Court File and Parties

COURT FILE NO.: CV-17-588632 DATE: 20180711 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Zenith Aluminum Systems Limited, Applicant AND: 2335945 Ontario Inc., Respondent

BEFORE: Carole J. Brown, J.

COUNSEL: Adam Wainstock, for the Applicant Greg Murdoch, for the Respondent

HEARD: May 22, 2018

ENDORSEMENT

[1] The applicant, Zenith Aluminum Systems Limited (“Zenith”), brings this application for an order requiring the respondent to submit to arbitration regarding the issue of whether Zenith was required to supply and install guardrails and privacy screens as regards the construction of the condominium known as One Victoria at 445 King St. W., Kitchener, Ontario. The applicant further seeks an order setting the scope, parameters and procedure for the arbitration pursuant to section 6(1) of the Arbitration Act, 1991, S.O. 1991, c 17, as well as fixing a date for the arbitration.

The Parties

[2] Zenith provides glazing, including aluminum window/wall systems to construction projects in southern Ontario. The respondent, 2335945 Ontario Inc., carrying on business as Momentum Developments (“Momentum”), is a developer and builder of condominiums in Ontario and was the registered owner of 445 King St. W., Kitchener.

[3] In late 2013, Zenith entered into negotiations with Momentum to determine the requirements for the window wall systems to be used in the construction of the condominium project. Zenith essentially provided the blueprint for the specifications for the glazing requirements of the project. In 2014, Zenith provided a series of budget quotations based on the changing project requirements, with a final budget quotation dated June 9, 2014 in the amount of $2,997,500 plus HST. Zenith never quoted or referred to pricing or details regarding a balcony guardrail system for the project, as Zenith does not supply or install such systems. On January 21, 2014, Aluminum Railing Technologies Limited (“ART”), a distinct corporation, provided a quotation for said balcony railings and dividers for a price of $319,000 plus HST.

[4] On August 25, 2014, Momentum issued a purchase order to Zenith accepting Zenith’s budget quote, as above stated, for its glazing services. Thereafter, in May 2015, Momentum took the position that Zenith was required to provide guardrails and privacy screens for the project, which were not included in its quote and which it does not do.

[5] As a result, the parties met to discuss the issue on May 11, 2015 and Momentum expressed its wish to arbitrate the issue of the guardrail and privacy screens (“the railing dispute”). On May 15, 2015, Momentum delivered correspondence setting out its version of the issues and indicating its intention to arbitrate the railing dispute. While Zenith never signed this document, it did agree to arbitrate the railing dispute. The parties agreed upon an arbitrator, Glenn Ackerley, and arbitration dates. The parties discussed the process for the arbitration with Mr. Ackerley. An arbitration date was scheduled for November 2016. It was subsequently rescheduled for April 2017. Subsequently, a dispute arose regarding the scope of disclosure and pre-arbitration steps to be taken.

[6] No arbitration agreement was signed, due to the disagreement on the scope and pre-arbitration steps to be taken.

[7] In early 2017, in order to avoid any concerns with limitation periods regarding the issues involved, the parties entered into a tolling agreement on May 15, 2017. Zenith had already executed the tolling agreement. Momentum returned its executed copy of the tolling agreement but it was never delivered to Zenith; rather, it was diverted to the “junk” folder of the software system. As a result of the failure to receive the tolling agreement, on May 17, 2017, Zenith issued a breach of trust claim as regards the “railing dispute”, naming Momentum and its officers and directors. The statement of defence and counterclaim of Momentum indicates that they agreed to arbitrate the railing dispute. Nevertheless, Momentum now takes the position that it does not wish to arbitrate but wishes to have all issues resolved in the litigation.

[8] It is the position of the applicant, Zenith, that both parties have indicated their intention to arbitrate the railing dispute, and that the parameters were set for conducting the arbitration, except for the scope of discovery. The arbitrator had been selected, a location for conduct of the arbitration had been agreed upon and witness lists were exchanged. Zenith states that the parties had agreed that there were only two possible outcomes for the determination of the railing dispute: either railings were not included in Zenith’s contract such that the sum of $319,000 was owing to Zenith from Momentum or, alternatively, Zenith was required to supply and install the railings, which it did not do, and Momentum is therefore entitled to a credit for the amounts spent on the railings. Thus, it is the position of Zenith that the essential terms of the arbitration had been agreed upon.

