COURT FILE NO.: 18-76033
DATE: 2020/06/10
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JONATHAN BEN-CHOREEN FREEDMAN
Applicant
– and –
FREEDMAN HOLDINGS INC and EQUITY MANAGEMENT INTERNATIONAL LIMITED
Respondent
James Plotkin, Anthony Daimsis and Gabriel Poliquin, for the Applicant
Catherine Francis, for the Respondents
– and between –
FREEDMAN HOLDINGS INC. and EQUITY MANAGEMENT INTERNATIONAL LIMITED
Applicants
Catherine Francis, for the Applicants
– and –
JONATHAN BEN-CHOREEN FREEDMAN
Respondent
James Plotkin, Anthony Daimsis and Gabriel Poliquin, for the Respondent
HEARD: April 24, 2019, with supplementary written submissions on February 10, 2020 and June 4, 2020 audio conference
SUPPLEMENTARY AND AMENDED REASONS FOR JUDGMENT
The text of the original judgment was amended on June 10, 2020 and the description of the amendment is appended
KANE j.
[1] These are applications brought by the Applicants and the Respondent in relation to several awards made by the Honourable James B. Chadwick Q.C. as arbitrator (the “Arbitrator”) regarding cross-claims by the parties in an arbitration conducted on December 19 and 20, 2017.
[2] The parties filed voluminous materials on this arbitration including multiple Affidavits on which there had been cross-examinations, transcripts from the prior examinations for discovery and factums.
[3] The December 19-20, 2017 arbitration hearing proceeded on the basis of cross motions by the parties as well as cross-examination at the hearing of the applicant Jonathan Freedman (“Mr. Freedman”), his expert witness from KPMG who filed an affidavit together with his expert report and Mr. Jacob Freedman on behalf of Freedman Holdings Inc. (“FHI”) and Equity Management International Limited (“Equity”) (jointly the “Companies”) as well as some oral argument. The hearing concluded with supplementary written argument to be provided by the parties in January and February 2018 as to one particular issue as directed by the Arbitrator.
[4] The awards and determinations in issue are amongst several other awards in the Arbitrator’s decision dated April 30, 2018 (the “Decision”). The Arbitrator subsequently issued a cost award dated July 12, 2018 (the “Cost Decision”) as to the December 19-20, 2017 arbitration.
[5] Prior to his role as arbitrator, the Arbitrator had been a judge of this court with considerable litigation experience in conducting hearings and the determination of legal issues.
The Decision
[6] The Arbitrator in the Decision:
dismissed Mr. Freedman’s claim against the Companies for damages for his wrongful dismissal, namely for notice equivalent to 36 months salary;
dismissed Mr. Freedman’s claim against the Companies for an award of increased salary back to 2001;
dismissed Mr. Freedman’s claim against the Companies for an award of past bonuses;
awarded the Companies $165, 233 against Mr. Freedman, being the principle amount of monies Mr. Freedman had taken out of the Companies without authorization or notice for his personal investment in a property development he was involved in (the “Shoresh Liability”);
awarded interest on the Shoresh Liability to the Companies against Mr. Freedman at the rate of 12% from the dates Mr. Freedman took such monies from the Companies up to December 31, 2008;
awarded 6 % interest on the Shoresh Liability to the Companies from January 1, 2009, until Mr. Freedman’s payment of such liability;
as sought in paras. 23 (a) and (c) of the Companies’ arbitration claim, determined that Mr. Freedman was required to account regarding:
a) pre-termination expenses he had claimed and been paid as business related expenses: and
b) any other debt that Mr. Freedman owed to the Companies; and
c) adjourned the Companies’ claims for determination and reimbursement of personal expenses inappropriate claimed and paid to Mr. Freedman as business related and any other indebtedness Mr. Freedman allegedly owned the Companies.
[7] The Arbitrator in the Cost Decision awarded costs of this arbitration to the Companies against Mr. Freedman in the amount of $297,454.56, the cost for the Arbitrator’s arbitration fee and 6 % interest thereon commencing August 12, 2018.
Mr. Freedman’s Application To Set Aside Decision
[8] Mr. Freedman in his application requests that:
a. the full Decision be set aside pursuant to ss. 46(1), 3, 6 and 7 of the Arbitration Act, 1991, S.O. 1991 c. 17 (“the Act”);
b. an order setting aside the Companies’ claims against him;
c. an order awarding no costs of the arbitration, or effectively to set aside the Cost Decision; and
d. in the alternative, an order remitting the arbitration back to a different arbitrator.
[9] Mr. Freedman’s challenges to the Decision:
a. pursuant to ss. 46(1) 3, 6 and 7, s. 19 and s. 33, are of the Arbitrator’s determination that Mr. Freedman’s limitation period defence to the Companies’ claims was not enforceable and did not bar or defeat such claims based upon the determination and application of the doctrine of laches by acquiescence as he was not given notice that the Arbitrator may apply the doctrine of laches;
b. pursuant to ss. 46(1) 6 and 7 and s. 38(1) in failing to produce a sufficiently reasoned award, are of the Arbitrator’s determination that the Companies’ claims were not discoverable prior to his employment termination on May 7, 2007, as the Arbitrator in the Decision failed to address evidence he presented of the Companies’ knowledge of complaints about him prior to and not later than September 2006 which thereby resulted in their claims being barred by limitation;
c. pursuant to ss. 46(1) 3 and 6, s. 19 and s. 33, are of the Arbitrator’s determination that Mr. Freedman must account as to whether his pre-termination expense claims were personal, or business related and as to any other debt he owed the Companies, as he was not given notice of and not given the opportunity to respond to the Arbitrator’s decision in ordering that he was required to account
d. pursuant to ss. 46(1) 3 and 6, are of the Arbitrator’s award of 12% interest on the Shoresh Liability until December 31, 2008, as he was denied the right to test critical evidence by cross-examination as to such award of 12% interest; and
e. pursuant to ss. 46(1) 3, 6 and 7 and s. 38(1), are of the Arbitrator’s award of 6% interest on the Shoresh Liability commencing January 1, 2009, as he was not given notice of the Arbitrator’s intention to apply and award 6% interest after January 1, 2009.
[10] Mr. Freedman in argument amended his claimed relief in that he no longer sought to set aside the Decision’s determination and award that he pay the Shoresh Liability principal sum of $165,233 to the Companies. His affidavit in response to the Companies’ application states that he paid that Shoresh Liability principal award to the Companies after release of the Decision.
