, the Arbitrator should not have allowed the Arbitration to proceed until she was in attendance. They argue that procedural fairness would include a party's ability to attend the case being brought against them. They rely on s. 19(2) of the Act, which states that each party must be "given an opportunity...to respond to the other party's case".

[46] They argue that since Jasmin was denied the opportunity to properly respond to Clifford's case, it was a violation of her natural justice rights codified in s. 19(2) of the Act.

Clifford's Position:

[47] Clifford argues that counsel for Andy and Jasmin requested and agreed to Clifford presenting his case to the Arbitrator in Jasmin's absence.

[48] Clifford argues that he and the Arbitrator made every effort to schedule the Arbitration to accommodate Jasmin's schedule. Jasmin's counsel arranged the schedule to exclude Jasmin from Days 1 and 2 of the hearing, notwithstanding his assertion that Jasmin was hospitalized for depression.

Analysis:

[49] Andy and Jasmin's counsel acknowledged at the hearing of the Motion that there was an agreement between the parties prior to the Arbitration that Jasmin did not have to be present for the entire Arbitration Hearing.

[50] Therefore, based on this acknowledgment, the Court finds that there was no procedural irregularity by her non-attendance for the full hearing of the Arbitration.

Issue #3: Does the amendment of the style of cause made by the Arbitrator and the removal of Jasmin as a Defendant at the Arbitration constitute a procedural irregularity that would render the decision procedurally unfair?

Andy and Jasmin's Position:

[51] Andy and Jasmin argue that the Arbitrator, at page 2 of his Decision, indicated that his jurisdiction was limited to the dispute between Clifford and Andy and that he interpreted the Order of Justice Scott to mean that Jasmin was only to attend the Arbitration as a witness and that she was not to become a party to it.

[52] They argue that this Ruling by the Arbitrator is in contradiction to the Scott J. May 9, 2016, Order made at the pre-trial, which ordered that:

The Plaintiff and the Defendants, Maracle and Johnson, will attend binding arbitration in Kingston, Ontario . . . the Defendant, CIBC, does not have to participate in the binding arbitration.

[53] Andy and Jasmin argue that in the Arbitration Agreement, he specifically refers to Jasmin as a Defendant. As well, the style of cause in the Arbitration Agreement and pre-Arbitration submissions specifically list Jasmin as a Defendant, but in the style of cause of the Arbitrator's Decision she is removed from the style of cause entirely.

[54] They argue that the Arbitrator removed Jasmin's name from the matter after the Arbitration, which is in violation of Justice Scott's Order without providing notice to the parties or their counsel.

[55] They argue that the liability of Andy cannot be separated from Jasmin because Clifford's original Statement of Claim claims against Andy, Jasmin and the CIBC and then proceeds to separate his claim against the CIBC. He makes the same allegations against Andy and Jasmin and seeks the same remedy against Andy and Jasmin, but a separate remedy against the CIBC.

[56] They argue that the case against Jasmin should either proceed by Arbitration, as per the Order of Justice Scott, or before a judge under the Superior Court of Ontario, which could lead to differing results on the same fact pattern or allegations, which brings the administration of justice into disrepute. They argue that the only way to avoid this is to set aside the Arbitration Decision and have a new Arbitration with both Andy and Jasmin as the Defendants.

[57] Andy and Jasmin rely on the case of Carillion Construction Inc. v. Imara (Wynford Drive) Ltd., 2015 ONSC 3658, at paragraph 63, which says:

63. The integrity of the administration of justice requires the court and the parties to find a process to harmonize the contractual arbitration process with the court trial process to avoid duplication, inconsistent findings and multiple proceedings. Where they are unable to do so then the court has discretion to intervene. Section 6§3 of the Arbitration Act, 1991 contemplates that situations may arise where that Act could operate in a manner that is unfair to a party to an arbitration agreement. The general prohibition against court intervention in arbitrations governed by the Arbitration Act, 1991 does not apply where the court is asked to intervene "to prevent unequal or unfair treatment of parties to arbitration agreements".

