CITATION: Profoto AB v Blazes Photographic, 2017 ONSC 6455
COURT FILE NO.: CV-17-570656
DATE: 20171101
APPLICATION FOR ENFORCEMENT OF ARBITRATION AWARD IN ACCORDANCE WITH THE INTERNATIONAL COMMERCIAL ARBITRATION ACT R.S.O. 1990 C. 19 INCORPPORATING THE UNCITRAL MODEL LAW IN ONTARIO, CANADA
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
PROFOTO AB
Applicant
– and –
BLAZES PHOTOGRAPHIC INC.
Respondent
Michael Brzezinski, for the Applicant
Michael Boylan, self-represented
HEARD: October 23, 2017
ENDORSEMENT
DIAMOND J.:
Overview
[1] The applicant is a company incorporated pursuant to the laws of Sweden with its registered head office in the City of Sundbyberg, Sweden. The applicant provides lighting solutions for professional and consumer photographers.
[2] The respondent is a company incorporated pursuant to the laws of the Province of Ontario, and carries on business in the city of Etobicoke as an importer of photographic equipment for resale on the Canadian market.
[3] The applicant seeks an order recognizing and enforcing an arbitration award dated August 16, 2016 pursuant to the provisions of the International Commercial Arbitration Act 2017, S.O. 2017, c. 2 (“the Act”). The respondent was represented by its president at the hearing of the application, and opposed the relief sought on the basis that, inter alia, the arbitrator lacked jurisdiction and the arbitration award is unenforceable under the provisions of the Act.
Summary of Relevant Facts
[4] Commencing in or around the early 2000s, the parties did business together for approximately 10 years in the absence of a formal written agreement.
[5] On or about June 1, 2013, the parties entered into a Formal Distribution Agreement for the sale and distribution of the applicant’s products by the respondent in the Canadian market. Clause 23 of the Distributor Agreement provided as follows:
“This Agreement shall be governed by the substantive laws of Sweden. Any dispute, controversy or claim arising out of, or any connection with, this Agreement shall be finally settled by arbitration administered by the Arbitration Institute of the Stockholm Chambers of Commerce. The Rules of expedited arbitration of the Arbitration Institute of the Stockholm Chambers of Commerce shall apply unless the SCC Institute, taking into account the complexity of the case, the amount and dispute and other circumstances, determines in its discretion that the Rules of the Arbitration Institute of the Stockholm Chambers of Commerce shall apply. In the latter case, the SCC Institute shall also decide whether the arbitral tribunal shall be composed of one or three arbitrators.”
[6] Subsequent to the execution to the Distributor Agreement, the parties entered into an Addendum which altered the terms of the above arbitration clause as follows:
“Notwithstanding the foregoing, any dispute, controversy or claim arising out of, or in connection with this Agreement which cannot be settled amicably between the parties shall be finally settled by arbitration (1) in Canada if instituted by Profoto or (2) in Stockholm, Sweden if instated by the Distributor. In avoidance of doubt, any actions or proceedings between the parties, including any proceedings to reduce an arbitration or to subsequent judgment, shall be brought only (1) in Canada if instituted by Profoto or (2) in Stockholm Sweden if instituted by the Distributor.”
[7] A dispute then arose between the parties resulting from outstanding sums due and owing by the respondent to the applicant. By letter dated October 30, 2014, the applicant terminated the Distributor Agreement. The salient contents of that letter are as follows:
“With reference to our letters of September 23, 2014 and October 17, 2014 regarding your repeated failure to pay us on the payment terms due and our intention to terminate the agreement unless the failure was remedied, we have decided to terminate the captioned Distribution Agreement, with an immediate effect under Section 12.4 of the Distribution Agreement (Section 13 of the Addendum).
Thus, this letter serves as a formal notice of terminating our Distribution Agreement including any and all Addendums that have been entered between us. The termination is effective November 1, 2014.”