[11] Mr. Freedman request that all other awards in the Decision be set aside and that all other issues in the Decision then be determined by another arbitrator would revive his claims, the dismissal of which are not directly challenged, and his position since 2009 that that his Shoresh Liability be offset by any awards he receives against the Companies.
[12] Mr. Freedman submits he is not appealing the Decision in seeking that it be set aside pursuant to s. 46(1) of the Act.
[13] The Companies submit that Mr. Freedman’s s. 46(1) application is an appeal of the Decision which he is prohibited from doing pursuant to Clause 10.3 of the Arbitration Agreement which states that awards are to be final and therefore not appealable.
Companies’ Enforcement Application
[14] The Companies’ in their application pursuant to s. 5(1)(vi) seek enforcement of the following awards in the Decision:
a. judgment against Mr. Freedman for the Shoresh Liability in the amount of $165,233;
b. judgment against Mr. Freedman for 12% interest on the Shoresh Liability until December 31, 2008, in the amount of $96,162;
c. judgment against Mr. Freedman for the 6% interest on the Shoresh Liability from January 1, 2009 until payment of the above; and
d. judgment against Mr. Freedman in the amount of the Cost Decision, namely $297,454.56.
Events Pre-Arbitration Agreement
[15] Mr. Freedman was the CEO and President of the Companies from the early 1990’s and until his May 7, 2007 termination.
[16] The Arbitrator made the following finds of fact as to Mr. Freedman’s control of the Companies;
a. that he did what he wanted and ran the Companies as if they were his own, as if they were his fiefdom;
b. that prior to his termination and until approximately 2005, he had free rein as to what he could do and pretty well did what he wanted as President of the Companies;
c. that there appeared to have been sporadic Board meetings, particularly before the year 2000; and
d. that Mr. Freedman did not follow directions of the Companies’ Board of Directors and acted as if he controlled the Board of Directors: Decision paras. 21, 25, 37, 38, 76-79, 82, 87 and 88.
[17] FHI, pursuant to instructions given to counsel by the late Mr. A. Goldberg who was then the Companies’ solicitor and sole trustee of the Riva Freedman Trust (the “RFT”) which owned the majority of FHI’s voting shares, commenced a civil action on February 3, 2006 (the “06 Action”) against Mr. Freedman and his three siblings namely Jacob, Joshua and Rose-Anne Freedman (the “3 Siblings”), containing numerous claims including:
a. A declaration that FHI had properly applied all monies to FHI’s City Center property to underwrite the obligations of one or more of the four Freedman siblings and that each of them had continuing obligations to support the costs of that property;
b. A declaration to set aside a January 2006 direction by Rose-Anne and Joshua Freedman to remit their contributions to FHI regarding a Laurier Ave. property of FHI; and
c. A reference to determine and damages against Rose-Anne and Joshua Freedman for their interference in the operations of FHI, including their notice of intention to cease financially supporting the City Center property.
[18] Mr. Freedman supported the relief claimed in the 06 Action sought by FHI including the claims against Rose-Anne and Joshua Freedman for their actions in interfering with his direction of the Companies. The Arbitrator in the Decision found that Mr. Golberg was a supporter of Mr. Freedman: Decision para. 20.
[19] The 06 Action was settled shortly after its commencement upon Mr. Freedman, the 3 Siblings, the Companies, other related corporations, Mr. Goldberg as trustee of the RFT and the trustees of the JFIT Trust signing an agreement in September 2006 (the “06 Agreement”) which dealt with a host of issues, including:
a. The establishment of an Audit Committee to assist and make recommendations to the Directors of FHI regarding the business of that corporation;
b. The then appointment of Mr. Moon as an independent Director of FHI;
c. Acknowledgement that an unspecified portion of Mr. Freedman’s share of revenue from the Leima property, which was suppose to have been paid to subsidize the City Center project, had been diverted to stand as security for a lien of his share in an unidentified interest he held and that he was required to take remedial measures as to that lien in order to eliminate adverse effects to the 3 Siblings;
d. Establishment of arbitration dispute resolution provisions as to any existing and ongoing disputes involving the parties; (the “Arbitration Agreement”) and
e. discontinuance on consent of the 06 Action.
[20] Mr. Moon, faced with Mr. Freedman’s refusal to disclose his reduction of his Leima revenue to support the City Center project to the 3 Sibllings, disclosed that fact to the Board of FHI on the eve of the signing of the 06 Agreement. It was only later determined in 2006 that the lien of Mr. Freedman’s share of the Leima revenues and his settlement with Mr. Goldberg’s assistance of that lien by depositing 50% of his Leima revenue into a lawyer’s trust account, was a lien by one of his partners in the Shoresh development he personally was involved in and financially supported through his withdrawal of the Shoresh Liability from the Companies: Decision paras. 61- 64.
Arbitration Agreement
[21] The Arbitration Agreement provisions in the 06 Agreement include and state that:
a. it governs all future disputes between any of the parties;
b. the appointment of an expert/arbitrator to resolve the dispute was to be on consent of the parties;
c. any claimant within 20 days was required to provide the respondent with a written summary of its position, setting out particulars of its position together with written submissions and any documents relied upon;
d. the respondent within 20 days was required to provide a summary of its position in answer, with any documents relied upon;
e. the claimant within 20 days thereafter may deliver a reply to the respondent;
f. the expert/arbitrator was thereupon to determine the procedure to be followed in the arbitration, with or without agreement of the parties; and
g. any award or procedural decision of the arbitrator was to be final and binding.
Arbitration Events
[22] The Arbitrator was Mr. Freedman’s first choice as arbitrator and was appointed to that position under the Arbitration Agreement in July 2006 on consent of the other parties to the 06 Agreement.
[23] The Arbitrator made a number of preliminary decisions between 2006 and 2017 prior to the December 19-20, 2017 hearing and the Decision.
[24] Mr. Freedman’s employment as President and CEO of the Companies was terminated on May 7, 2007. He thereupon issued a notice of arbitration dated June 7, 2007, against the 3 Siblings and the Companies.
[25] No arbitration proceeded pursuant to Mr. Freedman’s June 7, 2007 arbitration notice because, as determined by the Arbitrator, a series of civil actions were thereupon commenced in 2007 and 2008 by one or more of Mr. Freedman’s children and a second action by Mr. Goldberg: Decision paras. 20 and 26.