[58] They also argue that the Ontario Court of Appeal in its Decision of Griffin v. Dell Canada Inc., 2010 ONCA 29, at paragraph 48 said that there should be an effort to ensure that all parties are part of one proceeding.

Clifford's Position:

[59] Clifford's counsel argues that there was no procedural irregularity involved. Jasmin was not named as a party to the Arbitration Decision because she was not a partner in Smokin' Joe's and she was not found liable for approximately 11 million dollars as was her husband, Andy.

[60] He argues that the statement in the Arbitrator's Decision that Jasmin was a Defendant is obiter and that it has no effect whatsoever. The Arbitrator said that she was not a proper Defendant because she was not a party to the partnership dispute.

Analysis:

[61] The Partnership Agreement was clearly between Clifford and Andy. It was signed by both of them. Jasmin was not mentioned in the Partnership Agreement, nor was she party to the Partnership Agreement. Lastly, she did not sign the Partnership Agreement.

[62] Clifford set out the grounds under which the Statement of Claim was issued.

[63] The Arbitrator could not properly make a finding in relation to an allegation that Jasmin had signed cheques valued at 3.8 million dollars because the CIBC was not a party to the Arbitration and the source documents dealing with her purported unauthorized signature of cheques would have had to from the CIBC.

[64] Clifford filed an Affidavit from the Arbitrator, John Curtis who notes that the Scott J. May 9, 2016 Endorsement says, "The Plaintiff and the Defendants, Maracle and Johnson, will attend binding Arbitration in Kingston". He notes that Jasmin and Andy were required to "attend" the mediation.

[65] Mr. Curtis deposes that Justice Scott's Order gave no instructions or restrictions as to the Arbitrator's jurisdiction or as to the scope of the Arbitration or the issues to be determined. Mr. Curtis deposes that in his view those items were to be left to the Arbitrator to determine.

[66] Mr. Curtis' evidence is that once he commenced the Arbitration and had a chance to review the Partnership Agreement, it seemed obvious to him that Justice Scott had referred the matter to Arbitration because paragraph 21 of the Partnership Agreement included a provision for Arbitration between Andy and Clifford. He said that although the dispute between them in the court action was related to disputes under the Partnership Act, R.S.O. 1990, c. P.5, it was possible to separate the issues and simplify the court proceedings by having the Arbitration.

[67] The Court notes that the Scott J. Endorsement does not set out any rules or parameters for the Arbitration, nor does it set out the scope of the Arbitration or the issues to be determined. Those were to be determined by the Arbitrator as he thought appropriate, which, in fact, he did. The Court finds that the scope of the rules and parameters of the Arbitration were properly determined by the Arbitrator because the Scott J. Order left it open for the Arbitrator to do so.

[68] The Court does not see what benefit will be gained by an arbitration between Clifford and Jasmin.

[69] Therefore, the Court finds that the concerns raised by Andy and Jasmin in relation to this issue are not a procedural irregularity.

[70] Based on the pleadings of this action, the Court does not find that the balance of this matter going to trial would result in duplication, inconsistent findings or multiple proceedings.

[71] The Court finds that any other issues that relate to Jasmin in this action can be dealt with at trial. The Court finds that no further Arbitration is required.

Issue #4: Was there a reasonable apprehension of bias on the part of the Arbitrator at the Arbitration?

Andy and Jasmin's Position:

[72] Andy and Jasmin argue that the Arbitrator's conduct and comments made at the arbitration raise the question of bias.

[73] These are set out in the Affidavit of Andy as well as in the Affidavit of Jonathan Ferris, and are encapsulated as follows:

a) The Arbitrator said to Andy, "Your father just wants his empire back".

b) The Arbitrator said to Andy, "Are you sure you don't want to settle? Your father is quite a good litigator".

c) The Arbitrator indicated that he was honoured to preside over an Action with someone as famous as the father.

d) The Arbitrator indicated his admiration for the father for winning a case over the government on a tax issue.

e) The Arbitrator indicated this case would make a good book.

f) Andy overheard Clifford talking to the Arbitrator about a member of the bench that they both disliked. Apparently inappropriate language was used to describe the member of the bench.

g) The Arbitrator said that he would not give any weight to the evidence of Rob Deacon, an expert for Andy.

h) The Arbitrator allowed Clifford to put in his evidence without Jasmin being present.

i) The Arbitrator stated that he would not place a lot of weight on Mr. Deacon's testimony, which was inappropriate and lead to the appearance of bias on behalf of the Arbitrator.