[8] After the termination of the Distributor Agreement, and in an effort to maintain their longstanding business relationship, the parties were interested in continuing to do business with each other. As a condition of doing further business with the respondent, the applicant forwarded a new set of terms and conditions. These were prepared in order to enable the parties to resume the business relationship, and contained the following clause:
“All Agreements shall be governed by the substantive laws of Sweden. Any dispute, controversy or claim arising out of, or in connection with, and Agreement shall be finally settled by arbitration administered by the Arbitration Institute of the Stockholm Chambers of Commerce. The Rules for expedited arbitration of the Arbitration Institute of the Stockholm Chambers of Commerce shall apply unless the SCC Institute, taking into account of the complexity of the case, the amount and dispute and other circumstances, determines in its discretion that the Rules of the Arbitration Institute of the Stockholm Chambers of Commerce shall apply. In the latter case, the SCC Institute shall also decide whether the arbitral tribunal shall be composed of one or three arbitrators.”
[9] By email dated November 12, 2014 the applicant advised the respondent as follows:
“Thanks for the order. In order for me to process and release this order, I have to get cleared by Patrick and Petter and they have informed me (sic) the following:
‘Until a final decision has made on how to handle sales in Canada, we are, even if the Distribution Agreement has been terminated, willing to do business with you under the new terms and conditions (sic) has been sent to you on October 29th. As mentioned in the letter sent on November 6th the future decision on sales in Canada will be made based on fulfillment of certain criteria and Profoto’s evaluation. This need (sic) to be said in relation to both the email you have send on November 11th (attached) and in relation to your just newly placed order.
We will now process your order internally, however, first please confirm by return email that you acknowledge that attached Profoto terms and Conditions of Sale Canada will apply to the order.’”
[10] In response, the respondent delivered an email which had questions about the new terms and conditions, including questions surrounding standing pricing requirements and product exclusivity. However, on its face, that email did not ask any questions or raise any concerns with respect to the new arbitration clause.
[11] In any event, the respondent placed additional orders with the applicant. The respondent failed to remit payment towards the invoices rendered with those new orders (over and above the outstanding amounts due under the invoices rendered pursuant to the original Distributor Agreement).
[12] On or about May 3, 2015, the applicant terminated the new agreement pursuant to section 17 of the new terms and conditions. On June 12, 2015, the applicant made a demand for payment for $388,149.53 (USD) on account of all amounts owing to it from the respondent (i.e under both the original Distributor Agreement and the new agreement).
[13] Pursuant to a Request for Arbitration dated August 18, 2015, the applicant commenced arbitration proceedings against the respondent with the Arbitration Institute of the Stockholm Chambers of Commerce (“AISCC”). The AISCC accepted the case for arbitration. In response, the respondent denied the relief sought by the applicant and requested the AISCC to first determine whether it had jurisdiction to arbitrate the dispute between the parties. The respondent made formal submissions in support of its position that the AISCC did not have jurisdiction to conduct the arbitration.
[14] Ultimately, the AISCC determined that it had jurisdiction, but only over the disputed amounts allegedly owing under the new agreement (i.e. the products delivered and sold under the new terms and conditions).
[15] Once the jurisdiction issue was determined, the parties (including the respondent) exchanged and filed pleadings, documentary evidence and legal submissions in respect of the arbitration. It appears the respondent was given a full opportunity to present its case/defence, including the opportunity to lead evidence and make submissions (although in writing).
[16] On April 15, 2016, the AISCC delivered its arbitral award in favour of the applicant, holding that the applicant was entitled to:
(a) $112,956.94 USD on account of invoices owing pursuant to the new agreement, together with pre and post judgment interest;
(b) legal costs in the amount of 36,877.50 EUR;
(c) 11,157.92 EUR for arbitration costs; and
(d) interest on the legal costs and arbitration costs in the rate described by section 6 of the Sweden Interest Act.
[17] The respondent has refused to pay the amounts owing under the arbitral award. As a result, the applicant commenced the within application.