[26] Mr. Freedman upon the direction of the Arbitrator, issued a new second notice of arbitration on March 2, 2009, against the Companies and the 3 Siblings: Decision para. 90.
[27] Mr. Freedman’s June 7, 2007 and March 2, 2009 notices of arbitration contain no claims nor allegations of facts in support thereof.
[28] Those two notices of arbitration contain no “written summary of its (his) position, setting out particulars of its (his) position” as required by Clause 10.3(c) of the Arbitration Agreement.
[29] Those two arbitration notices are limited to citing questions or issues such as:
a. whether Mr. Freedman was wrongfully dismissed on May 7, 2007 and if so, whether he is entitled to severance;
b. whether the 3 Siblings are in breach of their fiduciary and contractual duties as Directors of FHI; and
c. whether Mr. Freedman is entitled to an order that the 3 Siblings be removed as Directors of FHI.
[30] Those two notices of arbitration in addition to not complying with Clause 10.3(c) of the Arbitration Agreement, contradict Mr. Freedman’s current submission that he, the Companies and the Arbitrator understood that the arbitration was governed by the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“Rules”), that he acted in accordance with and the arbitration was conducted in compliance with the Rules.
[31] The Companies on March 31, 2009, cite the deficiencies in Mr. Freedman’s March 2, 2009, notice of arbitration, but served a statement of defence and counterclaim against Mr. Freedman. The Companies in para. 23 of their counterclaim sought:
a. an accounting of all expenses charged by Mr. Freedman to the Companies as President and repayment of all amounts determined to have been improperly charged to them, together with interest at the rates paid by FHI for third party financing;
b. repayment of funds diverted from the Companies to an entity or project known as “Shoresh”, together with interest at the rates paid by FHI for third party financing;
c. an accounting of other monies owing by Mr. Freedman to the Companies; and
d. damages against Mr. Freedman for negligence and breach of fiduciary duty as to his pre-termination management of FHI.
[32] Mr. Freedman on August 25, 2009, served a six paragraph reply and statement of defence to the Companies’ claims. The two-paragraph defence to the counter-claim is limited to a blanket denial of numbered paragraphs of the Companies’ defence and the allegation that the 3 Siblings had raised the matters alleged in para. 23 of their and the Companies claim since 2005 and that such claims therefore were “statute-barred”.
[33] The Arbitrator found as a fact that Mr. Freedman “orchestrated and supported, if not controlled” the civil proceeding commenced after the September 2006 Arbitration Agreement and that such civil proceedings delayed and prevented the June 7, 2007 and the subsequent March 2, 2009 arbitrations commenced by Mr. Freedman from moving forward: Decision, paras. 20, 26, 41, 44 and 90.
[34] The appeal by Mr. Freedman’s children of the dismissal of their subsequent civil proceeding was finally dismissed by the Court of Appeal in 2014.
Earlier Motions in The Arbitration
[35] The parties in 2009 brought cross motions in the arbitration. The Arbitrator in his January 5, 2010 decision determined that the ultimate control of FHI was held by its preferred shareholders which were owned by the RFT, which Mr. Goldberg previously had been the sole trustee of. The two civil proceedings commenced by the children of Mr. Freedman in 2007 and 2008 sought the removal of their father and the 3 Siblings as trustees of the RFT.
[36] The Arbitrator in this January 5, 2010 decision, in response to the Companies’ motion that Mr. Freedman’s 2009 arbitration notice be stayed or struck for lack of standing and clarity, ordered that the issues to proceed to arbitration were:
a. Mr. Freedman’s entitlement if he was wrongfully terminated;
b. Mr. Freedman’s entitlement for other compensation; and
c. the paras. 23(a), (b) and (c) claims of the Companies against Mr. Freedman.
[37] The Arbitrator in this January 5, 2010 decision ruled that he lacked jurisdiction to grant several heads of relief sought by Mr. Freedman on his motion against the 3 Siblings, which included a request for an order removing them as Directors of FHI and the authority of that Board to engage a third-party property manager.
[38] Mr. Freedman on his motion as to this January 5, 2010 decision sought no relief as to his “statute barred” defence to the Companies’ claims.
[39] The Companies brought a motion in December 2015 for a determination that they were the sole respondents in the arbitration and that Mr. Freedman was not entitled to examine each of the 3 Siblings for discovery. The Arbitrator by order dated January 4, 2016, confirmed his 2010 order as to the issues to proceed to arbitration, ordered that Mr. Freedman was only entitled to discovery examination of one of the 3 Siblings and in their capacity as a Director of the Companies. The Arbitrator in this decision again refers to the numerous court applications brought by various parties relating to the RFT and the JFIT trusts and states that “no further steps were taken to advance the arbitration” as a result of those court applications: para. 13.
[40] The Companies brought a motion in May 2017, to strike Mr. Freedman’s claims for delay, his refusal to re-attend for the completion of his examinations for discovery and based on admissions to date on discovery. The Arbitrator in his decision dated June 20, 2017:
a. adjourned the Companies’ motion to strike Mr. Freedman’s claims for delay;
b. ordered Mr. Freedman to re-attend to complete his examination for discovery;
c. ordered Mr. Freedman to produce all records relating to the Shoresh Liability, to produce his income tax returns for the years 2000 to 2010 and to answer his outstanding undertakings;
d. dismissed the Mr. Freedman’s cross-motion beyond ordering that he was entitled to speak with the Companies’ accounting firm; and
e. held that there was no reason to strike the 2009 accounting report of RGCT obtained by the Companies in 2009 report however that issue could be reconsidered during the arbitration hearing., the date of which was to be set upon the completion of examinations for discoveries.
[41] The covering correspondence by counsel for the Companies in providing Mr. Freedman with the two RGCT reports on June 11, 2009 states that those reports contain a limited assessment of certain categories of expenses charged by Mr. Freedman, were not a forensic investigation whether Mr. Freedman’s expense reports are properly characterized in the Companies’ ledger, were limited to expenses charged by credit card and their intended use was for the examination for discovery of Mr. Freedman.
[42] The discovery of Mr. Freedman was completed in July 2017.