[74] Andy and Jasmin rely on s. 46(1)8 of the Act, which states that an Arbitration award will be set aside if there is a "reasonable apprehension of bias of the conduct of the Arbitrator". They rely on the case of Calabrese v. Weekes (2003), 126 A.C.W.S. (3d) 383, at paragraph 35, which says:

A reasonable apprehension of bias is '...measured by whether a reasonably informed bystander could reasonably perceive bias on the part of the adjudicator'.

[75] They argue that the test for finding reasonable apprehension of bias is an objective test and is highly fact specific (Simcoe Condominium Corp. No. 78 v. Simcoe Condominium Corp. No. 50 (2006), 40 R.P.R. (4th) 102, at paragraph 57).

Clifford's Position:

[76] Clifford's counsel relies on s. 13(1) and (3) and s. 46(4) of the Act, which read as follows:

13 (1) A party may challenge an arbitrator only on one of the following grounds:

1. Circumstances exist that may give rise to a reasonable apprehension of bias.

2. The arbitrator does not possess qualifications that the parties have agreed are necessary.

(3) A party who wishes to challenge an arbitrator shall send the arbitral tribunal a statement of the grounds for the challenge, within fifteen days of becoming aware of them.

46(4) The court shall not set aside an award on grounds referred to in paragraph 8 of subsection (1) if the party had an opportunity to challenge the arbitrator on those grounds under section 13 before the award was made and did not do so, or if those grounds were the subject of an unsuccessful challenge.

[77] Clifford argues that, under s. 13(1) and (3) at the latest, Andy and Jasmin would have to had claimed the bias 15 days after the release of the decision being 15 days after November 24, 2016. He argues that no letter to the claim for bias was put in evidence before the Court.

[78] Further, Clifford argues that in accordance with the Affidavit of Mr. Curtis, his evidence is that there was a mediation followed by an arbitration and that the terms of the mediation agreement provided that everything said during that part of the process is confidential. Mr. Curtis said that the mediation part of the process can sometimes include what mediator's call "reality testing", in which parties are asked to look at various worse case outcomes.

[79] Mr. Curtis categorically denies making any of the comments alleged during the arbitration hearing, as set out in the Applicant's Factum at paragraphs 34(a), (b) and (c). He says that anything that was said during the mediation was confidential.

[80] He also states that he does not recall making any disparaging remarks about a judge.

Analysis:

[81] At paragraph 36 of Calabrese v. Weekes, Justice Himel says:

In A.T. Kearney Ltd. v. Harrison, [2003] O.J. No.438 (Sup.Ct.), Lax J. said at para. 7:

The threshold for a finding of real or perceived bias is a high one since it calls into question both the personal integrity of the adjudicator and the integrity of the administration of justice. The grounds must be substantial and the onus is on the party seeking to disqualify to bring forward evidence to satisfy the test....

[82] In Calabrese, the Court held that the onus on the Applicant had not been met and that Mr. Calabrese could not rely on s. 46 to set aside the Decision and allege that the Arbitrator erred in law in his interpretation of the contract.

[83] The Court agrees that the threshold to find a reasonable apprehension of bias is very high.

[84] The parties were aware that both a mediation and a subsequent arbitration were going to take place. They had all signed the Mediation and Arbitration Agreements.

[85] The Court is satisfied that if any of the statements were made by the Arbitrator, they would have been made during the Mediation and not during the Arbitration.

[86] The Court does not find that Andy and Jasmin have met the threshold on either real or perceived bias on the part of the Arbitrator.

[87] The Court has reviewed s. 13(1) and (3) and s. 46(4) and notes that that these sections are very specific. The bias complained of must be made in writing within 15 days and it must be made to the arbitrator. The Court finds that there is no evidence that s. 13(1) and (3) were complied with by either Andy or Jasmin.