Endorsement of Foreign Arbitral Awards
[18] The Act adopts the provisions of the Model Law on International Commercial Arbitration and The Convention of the Recognition and Enforcement of Arbitral Awards. As held by the late Justice Lax in Corporacion Transnacional de Inversiones S.A. de C.V. v. Stet International S.P.A 1999 CanLII 14819 (ON SC), [1999] O.J. No. 3573, broad deference and respect are to be accorded to decisions made by foreign arbitral tribunals pursuant to the Model Law.
[19] An arbitral award is not invalid if the court hearing the application is of the opinion that the tribunal wrongfully decided an issue of fact or law. There is a powerful presumption that the foreign arbitral tribunal acted within its powers and jurisdiction.
[20] Absent proof of certain restricted, enumerated grounds, a foreign arbitral award will be recognized and enforced in Ontario. Article 36(1) of the Model Law sets out those specific grounds for refusing enforcement. In summary, those grounds are as follows:
(a) if a party to the arbitration was under an incapacity, or the arbitration agreement is not valid under the law to which the parties has subjected it;
(b) if the party against whom the award is invoked was not given proper notice of the appointment, or the arbitrator, or the arbitral proceedings;
(c) if the award deals with a dispute not contemplated by or not falling within the terms of this submission to arbitration;
(d) if the composition of the arbitral tribunal or the arbitral process was not in accordance with the agreement between the parties;
(e) if the arbitral award has not yet become binding on the parties, or has been set aside or suspended by a court of the country in which the order was made; and
(f) if the enforcing court finds that the recognition or enforcing of the order is contrary to the public policy of the enforcing court, or if the subject matter of the dispute is not capable of settlement by arbitration under the law of the enforcing court.
Decision
[21] In my view, the respondent cannot satisfy any of the above grounds to avoid enforcement and recognition of the AISCC arbitral award. The respondent challenged the jurisdiction of the AISCC, and lost on the basis that the AISCC assumed jurisdiction over the dispute under the new agreement. The amounts ordered under the arbitral award arose from obligations incurred by the respondent under the new agreement, and therefore properly before the AISCC.
[22] Regardless of whether the original Distributed Agreement or Addendum contained different arbitral clauses, in my view the pre-existing contractual relationship between the parties is irrelevant to the issue of whether the AISCC could determine issues governed by the terms of the new agreement. I do not find that the respondent has displaced the powerful presumption that the AISCC acted within its powers and jurisdiction.
[23] The respondent has not taken any steps to attempt to have the arbitral award set aside or suspended. There is no basis to find that enforcement of recognition of the AISCC arbitral award would be contrary to public policy. There is nothing in the arbitral award which fundamentally offends the basic principles of fundamental justice and fairness in Ontario.
[24] Accordingly, the application is granted. The arbitral award dated April 16, 2006 is recognized and enforced by this Court. The respondent is hereby ordered to pay the applicant an amount in Canadian currency sufficient to purchase:
(a) $112,956.94 (USD) on account of outstanding invoices;
(b) 36,877.50 EUR in legal costs; and
(c) 11,157.92 EUR for arbitration costs, together with interest as awarded by the AISCC.
Costs
[25] I would urge the parties to try and resolve the issue of costs of this proceeding. Absent an agreement, they may serve and file written submissions in accordance with the following schedule:
(a) the applicant may serve and file its costs submissions within 10 business days of the release of this Endorsement. Those submissions shall be no more than four pages including a Bill of Costs.
(b) the respondent shall thereafter have an additional 10 business days from the receipt of the applicant’s costs submissions to deliver its responding costs submissions which shall also be no more than four pages including a Bill of Costs.
Diamond J.
Released: November 1, 2017
CITATION: Profoto AB v Blazes Photographic, 2017 ONSC 6455
COURT FILE NO.: CV-17-570656
DATE: 20171101
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
PROFOTO AB
Applicant
– and –
BLAZES PHOTOGRAPHIC INC.
Respondent
ENDORSEMENT
Diamond J.
Released: November 1, 2017