Motions on Arbitration Hearing
[43] The Companies served a motion dated September 19, 2017 in which they sought:
a. an order dismissing Mr. Freedman’s claims for wrongful dismissal and retroactively pay on the basis of his lack of evidence and lack of legal entitlement thereto on several grounds including his delay, his admissions on examination for discovery and his failure to comply with the Arbitrator’s June 20, 2017 order to produce all Shoresh Liability documentation and his required income tax returns;
b. partial summary judgement, namely an award for the Shoresh Liability, together with interest thereon; and
c. directions regarding determination and quantification of the Companies’ other claims.
[44] The Arbitrator on September 8, 2017, notified the parties of his pending retirement effective September 30, 2017. The Arbitrator by letter dated September 11, 2017, clarified to the parties that his September 8,2017 retirement notice meant that he would not be taking on any new matters after September 30, 2017, and that he would continue to complete matters he was seized of after that date.
[45] The Arbitrator on October 2, 2017, ordered that the Company’s above motion for summary judgement would proceed to hearing on November 29 and 30, 2017, or on December 19 -20, 2017 if such earlier dates were unavailable for Mr. Freedman’s counsel. Mr. Freedman’s counsel on November 3, 2017, advised she was unavailable for the earlier November hearing dates.
[46] On November 21, 2017, Mr. Freedman for the first time advised that he would bring an unspecified cross-motion for partial summary judgement to be argued at the December 19- 20, 2017 hearing. In response to the Arbitrator’s inquiry as to what Mr. Freedman would be seeking on his motion, his counsel advised that if FHI on its motion failed to prove just cause, Mr. Freedman would then seek judgment for damages for wrongful dismissal and accordingly his cross-motion was not expected to add any further time to the scheduled arbitration hearing.
[47] Mr. Freedman on December 4, 2017, delivered an extensive summary judgment motion of some 1500 pages in which he sought:
a. a declaration that he was wrongfully dismissed and entitled to payment in lieu of reasonable notice consisting of thirty-six months salary;
b. payment of retroactive pay back to 2001;
c. payment of a bonus as determined by the Audit Committee;
d. dismissal of all counterclaims by the Companies as unproven, and “statute barred” without any particulars: and
e. that any amounts he owed for the Shoresh Liability should be offset against the award of damages he was entitled to against the Companies.
[48] This December 4, 2017 motion request by Mr. Freedman to dismissal all claims by the Companies as “statute-barred” repeated his August 2009 defence that such claims were “statute-barred” and should be dismissed. This is the background as to the Arbitrator’s statement in the Decision that “….the limitation period issue was not raised before me until December 4, 2017, when Jonathon’s counsel served a cross-motion record.”: Decision para. 29.
[49] In support of his motion, Mr. Freedman filed several affidavits including his own as well as an expert opinion affidavit and report from K.P.M.G., all dated December 4, 2017.
[50] The Companies filed two supplementary Affidavits dated December 11 and 14, 2017. Mr. Freedman filed three supplementary Affidavits dated December 15 and 18, 2017.
[51] Mr. Freedman then sought an adjournment of the two motions in order that they be decided together with the Companies’ remaining claims by the next arbitrator. The Arbitrator refused this request and indicated that argument of the two motions, including the scheduled cross-examination before him of Mr. Freedman, his expert and of Jacob Freedman, would proceed as scheduled and commence on December 19, 2017.
[52] Upon the commencement of the arbitration hearing, counsel for the Companies advised that she would need additional time to address Mr. Freedman’s December 4, 2017 request that all of the Companies claims be dismissed as “statute barred”. The Arbitrator granted that request in ordering that the parties were to provide supplementary written submissions as to Mr. Freedman’s limitation defence as occurred on the following dates:
a. January 15, 2018, by the Companies;
b. January 31, 2018, by Mr. Freedman; and
c. February 5, 2018, reply submissions by the Companies.
Standard of Review
[53] Mr. Freedman submits he is not appealing the Decision in seeking that it be set aside pursuant to s. 46(1). The Companies dispute that denial and submit that Mr. Freedman in this application is attempting to appeal the Decision which he is prohibited from doing under Clause 10.3(i) of the Arbitration Agreement. Mr. Freedman does not dispute he is prohibited from appealing under s. 45.
[54] Unlike arbitration legislation in some other provinces, the Act does not indicate a standard of review on an application to set aside an arbitration award pursuant to s. 46(1). Mr. Freedman’s position was that such legislative absence requires the preliminary determination of the standard of review on his application pursuant to s. 46(1) 3, 6. and 7.
[55] There is conflicting jurisprudence as to what is the appropriate review standard under s. 46(1).
Position of the Parties as to Standard of Review
[56] The Companies submit that:
a. patently unreasonableness is the review standard as to the Mr. Freedman’s s. 46(1) 3, 6 and 7 challenges to the Decision: Calabrese v. Weekes (2003), 2003 CanLII 3311 (ON SC), 38 B.L.R. (3d) 221, (Ont. S.C.), at para. 29, citing Canada (Attorney General) v. Public Service Alliance of Canada, (1993) 1993 CanLII 125 (SCC), 101 DLR (4th) 673 (S.C.C.); and
b. Mr. Freedman on this application is incorrectly using administrative law principles which do not apply to this arbitration under the Act and the Decision.
[57] Mr. Freedman submits that correctness is the standard of review as to decisions made pursuant to ss. 46(1) 3, 6 and 7.
[58] The Calabrese decision relied upon by Mr. Freedman involved an application to set aside an arbitrator’s decision conducted under the regulations of the National Hockey League Player’s Association, pursuant to ss. 46(1) 6, 7 and 8. The court determined that the application could not proceed as it was brought beyond the 30 day time limit and that s. 47 grounds of fraud were not present to extend that time limit. That court then determined that the applicant could not appeal the arbitration decision because of the privative clause in that case. The court then examined whether leave to appeal the decision should be granted in accordance with the applicable standard of review. As to whether leave to appeal should be granted, the court stated that that the standard of review of arbitration decisions was patent unreasonableness and relied upon the Supreme Court’s decision in Canada (Attorney General): para. 29.
[59] Canada (Attorney General) involved a complaint reference to, a decision by the Public Service Staff Relations Board and the appeal of that decision to the Federal Court of Appeal. The Supreme Court on the subsequent appeal held that the test on judicial review of a decision of a specialized administrative tribunal involving a privative clause was patent unreasonableness: paras. 38-43.
[60] Mr. Freedman’s s. 46(1) application is not an appeal of the decision of a specialized administrative tribunal, thereby distinguishing the above jurisprudence.