[88] The Court also notes that none of the allegations related to bias as suggested either by Andy or by Mr. Ferris are corroborated in any way.

[89] Therefore, the Court finds that there is no reasonable apprehension of bias on the part of the Arbitrator in this decision.

Issue #5: Did the non-use of the then existing rules of the Canadian Arbitration Association as being the governing rules for the arbitration as set out in the Partnership Agreement, and the use of the provisions of the Arbitration Act and the ADRIC Rules of Arbitration constitute a procedural irregularity that would render the Arbitrator's Decision procedurally unfair?

Andy and Jasmin's Position:

[90] Andy and Jasmin argue that the Arbitrator did not conduct the Arbitration pursuant to the agreed upon procedure set out in the Partnership Agreement, i.e. in accordance with the then existing rules of the Canadian Arbitration Association.

[91] They argue that the Arbitrator in his decision at page 2 said that the Arbitration was conducted under the terms of the Partnership Agreement, when it was, in fact, conducted under the ADRIC Rules.

[92] They argue that failing to conduct the Arbitration under the agreed upon method in the Partnership Agreement is a procedural irregularity.

Clifford's Position:

[93] Clifford argues that this is not an issue because all parties signed the Arbitration Agreement, which specifically said that the Arbitration would be conducted in accordance with the rules under the Act and the ADRIC Rules. There was no objection at the time that the Arbitration Agreement was signed and therefore there was no procedural irregularity.

Analysis:

[94] In relation to the rules to be adopted for the procedure at the Arbitration, Mr. Curtis, in a letter dated September 27, 2016, to counsel at paragraph 4 said:

Counsel will confer with each other to determine the rules of procedure to be applied by the Arbitrator (Arbitration Act or Rules of Civil Procedure ADRIC Rules...).

[95] The Court has reviewed the Arbitration Agreement. Paragraph 1 specifically says that the parties agree to proceed to an Arbitration of their dispute in accordance with the provisions of the Arbitration Act and the ADRIC Rules of Arbitration, where applicable.

[96] The Court finds that all parties:

1. had independent legal advice;

2. agreed to the use of the provisions of the Arbitration Act and the ADRIC Rules of Arbitration; and

3. signed the Arbitration Agreement.

[97] The Court finds that, based on this evidence, the parties were aware of what rules would apply to the arbitration well in advance of its commencement. The issue was not raised prior to Arbitration and the parties signed the Arbitration Agreement.

[98] Therefore, the Court finds that there is no procedural irregularity with respect to this issue.

Issue #6: Were the irregularities with respect to the expert testimony, sufficient to result in the rendering of the Arbitrator's decision procedurally unfair?

Andy and Jasmin's Position:

[99] Andy and Jasmin argue that their expert, Mr. Deacon did not testify as a result of comments made by the Arbitrator at the Arbitration because, according to them, the Arbitrator made representations to them and their counsel that lead to their decision not to call Mr. Deacon.

[100] The Affidavit of Mr. Ferris says that Mr. Curtis informed his clients and himself that he, Mr. Curtis, would not be placing much weight on the testimony of Mr. Deacon due to representations made by the Plaintiff's expert witness John Douglas, and production of a document not seen before the Arbitration hearing called "Practice Bulletin no. 1E 210: Guidance on Limited Critique Reports" authored by or on behalf of the Canadian Institute of Chartered Business Evaluators submitted by Clifford.

[101] Andy and Jasmin argue that the reason they decided not to call Mr. Deacon as an expert was because of the following:

1. Mr. Douglas, the expert for Clifford at the Arbitration, indicated that any numbers could be plugged into his calculation method and a figure for lost profits would result.

2. Mr. Douglas indicated that he had not undertaken any forensic accounting of his own, but has simply used the numbers for costs per item provided to him by Clifford or people who work for him. There was no evidence provided to Mr. Douglas to substantiate the numbers used in his formula.