[9] Momentum takes the position that there is no longer an arbitration agreement, as Zenith served it with a Withdrawal of Notice of Arbitration dated November 21, 2016. However, following that, the parties continued to attempt to agree as regards an arbitration and signed the tolling agreement. The parties attempted to agree on terms for an arbitration agreement following the notice of withdrawal but were unsuccessful.

[10] It is the position of Momentum that multiplicity of legal proceedings shall be avoided: Courts of Justice Act, R.S.O. 1990, c. C 43, s. 138, and that, with the commencement of the lawsuit, it is no longer willing to arbitrate. It takes the position that Zenith has chosen to initiate a court action dealing with the same subject matter as the contemplated arbitration, adding Momentum’s directors to that action, although it admits that the original dispute between the parties may have been capable of resolution by way of arbitration.

Law and Analysis

[11] Pursuant to the Arbitration Act, 1991, S.O. 1991, c. 17, s. 1 (“the Arbitration Act”), an “arbitration agreement” means an agreement by which two or more persons agree to submit to arbitration a dispute that has arisen or may arise between them. Section 5(3) of the Arbitration Act provides that an arbitration agreement need not be in writing. Furthermore, s. 5(5) of the Arbitration Act provides that an arbitration agreement may be revoked only in accordance with the ordinary rules of contract law.

[12] It is clear that the parties initially agreed to arbitrate and had agreed upon the essential terms of the arbitration, but not the scope of discovery. Delays were occasioned and the arbitration was rescheduled for April 2017. I find that an arbitration agreement as defined by the Arbitration Act existed, albeit not in writing. The parties had agreed about the subject matter of the contract and its fundamental terms. In addition, the Arbitration Act gives great weight to the parties’ intentions to resolve disputes through arbitration, and courts have been reluctant to intervene in arbitral proceedings: see Magnotta Winery Corp. v. Ziraldo (1999), 107 O.T.C. 103 (Ont. S.C.J.), at para. 21.

Having found that an agreement to arbitrate existed, the question then becomes whether it was revoked. Momentum argues that there is no longer an enforceable arbitration agreement between the parties, as Zenith withdrew its notice of arbitration. However, even after the withdrawal, the parties continued to discuss arbitration. This demonstrates that the arbitration agreement – the fundamental agreement to submit a dispute to arbitration – continued in force, even if an agreement was not in writing. Furthermore, it would not be in keeping with the ordinary rules of contract law to allow one party to unilaterally withdraw from its obligations under an agreement, where such an option was not contracted for.

[13] Moreover, I am satisfied that the most expeditious way of dealing with the railing issue is the method that the parties had originally agreed upon, namely by arbitration. Indeed, this may likely put an end to any further disputes between the parties. The arbitrator is apparently still willing to conduct the arbitration. The outstanding issue is the scope of discovery. I am satisfied that that is an issue best left to the arbitrator, who will have full details of the matter. I therefore decline to determine the scope of discovery.

[14] After the tolling agreement was signed in May 2017 to preserve the limitation period, a fully executed tolling agreement was not received by Zenith due to an unfortunate computer email issue. This led to the issuance of the statement of claim. The statement of claim clearly deals with the same subject matter as the contemplated arbitration, adding Momentum’s directors, given that it is a breach of trust action arising from construction.

[15] I recognize that allowing a court action in an arbitration to proceed when claims are overlapping may result in an unnecessary duplication of resources. In the event that it becomes an issue, the parties are not precluded from attending before me as regards a stay of the litigation pending the arbitration hearing.

[16] I order that the arbitration be completed by the end of this year, if a mutually available date before the end of the year can be accommodated by the parties and the arbitrator. If not, I am fully confident that the parties can work out an alternate date with the arbitrator. If that is not possible, they may attend before me on a case conference to schedule the earliest possible date available to the parties and the arbitrator.

Costs

[17] The parties have provided me with their costs outlines. However, in all of the circumstances of this case, I order that the parties each bear their own costs.

Carole J. Brown, J.

Date: July 11, 2018