[61] The standards of review of patent unreasonableness, reasonableness simpliciter and correctness as developed in the field of administrative law have a long challenging history during which such standards and when they are applicable have significantly changed over time.
[62] The Supreme Court in Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, merged the standards of “patent unreasonableness” and “reasonableness simpliciter” into a single “reasonableness” standard of review, thus limiting the review standards to “correctness” and “reasonableness”: paras. 34–50.
[63] The Supreme Court in Dunsmuir in explaining its decision to reduce and simplify the standards of review stated that the three standards had led to practical and theoretical difficulties in the application thereof including the struggle by lower courts with the conceptual distinction between patent unreasonableness and reasonableness simpliciter as well as to direct the court’s attention to the substance of the complaint in issue rather than determination of the case based on “lengthy and arcane discussions of ….. the pragmatic and functional test” at great expense and risk as to the outcome: paras. 39, 40 and 133.
[64] Although the Supreme Court’s above reasons and decision in Dunsmuir to move to a single standard of reasonableness related to the area of administrative law, there is nothing in the Act or related to arbitrations governed by the Act which warrants the continuing use of the standard of patent unreasonableness with its accompanying difficulties as a standard of review under s. 46(1) rather than reasonableness.
[65] Patently unreasonableness accordingly is not the appropriate standard of review on this application.
[66] The Supreme Court’s above comments in Dunsmuir, although made in the context of judicial review, are similar as to the delay, cost and risk of the preliminary argument of and determination of the standard of review on a s. 46(1) application.
[67] Mr. Freedman’s reliance upon the decision in Sattva Capital v. Creston Molly, 2014 SCC 53, [2014] 2 S.C.R. 633, as to correctness being the appropriate standard of review under s. 46(1) is inappropriate.
[68] Sattva involved an appeal on a question of law of a commercial arbitration decision and determined that:
a. the review of commercial arbitration awards is different from judicial review of a decision of a statutory tribunal and as such the judicial review framework in Dunsmuir is not entirely applicable to the commercial arbitration context;
b. judicial review of administrative tribunal decisions and appeals of arbitration awards are analogous in some respects and therefore certain aspects of the Dunsmuir framework are helpful in determining the appropriate standard of review to apply in the case of an appeal of a commercial arbitration award; and
c. reasonableness was the appropriate standard of review on an appeal of the decision of that arbitrator: paras. 104 to 106.
[69] The Supreme Court recently in Canada (Minister of Citizenship and Immigration ) v. Vavilov, 2019 SCC 65, noted the similar ongoing debate and expenditure of resources in determining the appropriate standard of review on applications for judicial review of administrative decisions as a need supporting the further consolidation and its determination that reasonableness would be the presumptive and appropriate standard of review of grounds on judicial review of administrative decisions absent the legislation providing for the standard of review, unless review on a standard of correctness is required, as on an appeal of the administrative decision, or by the rule of law, namely for constitutional questions, general questions of law of central importance to the legal system as a whole and questions regarding the jurisdictional boundaries between two or more administrative bodies, as to which exceptions, correctness is the appropriate standard of review: paras. 1, 4-6, 21, 22, 25, 36, 47 and 69.
[70] Despite this not being an application for judicial review, the following comments of the Supreme Court in Vavilov as to why the standard of review on judicial review applications resulted in expanded litigation, created uncertainty and needed clarity, are not dissimilar to and to that extent are informative as to s. 46(1) applications as in this case:
21 Certain aspects of the current framework are unclear and unduly complex. The practical effect of this lack of clarity is that courts sometimes struggle in conducting the standard of review analysis, and costly debates surrounding the appropriate standard and its application continue to overshadow the review on the merits in many cases, thereby undermining access to justice. The words of Binnie J. in his concurring reasons in Dunsmuir, at para. 133, are still apt:
[J]udicial review is burdened with undue cost and delay. Litigants understandably hesitate to go to court to seek redress for a perceived administrative injustice if their lawyers cannot predict with confidence even what standard of review will be applied ... . If litigants do take the plunge, they may find the court's attention focussed not on their complaints, or the government's response, but on lengthy and arcane discussions of something they are told is [the choice of standard analysis] ... . A victory before the reviewing court may be overturned on appeal because the wrong "standard of review" was selected. A small business denied a licence or a professional person who wants to challenge disciplinary action should be able to seek judicial review without betting the store or the house on the outcome ...
Regrettably, we find ourselves in a similar position following Dunsmuir. As Karakatsanis J. observed in Edmonton (City) v. Edmonton East (Capilano) Shopping Centres Ltd., 2016 SCC 47, [2016] 2 S.C.R., at para. 35, "[t]he contextual approach can generate uncertainty and endless litigation concerning the standard of review." While counsel and courts attempt to work through the complexities of determining the standard of review and its proper application, litigants "still find the merits waiting in the wings for their chance to be seen and reviewed": Wilson v. Atomic Energy of Canada Ltd., 2016 SCC 29, [2016] S.C.R. 770, at para. 25, per Abella J.
22 As noted in CHRC, this Court "has for years attempted to simplify the standard of review analysis in order to 'get the parties away from arguing about the tests and back to arguing about the substantive merits of their case'": para. 27, quoting Alberta Teachers, at para. 36, citing Dunsmuir, at para. 145, per Binnie J. The principled changes set out below seek to promote the values underlying stare decisis and to make the law on the standard of review more certain, coherent and workable going forward.
[71] The above comments of the Supreme Court in Vavilov are similarly applicable regarding such issues in commercial arbitrations under the Act, despite s. 46(1) not being a judicial review application.
[72] The recent decision in Buffalo Point First Nation et al. v. Cottage Owners Association, 2020 MBQB 20, is an example of the applicability of Vavilov as to some issues involving arbitration legislation such as the Act.
[73] The court in Buffalo granted leave to appeal a question of law pursuant to s. 44(2) of the Manitoba Arbitration Act, C.C.S.M. c. A120.
[74] In granting such leave to appeal, the court in Buffalo relied upon Vavilov in concluding that correctness was the appropriate standard of review as to whether to grant leave to appeal on a question of law. In so deciding, that court stated:
48 Applied to these applications, s. 44(2) of The Arbitration Act expressly states "a party may appeal an award to the court ... ". Following the Supreme Court's (Valvilov) dicta, the standard of review should be the appellate standard of correctness, not the reasonableness standard normally associated with a judicial review. I will proceed on that basis.