3. Nearing the conclusion of the Arbitration, Clifford's counsel suggested that they should be able to submit numbers for the actual costs to net profits for both tobacco sales and gasoline profits. According to Mr. Ferris' Affidavit, Mr. Bogue stated that his client was not seeking a windfall, simply "the truth". Mr. Ferris says that this was agreed to by Mr. Curtis.

4. At the hearing of the motion, Andy and Jasmin's counsel argued that since the Arbitrator said that he would place little or no weight on Mr. Deacon's testimony, they chose not to call him because they felt that doing so would antagonize the Arbitrator.

[102] According to Andy and Jasmin, they had retained Mr. Deacon to prepare a Limited Critique Report. They argue that a Limited Critique Report in responding to an expert's report has been recognized by the Courts. They rely on the case of Glass v. 618717 Ontario Inc., 2012 ONSC 535, at paragraph 248 in which the Court said:

[T]he Canadian Institute of Chartered Business Evaluators defined a Limited Critique Report as one which comments on another report...while a Limited Critique Report cannot offer its own conclusion...the Standards due permit it comment on the calculations in the original Evaluation Report and make statements 'of directional impact of differing calculations or assumptions and on the Original Report's conclusion, as appropriate...'

[103] Andy and Jasmin argue that as a result of comments made by the Arbitrator, they did not call Mr. Deacon to testify. This argument was based on representations made by the Arbitrator to Andy, Jasmin and their counsel, Mr. Ferris.

[104] According to Mr. Ferris' Affidavit, at paragraph 3 he deposed that the Arbitrator informed them that he would not be placing much weight into the testimony of Mr. Deacon due to representations made by Clifford's expert John Douglas and the production of the aforesaid practice bulletin.

Clifford's Position:

[105] Clifford argues that Mr. Deacon did not testify and that the only information available to the Arbitrator in relation to the amount claimed was the evidence given by Mr. Douglas together with his report.

[106] He argues that Mr. Curtis made a ruling on October 14, 2016, the second day of the Arbitration. Among other things, the ruling read:

[3] Mr. Ferris confirmed that he will call three witnesses on October 31, 2016 as follows: Andy Miracle [sic], Jasmin Johnson and Robert Deacon.

[4] It was further discussed and agreed between the parties, and I so order that Mr. Ferris will contact Mr. Deacon forthwith regarding the issues raised by the Defendants with respect to the practice bulletin (filed herein as Exhibit "J") and provide to Mr. Bogue the response of Mr. Deacon on or before October 19, 2016. They further agreed, and I so order, that if there are any disagreements regarding the evidence Mr. Deacon will provide that require a Ruling by the Arbitrator, the Arbitrator will be advised of such a disagreement and will rule on this on or before October 27, 2016.

[107] Mr. Clifford's counsel argues that a series of emails followed the Ruling, the first of which was on October 19, 2016, at 12:12 p.m. which was from Mr. Curtis to Mr. Bogue and to Mr. Ferris that reads:

Mr. Bogue is correct. If Mr. Deacon will be changing his report or providing any documents to support a decision he will be taking with regard to the issues raised by the information bulletin (Exhibit J) that must be provided by the end of the day today.

[108] A subsequent email on October 19, 2016, at 5:57 p.m. from Mr. Curtis to Mr. Bogue and Mr. Ferris reads:

If Mr. Deacon will limit his testimony on this subject of the restrictions on his opinion raised by the contents of Exhibit J oral testimony, I will hear his explanation, but if he intends to refer to any external sources, those must be provided by the end of the day.

Given my late response to this email, I am prepared to make allowance on this and extend that time from to [sic] the end of the day tomorrow (October 20^th).

A further email was received from Mr. Curtis sent to Mr. Bogue and to Mr. Ferris on October 19, 2016, at 12:13 p.m. reading, "Mr. Deacon has indicated to me that his letter is not a limited critique and will explain such during his testimony."

[109] On October 20, 2016, at 2:16 p.m. an email was sent from Mr. Ferris to Mr. Curtis and Mr. Bogue reading:

I am now in D.C. with internet and can advise Mr. Deacon will limit himself to oral testimony. I look forward to meeting again on the 31^st.

