American Orthodontics Corporation v Curiel

CITATION: American Orthodontics Corporation v Curiel, 2017 ONSC 7765
COMMERCIAL LIST FILE NOS. CV-17-11759-00CL, CV-17-11825-00CL
DATE: 20171214

ONTARIO SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST

B E T W E E N:

AMERICAN ORTHODONTICS CORPORATION, Applicant

• and -

PATRICK CURIEL, Respondent

BEFORE: F.L. Myers J.

COUNSEL:
Robert Wisner and Geoff Moysa, Lawyers for American Orthodontics Corporation
John Terry and Myriam Seers, Lawyers for Patrick Curiel

HEARD: December 14, 2017

ENDORSEMENT

(Transcribed handwritten) ENDORSEMENT

I do not accept the Applicant's argument that the issue of alleged mis-application of French Law is a true issue of jurisdiction. Certainly there is no indication that the Arbitrator intentionally misapplied the law so as to pretend to determine the parties' true intentions while actually changing their agreement as discussed by Wagner J.A. (as he then was) in Nearctic Nickel Mines Inc. v. Canadian Royalties Inc., 2012 QCCA 385 at para. 78. That is a very different thing than interpreting true intentions to complete a term of the contract or determining that the written terms do not reflect the parties’ true intentions – both of which are open to the Arbitrator under French law (see paras. 70 and 73 of Nearctic).

The Applicant's complaint is that the Arbitrator read into the Earn-Out Clause a requirement for the buyer to diligently manage the purchased business based on pre-contractual representations made in connection with an unsuccessful effort by the parties to negotiate a supply agreement. The applicant says pre-contractual representations were barred by the Entire Agreement Clause. The Arbitrator disagreed. He accepted the expert evidence of the respondent’s French law expert that French law allows adjudicators to interpret conditional rights (like an earn-out) to include an obligation of diligent performance if doing so enables fulfilment of the purpose of the contract. See para. 144. The applicant had its own expert and argued the interpretative point of French law expressly before the Arbitrator.

This is a debate on whether the Arbitrator correctly decided an issue of fact (the applicable French law) and an issue of mixed fact and law (whether the Earn-Out Clause includes an obligation of the applicant to perform with diligence, as fairly interpreted). This Court ought not and will not review the merits of the decision of the Arbitrator.

The applicant argues that the issue is jurisdictional because the Arbitrator added to the scope of the submission. See United Mexican States v. Cargill, 2011 ONCA 622 at para. 41. I disagree. The issued to be decided under the counterclaim was whether the applicant was liable for breach of the SPA by, among other things, its failure to adequately support sales efforts. In the preliminary ruling, the Arbitrator held that the issue was properly before him. (The Applicant did not seek a review of that ruling). There is nothing in the arbitration clause of section 11.11 of the SPA precluding the Arbitrator from making the award. These are the necessary findings that resolve the jurisdiction issue under Cargill – see para. 52. There was no misinterpretation of section 11.11 of the SPA that might invoke para. 41 of that decision. Neither may I review that decision for reasonableness to find a jurisdictional error. Cargill at para. 51.

I am not to be taken as accepting that evidence is admissible in this proceeding, especially expert evidence on the ultimate question of whether the Arbitrator was wrong in his interpretation of French law and the contract. No one objected to the evidence as filed.

The respondent raised an issue as to whether the applicant may be estopped from challenging jurisdiction under article 34 of the Model Law, at least due to its failure to challenge the interim decision on jurisdiction under article 16(3) of the Model Law. I do not need to decide that issue given that I do not agree that an issue of true jurisdiction is raised in this matter.

Finally, the applicant argues that it was denied natural justice when the Arbitrator refused it leave to file a sur-sur-reply to rebut what it claimed was a surprise in a new theory advanced in the respondent's sur-reply (rejoinder). The Arbitrator heard argument on this issue. In his ninth procedural decision he found as a fact that the issue dealt with in the new evidence (the interpretation of the Earn-Out and the Entire Agreement Clause) was not new and was in issue before the rejoinder. Moreover, a request for further evidence would have affected timing so that the respondent would have lost the ability to cross-examine the applicant's expert. The Arbitrator balanced relative prejudice and exercised his discretion to deny the applicant a further right to file evidence. He did note that since the issue was one of law, he would allow the Applicant to argue that issue with the aid of its expert in closing argument. Moreover, Mr. Wisner confirmed that the issue was argued.

Mr. Moysa is left to challenge a finding of fact supporting a discretionary procedural decision. That is a long way from saying, or proving, that the Applicant was denied the right to be heard or procedural fairness. While Mr. Moysa argues that his client was impacted in its cross-examination and legal argument by the lack of yet another expert report, that is speculation at best. He argues that the Arbitrator could have adjourned the hearing to ensure all witnesses’ availability for cross-examination at a later date after a further report was delivered. I have no idea if that was put before the Arbitrator or if, perhaps, the applicant did not want an adjournment then. These possible evidentiary points go to a balancing of interests in deciding when the evidentiary record was closed. It had to close at some point. That procedural decision had its own rules under the applicable processes expressly adopted in section 11.11 of the SPA. In my view, the Applicant cannot show that it was denied a fair right to be heard by the discretionary decision made that protected its rights to participate and argue law as best as circumstances allowed in the Arbitrator's view.

This Court's approaches toward arbitration have evolved. We respect parties' rights to avoid judges and courts in favour of private proceedings. But, subject to narrow exceptions, those choices prevent later return to the courts if one is dissatisfied with the outcome of the chosen system. Cargill is clear on the policy limiting judicial intervention embodied in the Model Law. In my view, the applicant is asking me to correct errors of fact, law, and mixed fact and law that it alleges were made by the Arbitrator. That is not my role. Absent an error of jurisdiction or a denial of fairness, there is no basis for this court to intervene.

Dr. Curiel's application to recognize the award is granted. The applicant's challenge is dismissed.

Dr. Curiel is the applicant in parallel proceedings. He made and beat his offer to settle. While he did not offer a huge compromise, €142,000 is not a trifling sum. Costs on a partial indemnity basis to October 16, 2017 and a substantial indemnity basis thereafter total $217,762.04 with disbursements and taxes. A.O.C. is ordered to pay that amount to Dr. Curiel forthwith.

F.L. Myers J.

Date: December 14, 2017