Section 46(1) 3 - Standard of Review
[75] Mr. Freedman submits correctness is the standard of review under s. 46(1) 3, which involves jurisdictional question as to whether the Decision 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 arbitration agreement: Cricket Canada v. Bilal Syed, 2017 ONSC 3301, and Intact Insurance Co. v. Allstate Insurance Co. of Canada, 2016 ONCA 609., 131 O.R. (3d) 625, T- 10 paras. 37-45.
[76] The arbitration agreement in this case required determination by the Arbitrator of all disputes between the parties as submitted to arbitration. The issue in this application is whether certain matters were properly before the Arbitrator in this hearing, namely whether certain decisions made by the Arbitrator exceeded the issues before him or were beyond his jurisdiction.
[77] Cricket Canada involved an application under s. 46(1) 3 to set aside a portion of that arbitration decision which directed Cricket Canada to amend its bylaws. The court held that the issue under s. 46(1) 3 related to jurisdiction and, relying on Smyth v. Perth and the Smiths Falls District Hospital, 2008 ONCA 794, 92 O.R. (3d) 656, at para. 17, held that the standard of review under s. 46(1) 3 was correctness. The court in Cricket Canada concluded that this portion of the arbitration decision was beyond the scope of the arbitration agreement and therefore beyond the arbitrator’s mandate and jurisdiction: paras. 32 and 33.
[78] The Court in Cricket Canada quotes the following statement of the Court of Appeal in Smyth:
- In Smyth v. Perth and Smiths Falls District Hospital, 2008 ONCA 794, the Court of Appeal held that where an arbitrator makes a determination in respect of the scope of his or her jurisdiction, the standard of review is correctness, holding at para. 17:
[A]n arbitrator must address the issues, and only the issues, referred to him in the arbitration agreement. In this case, the respondent's position was that the Arbitration Agreement set out two specific issues for resolution and did not authorize the arbitrator to go beyond those questions in order to determine whether the board of the Hospital should accept or reject the respondent's application for reappointment. In my view, the respondent's position raised a jurisdictional issue within the description above in Dunsmuir. Accordingly, the application judge's review of the arbitrator's decision on this issue on a correctness standard was appropriate.
[79] It is important to note the Court of Appeal’s reliance in the above statement in Smyth upon Dunsmuir regarding the scope of jurisdiction under an arbitration agreement governed by the Act.
[80] The Supreme Court in Vavilov however terminated correctness as the standard of review of jurisdictional questions on cases of judicial review, thereby overturning Smyth that correctness is the review standard as to jurisdiction: para. 65.
[81] The decision in Intact Insurance is not applicable and the portions thereof relied upon by Mr. Freedman do not support the principle he cites.
[82] Intact Insurance was an appeal of an arbitration determination as to which of the parties was responsible to pay insurance benefits to an injured claimant.
[83] The court in Intact Insurance held that the reasonableness standard, as determined on the appeal in Sattva, applied on the appeal in Intact Insurance as to the decision determining insurance priority disputes as that issue was not a question of jurisdiction, a constitutional question nor a general question of law that is of central importance to the legal system as a whole, which are matters outside an adjudicator’s expertise.
[84] The court in Advanced Explorations Inc. v. Storm Capital Corp., 2014 ONSC 3918, 30 B.L.R. (5th) 79, reviewed the jurisprudence as to whether s. 46 permitted a court to review an arbitral award for reasonableness when the parties have agreed that there is no right of appeal. In so doing, that court questioned whether the Court of Appeal’s decision in Smyth stood for the proposition that, even where the parties have agreed that the arbitral award is final and binding and the arbitrator limited the decision to those issues referred by the arbitration agreement, an application judge has the authority under s.46 to review the arbitration award on a reasonableness standard. That issue was not decided as that court determined that the arbitration decision was reasonable.
[85] This court recognizes that:
a. the Arbitrator was not appointed by legislation as the decision maker, but instead by the parties’ contractual agreement;
b. the Arbitrator’s authority to decide disputes between the parties derives principally from the Arbitration Agreement;
c. this application is brought under s. 46(1) and is not a judicial review application.
[86] While recognizing the above differences, there is no reason why a court’s review of a jurisdictional challenge as to whether an adjudicator’s determination was within or beyond his or her jurisdiction should attract the higher correctness standard of review under s.46(1) 3 of the Act, rather than the reasonableness standard pursuant to Vavilov on a judicial review application of a decision based on the same lack of or exceeding jurisdiction by the decision maker. Acting within or beyond jurisdiction is no different whether it was by an administrative adjudicator appointed by legislation or an arbitrator governed by the Act.
[87] While the Arbitrator’s authority originates from the consensual agreement pursuant to which he was appointed, his authority also includes statutory powers granted by the Act, including the authority to decide: ss. 17(1), (7) and (10), 20, 25(1), 27, 28, 29(3), 31, 32(1), 41, 42, 44 and 54(1).
[88] The above statutory powers granted by the Act to an arbitrator are not dissimilar to some of the statutory powers granted to administrative law decision makers.
[89] There are common grounds of review under the Act and on judicial review such as jurisdiction, lack of procedural fairness, breach of the governing legislation regulating the decision or hearing and bias by the decision maker: Administrative Law, Dussault & Borpeat, Second Edition, Volume 4, pp. 211–233, 246,256 and 301–328, 368 – 371, 391 and 491.
[90] Similar to an application under s. 46(1), a court’s remedy on judicial review is to set aside or quash the decision challenged but not substitute its opinion for that of the agency or administrative authority: Administrative Law, pp. 368-371 and 391.
[91] Some administrative law decisions subject to judicial review are, like many arbitrations, made after a contested hearing and representations by the parties, as in Dunsmuir.
[92] Like some administrative law determinations which are subject to judicial review, arbitration of issues pursuant to s. 26(1) of the Act need not involve a hearing and can be limited to and determined solely by written materials.
[93] What is reviewed by a court on an application to set aside a decision for lack of or exceeding jurisdiction, whether on judicial review or under s. 46(1) 3, is the decision maker’s jurisdictional authority to make the decision. The subject, issue and nature of the jurisdictional challenge is the same whether the review of that question is by judicial review or under s. 46(1) 3.