[110] Later on October 20, 2016, at 4:11 p.m., Mr. Bogue wrote to Mr. Ferris and Mr. Curtis reading:

I asked for clarification of J.C.'s ruling late on the 19^th.

#1 If no documents from Mr. Deacon arrive by 5:00 p.m. today, no documents will be allowed on October 31.

#2 J.F. just advised Mr. Deacon is limited to oral testimony on October 31.

#3 We still request a definition of what a limited critique is in the mind of Mr. Deacon, before October 31, so we can make a timely response from our experts. Further, we request a statement before October 31, for Mr. Deacon stating exactly what his letter in evidence is, if not a limited critique so our experts can timely reply. Otherwise, we would not be able to cross-examined [sic] properly.

[111] Mr. Curtis replied on October 20, 2016, to Mr. Bogue with a "cc" to Mr. Ferris at 7:40 p.m.:

#1 Correct.

#2 Correct, if nothing was delivered by the end of today.

#3 It would be reasonable for the Defendant to provide an answer to the question of how Mr. Deacon will respond to the questions about limited critique prior to him giving testimony, but I will not make an order in this regard. Should I determine that providing this answer prior to October 31^st would have avoided delay in allowing the Plaintiff's to prepare a reply or necessitated rebuttal testimony from the Plaintiff's expert, then the expense will be borne by the Defendants. I have already determined that I would consider submissions on costs if the Plaintiffs needed to bring their experts back to reply to the evidence of Mr. Deacon or to any other witnesses of the Defendants.

[112] Mr. Ferris replied to Mr. Curtis and "cc'd" Mr. Bogue on October 21, 2016 at 9:38 a.m., "Thank you John. Have a nice weekend all."

[113] On October 21, 2016, at 9:48 a.m., Mr. Bogue wrote to Mr. Curtis and Mr. Ferris saying:

In part, to be clear, the witness list for J.F. is: Andy, Jasmin, Lisa and Mr. Deacon. No more documents are to be filed regarding Mr. Deacon's testimony, which is now oral.

[114] Mr. Curtis replied to Mr. Bogue with a "cc" to Mr. Ferris on October 21, 2016, at 4:25 p.m. saying, "This is my understanding."

[115] Clifford's position is that Mr. Deacon could have testified if he wished and did not.

[116] Therefore, it is his position that there is no reason to set aside the Arbitration Decision just because Mr. Deacon did not testify and his Limited Critique Report was not tendered as evidence.

Analysis:

[117] The evidence is that Mr. Douglas is a forensic accountant who holds designations as a chartered accountant, chartered professional accountant, certified fraud examiner and certified forensic investigator. He operates a business specializing in forensic/investigative accounting and litigation. He had included an acknowledgement of the expert's duty in the format required pursuant to the Ontario Rules of Civil Procedure.

[118] Mr. Douglas was retained by the Plaintiff to calculate the Plaintiff's share of Smokin' Joe's partnership property.

[119] The evidence in the Arbitrator's Decision is that the Defence did not question Mr. Douglas' professional qualifications and experience. According to the Arbitration Report, Mr. Douglas produced five expert reports in total, but explained that two of the reports were just really an update of the original report to account for additional profits as the litigation had continued over a number of years. The original reports had covered only the period up to the end of 2013. The second reports covered until the end of 2015. The final report was not a report as much as a compendium of spreadsheets with raw data with which he was provided to create the reports.

[120] Mr. Robert Deacon is a certified chartered accountant, chartered business evaluator and certified fraud examiner.

[121] Mr. Deacon wrote a letter dated March 12, 2014, to David Cavanagh, the former solicitor for Andy and Jasmin. The letter indicated that Mr. Deacon was going to review the forensic accounting report prepared by Mr. John Douglas dated July 8, 2013, and provide comments in the form of a Limited Critique Report to be used in relation to the litigation concerning Clifford, Andy and Jasmin.

[122] According to the letter, Mr. Deacon prepared a preliminary analysis of the Douglas report and met with Andy and Jasmin to obtain additional information about the operation of Smokin' Joe's. Mr. Deacon met with Mr. Rod Gramm, a certified public accountant who was qualified as an expert for Clifford, to review the records in the possession of Yolanda Miracle who worked for Clifford Miracle.