[94] The differences as to the consensual appointment of an arbitrator under the Act versus the legislative appointment of administrative law decision makers and the fact that some of the powers of an arbitrator are contained as in this case in the Arbitration Agreement; do not detract from the commonality between a judicial review of a determination made by a decision maker and a s. 46(1) review of an award by an arbitrator made under the Act.
[95] The similarities between judicial review and a s. 46(1) 3 review of jurisdiction include:
a. the issue whether jurisdiction existed or was exceeded, is the same on judicial review as to the decision maker and on a s. 46(1) application as to the arbitrator;
b. the ancillary legislative powers granted an arbitrator under the Act are often akin to the legislative powers granted to other decision makers; and
c. the identification of the need and establishment in Vavilov of a uniform prioritized set of review standard principles upon a court’s judicial review of the determination of rights by administrative law decision makers.
[96] Parties frequently select arbitration instead of civil litigation for a host of reasons which can include a much faster, less multi-layered, less expensive, more private and final determination of disputes, which does not get extended by multiple subsequent levels of appeals, particularly where the parties include a privative clause in their agreement to arbitrate, as in this case.
[97] The Act partially facilitates the above objectives, selection and advantages of arbitration instead of civil litigation.
[98] The uncertainty, delay and costs of post-decision, multi-level appeals of arbitration decisions can be deleted by agreement or are otherwise subject to narrow limitations, pursuant to ss. 3, 6, and ss.45(1), (2) and (3).
[99] The unrestricted provisions and use of s. 46(1) applications however effectively eliminates the above goals and advantages of arbitration. Parties cannot contract out of s. 46(1) applications pursuant to s. 3(1), despite agreeing as in this case that arbitral decisions will be final and binding. That reintroduces this post-arbitration s. 46(1) court hearing and the subsequent appellate levels with this and their associated delay of determination and uncertainty, including the potential that the original dispute arbitration must be recommenced, as well as associated costs.
[100] The scope of the broad grounds in s. 46(1), combined with the ability to contract out of appellate review or the limited scope thereof, encourages the bringing of s. 46(1) applications as in this case on multiple grounds challenging determinations of law and fact couched under available broad headings such as lack of fairness, disregard of important evidence as demonstrated by the inadequacy of reasons, etc.
[101] Using a standard of correctness on s. 46(1) applications reinforces parties’ incentive to bring such applications despite having contracted that their arbitration awards are to be final.
[102] A standard of reasonableness, as directed in Vavilov in administrative law with its limited exceptions rather than correctness, respects the Legislature’s s. 3 prohibition against excluding s. 46(1) by contract, but maintains some limit and control as to the use of these applications and the frequent appeal thereof, as well as acknowledging the parties’ election, agreement and inclusion of a final privative clause. That acknowledgement is not dissimilar to the recognition of respect to a legislature’s choice to delegate matters to administrative law decision makers: Vavilov, paras. 26, 53 and 69. Despite the differences as to a court’s review of jurisdiction on judicial review versus s. 46(1) 3, those differences are insufficient justification to override the commonality between what remains a court’s review of a jurisdiction challenge to justify a different standard of review, namely a reasonableness standard on judicial review pursuant to Vavilov and correctness under s. 46(1) 3 of the Act.
[103] Despite the differences as to a court’s review of jurisdiction on judicial review versus s. 46(1) 3, those differences are insufficient justification to override the commonality between what remains a court’s review of a jurisdiction challenge to justify a different standard of review, namely a reasonableness standard on judicial review pursuant to Vavilov and correctness under s. 46(1) 3 of the Act.
[104] Based on the above analysis, the appropriate standard of review as to the jurisdictional requirements under s. 46(1) 3 is reasonableness.
Section 46(1) 6- Standard of Review
[105] Mr. Freedman submits correctness is the standard of review under s. 46(1) 6 as to whether Mr. Freedman was denied procedural fairness:
a. in not being treated equally and fairly; or
b. in not given an opportunity to present a case or to respond to the other party’s case.
[106] The procedural fairness requirements under the Act are contained in s. 19 which states:
Equality and fairness
19 (1) In an arbitration, the parties shall be treated equally and fairly. 1991, c. 17, s. 19 (1).
Idem
(2) Each party shall be given an opportunity to present a case and to respond to the other parties’ cases. 1991, c. 17, s. 19 (2).
[107] Mr. Freedman acknowledges that the review of procedural fairness on the correctness standard includes a margin of appreciation when the procedural decision is discretionary, such as decisions whether to admit a particular piece of evidence or whether to request supplementary submissions after the hearing: Mission Institute v. Khela, 2014 SCC 24, [2014] 1 S.C.R. 502, at para. 74, and Senjule v. Law Society of Upper Canada, 2013 ONSC 2817, 309 O.A.C. 1 (Div. Ct.), at para. 20.
[108] He submits he was denied fair treatment and the right to respond:
a. to the Arbitrator’s reliance upon the doctrine of laches as to his limitation defence to the claims by the Companies, excluding the award that he was liable for the Shoresh Liability;
b. the decision that he was required to account;
c. the Companies’ reliance upon the RCGT 12% interest calculation to December 31, 2008; and
d. the Arbitrator’s decision to award 6 % interest after January 1, 2009.
[109] Mr. Freedman submits that the arbitration decisions in a), b) and d) above are not discretionary decisions and those issues are therefore to be reviewed on the correctness standard with no margin of appreciation. He argues that the issue as to a), b) and d) therefore is simply whether he pursuant to s. 19 was afforded procedural fairness or not.
[110] Denial of procedural fairness is a common ground on an application of judicial review to set aside an administrative decision.
[111] Mr. Freedman submits the Arbitrator exceeded the margin of appreciation as to c) above in relying upon RCGT’s interest calculation at the rate of 12% despite its author being shielded from cross-examination and despite such calculation not being tendered in accordance with the Rules which he submits he, the Companies and the Arbitrator were vigorously applying in this arbitration. The issue he submits as to c) therefore is the same as to a), b) and d), namely whether he was or was not denied procedural fairness as to c), which therefore should be determined on a correctness standard.
[112] This articulation and limitation of the issue as to whether he was or was not denied procedural fairness, derives from case law involving the issue of procedural fairness on applications for judicial review and appeals which held that as to procedural fairness, there is no correctness versus reasonableness standard of review analysis and the question or issue is simply whether or not the applicant/appellant was afforded procedural fairness.