[123] In the March 12, 2014, letter Mr. Deacon states:

As a result of our preliminary analysis and discussions to date, it is unclear to us the extent and the scope of work by the writer of the Douglas Report. Therefore, prior to preparing our Limited Critique Report, we request to obtain clarification with respect to certain matters that have come to light during the course of our preliminary analysis in this session.

[124] The letter goes on to seek clarification for various matters.

[125] The Court notes that save and except the October 14, 2016, Ruling, no other Rulings were made save and except for the decision as rendered by Mr. Curtis.

[126] The Court has reviewed the email exchanges noted above. The Court finds the email correspondence between Counsel and Mr. Curtis to be clear and unambiguous as to what was to occur and by when.

[127] The Court fails to understand why Mr. Deacon was not called to give evidence or why Andy and Jasmin did not comply with the October 14, 2016, Ruling of Mr. Curtis in relation to Mr. Deacon.

[128] In failing to comply with the aforesaid Ruling, Andy and Jasmin left the Arbitrator in a position to decide the case based on the evidence put forward at the Arbitration. The only evidence about the partnership financial information was contained in Mr. Douglas' evidence and is in his report.

[129] Mr. Curtis in his Affidavit said that:

As to the allegations by Mr. Ferris, I may have said that I would likely not be able to place much weight on any expert witness without proper documentation, but consistent with all my rulings, that weight would never occur until I have heard from the witness, had weighed their credentials and evidence before me for factors that may overcome a dearth of documentation.

[130] Andy and Jasmin chose not to file either an expert report or a Limited Critique Report. They also chose not to call Mr. Deacon to give evidence even though the email evidence up to October 21, 2016, said that Mr. Deacon would give oral evidence.

[131] Andy and Jasmin had experienced counsel who made a decision not to file a Limited Critique Report or to call Mr. Deacon. They cannot now come to court to say that there were procedural irregularities caused by the Arbitrator because the Limited Critique Report was not filed and Mr. Deacon did not testify.

[132] Any procedural irregularities in relation to these two items were not caused by the Arbitrator. The Court finds that if these were procedural irregularities, they were caused by Andy and Jasmin, who cannot now attempt to shift the burden and argue that the irregularities were caused by the Arbitrator. The responsibility for these potential irregularities rests with Andy and Jasmin alone.

[133] The Court finds that the Arbitrator based on his Decision on the information that was available to him at the Arbitration.

[134] Andy and Jasmin argue that the Arbitrator made comments with the result that Mr. Deacon did not testify. As stated previously, the Court finds that the responsibility on whether Mr. Deacon testified or not rested with the Applicants and their counsel.

[135] Other than a bald statement made by Mr. Ferris at paragraph 3 of his Affidavit, that the Arbitrator would not be placing much weight on the testimony of Mr. Deacon due to the representations made by Mr. John Douglas and the production of a practice direction No. 1E210: Guidance on Limited Critique Reports, there was no corroboration of his evidence.

[136] The Court appreciates why the Arbitration Decision placed heavy emphasis on the Douglas Report – because there was no expert report, no Limited Critique Report and no oral testimony given by anyone on behalf of Andy and Jasmin in relation to the quantum of damages or the calculations given in the Douglas Report for his testimony.

[137] The issue of the value of and the weight to be placed on the Limited Critique Report was never before the Arbitrator because such a report was never tendered as evidence at the Arbitration.

[138] Andy and Jasmin also argue that they chose not to call Mr. Deacon because the Arbitrator said that he would not listen to Mr. Deacon's evidence. The Court does not accept this position. The Court is satisfied that Mr. Curtis is an experienced Arbitrator who would not have told a party that he would not listen to the evidence of a witness, if called.

[139] Therefore, the Court finds that there was no procedural irregularities in relation to this issue that were the responsibility of the Arbitrator.

Issue #7: Did the non-consideration by the Arbitrator of the post-arbitration financial information provided by Andy and Jasmin constitute a procedural irregularity that would render the Arbitrator's Decision procedurally unfair?

Andy and Jasmin's Position:

[140] Andy and Jasmin argue that it was represented to Mr. Ferris, Andy and Jasmin, that they could submit their own numbers post-Arbitration to refute the analysis of Mr. Douglas. They argue that the Arbitrator's Decision actually states the opposite, that the Arbitrator would not be placing any weight on post-Arbitration submissions. At page 25 of the Arbitration, it reads:

I have ruled that Financial Records for 2015 prepared and submitted post-Arbitration are inadmissible...no opportunity for the Plaintiff to review and test them...

[141] Andy and Jasmin argue that their post-Arbitration numbers were not considered and should have been.

Clifford's Position:

[142] Clifford argues that there were no procedural irregularities by the Arbitrator in relation to post-Arbitration financial information provided by Andy and Jasmin. He argues that the Arbitrator made his findings in relation to these matters and that the Arbitration Decision should stand.

Analysis

[143] The Court finds it very odd that an experienced Arbitrator would say that post-Arbitration additional evidence could be tendered by one party without the other party being able to review or cross-examine on that evidence.

[144] At page 6 of the Arbitration Decision, the Arbitrator says that the defence did not question Mr. Douglas on his professional qualifications and experience.

[145] At Page 15, the Arbitration Decision says:

No objective evidence to call into question the projections in the Douglas report were offered by the Defence, apart from vague descriptions of several competitive stores opening in the general vicinity.

[146] At Page 25 of his decision, in relation to additional evidence post-Arbitration, the Arbitrator states:

I have ruled that the Financial records for 2015 prepared and submitted post-arbitration are inadmissible. There was no opportunity for the Plaintiff [Clifford] to review and test them before me at the hearing. There could have been many years during which such documents could have been provided since the commencement of the litigation in 2011. By this I mean similar records for 2013-2015. To be persuasive in the face of the Douglas reports, this type of data must be presented in a digestible format, preferably by an independent and impartial expert such as Mr. Douglas. I am simply not able to adequately understand what these must prove, nor would it be fair to the Plaintiff for me to attempt to do this without any comment from his expert.

[147] Later on, at Page 26, the Arbitrator says:

If the appropriateness of the assumptions in the Douglas report were in dispute Defence should have provided an independent expert to refute this. The Defence had several years to retain such an expert, appeared to be planning to call one (Mr. Deacon) but decided not to do so for unknown reasons. In addition the assumptions used in Mr. Gramm's calculations did prove to be quite accurate except for 2010 so this criticism falls flat.

[148] The Court rejects the arguments of Andy and Jasmin that the Arbitrator agreed to allow post-arbitration evidence on financial matters. That argument makes no sense.

[149] The Court does not take any issue with the Arbitrator's Decision to not allow this post-Arbitration evidence. To have allowed the introduction of financial evidence post-arbitration would have put Clifford at a disadvantage as he would not have been able to review and test the validity and/or veracity of the documentation.

[150] For those reasons, the Court finds that there was no procedural irregularity with respect to this issue.

Costs:

[151] Both parties have submitted costs outlines.

[152] The parties will be allowed 14 days within which to try to resolve the issue of costs. If they are unable to do so, they are to contact the trial coordinator at Belleville and set up a time at 4:30 p.m. when the parties can address the issues of costs, by teleconference.

[153] Each party will provide Rule 49 Offers to Settle, if any, to the Court at least 5 days prior to the hearing date. Each party will be allowed 10 minutes to provide oral argument as to their position on costs.

[154] Order accordingly.

Mr. Justice Stanley Kershman

Released: October 10, 2017

CITATION: Maracle v. Miracle, 2017 ONSC 5876

COURT FILE NO.: CV-13-0284-00/16-2262

DATE: 2017/10/10

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ANDREW MARACLE III and JASMIN JOHNSON

Applicants

– and –

SIR ANDREW CLIFFORD MIRACLE

Respondents

REASONS FOR JUDGMENT

KERSHMAN J.

Released: October 10, 2017