[113] As stated above, the same “whether or not” or correctness standard argument can be made as to a jurisdictional challenge. Vavilov however has eliminated review on a correctness standard other than limited exceptions which do not apply to the grounds in this application.
[114] Such caselaw also contradicts Mr. Freedman’s position that the s. 46(1) 6 review standard as to procedural fairness is correctness.
[115] The Divisional Court on a judicial review application in Queensway Excavating & Landscaping Ltd v. Toronto (City), 2019 ONSC 5860, [2019] O.J. No. 5227, set aside a decision by Toronto’s Fair Wage Office ordering Queensway pursuant to a City policy to pay unpaid wages to its employees and based thereon, a subsequent resulting decision by City Council disqualifying Queensway from working on City contracts for two years.
[116] The Divisional Court set aside the first decision as Queensway was denied the right to notice, to disclosure and to be heard in the process leading to that decision. The second decision was set aside as it was based on the first decision which that court had set aside.
[117] The parties on the judicial review application in Queensway agreed no standard of review analysis was necessary. That court stated:
60 The parties also agree that there is no standard of review analysis necessary with respect to the issue of procedural fairness; either Queensway was provided with procedural fairness, or it was not: see Moreau-Bérubé v. New Brunswick (Judicial Council), 2002 SCC 11, [2002] 1 S.C.R. 249, at para. 74; London (City) v. Ayerswood Development Corp., 2002 CanLII 3225 (C.A.), at para. 10; Platinum Auto Gallery Inc. v. Registrar, Motor Vehicle Dealers Act, 2002, 2015 ONSC 1299 (Div. Ct.), at para. 3.
[118] The case law relied upon by the court in Queensway pre-dates Vavilov in which the Supreme Court did not create procedural fairness as an exception to the presumption of reasonableness standard on judicial review of an administrative decision.
[119] The court in Moreau-Bérubé v. New Brunswick (Judicial Council), 2002 SCC 11, [2002] 1 S.C.R. 249, involved the judicial review of an administrator’s decision and stated:
74 The third issue requires no assessment of the appropriate standard of judicial review. Evaluating whether procedural fairness, or the duty of fairness, has been adhered to by a tribunal requires an assessment of the procedures and safeguards required in a particular situation. (See generally Knight v. Indian Head School Division No. 19, 1990 CanLII 138 (SCC), [1990] 1 S.C.R. 653, and Baker, supra.)
[120] London (City) v. Ayerswood Development Corp. (2002), 2002 CanLII 3225 (ON CA), 167 O.A.C. 120 (Ont. C.A.), was an appeal by the City of the dismissal of its appeal of a decision by the Ontario Municipal Board on the grounds of denial of natural justice. That court held that a court need not engage in an assessment as to the appropriate standard of review in assessing an allegation of denial of natural justice and stated:
10 When considering an allegation of a denial of natural justice, a court need not engage in an assessment of the appropriate standard of review. Rather, the court is required to evaluate whether the rules of procedural fairness or the duty of fairness have been adhered to. The court does this by assessing the specific circumstances giving rise to the allegation and by determining what procedures and safeguards were required in those circumstances in order to comply with the duty to act fairly. See Moreau-Bérubé, supra, at paras. 74-75.
[121] The present application to set aside the Decision pursuant to s. 46(1) 6 for the denial of procedural fairness, as Mr. Freedman acknowledges, is not an appeal of the Decision.
[122] C.M. v. York (Regional) Police, 2019 ONSC 7220, [2019] O.J. No. 6317, was an application for judicial review of a decision of York Regional Police.
[123] The Divisional Court in C.M. assumed reasonableness as the appropriate standard of review to assess the inclusion of information about a prior criminal charge, subsequently withdrawn, in a Police Vulnerable Sector Check involving the applicant.
[124] The court in C.M:
a. held that reasonableness was the appropriate standard of review in that case which was to be applied as indicated in Dunsmuir; and
b. then recites the conclusion in Queensway that not standard of review analysis was necessary on the issue of procedural fairness as the question was whether the applicant was or was not denied procedural fairness: paras 35 and 36.
[125] The Supreme Court in Vavilov:
a. ended the necessity for a standard of review analysis, similar to that above finding in Queensway, in creating reasonableness as the presumed standard of review including the issue of jurisdiction, subject to the standard of correctness for specific exceptions cited therein;
b. reviewed whether to expand the recognized limited exceptions to be reviewed on a correctness standard and did not create procedural fairness as an exception to the presumption of the reasonableness standard on judicial review of an administrative decision; and
c. acknowledged its decision in Vavilov changed some of its prior decisions as to the appropriate standard of review.
[126] Mr. Freedman’s reliance upon some of the above judicial review decisions supports the court’s comparison to and reliance upon Vavilov’s establishment of reasonableness as the appropriate standard of review under s. 46(1) 6 of a decision as to procedural fairness.
[127] It can be said that the issues under ss. 46(1) 3, 6 and 7 are similar in requiring determination whether or not an arbitrator:
a. had or exceeded jurisdiction;
b. afforded procedural fairness; or
c. followed the appropriate procedures in the arbitration;
and that each therefore should be decided on the same standard. Vavilov specifically changed jurisdictional review from a correctness to a reasonable standard.
[128] The above similarity therefore indicates the same standard of reasonableness should apply as to ss. 46(1) 3, 6 and 7.
[129] Based on the above analysis, the issue under s. 46(1) 6, namely whether or not Mr. Freedman was afforded procedural fairness pursuant to s. 19, is to be reviewed on a standard of reasonableness.
Section 46 (1) 7- Standard of Review
[130] Section 46(1) 7 provides that a court may set aside an award on the ground that:
- The procedures followed in the arbitration did not comply with this Act.
[131] Mr. Freedman again submits correctness is the standard of review under s. 46(1) 7 as to whether the procedures followed in this arbitration complied with the Act. The procedures to be complied with include the s. 38(1) requirement to provide reasons. He points to the fact that the parties in the Arbitration Agreement did not exclude the s. 38(1) requirement that the award state the reasons upon which it is based.
[132] The court was not provided with jurisprudence as to the review standard under s. 46(1) 7.
[133] Mr. Freedman however submits correctness is the standard as to s. 46(1) 7 as he relies upon s. 46(1) 7 in conjunction with his reliance upon s. 46(1) 6, namely the Arbitrator’s failure to provide sufficient reasons in respect of his discoverability finding and in the application of laches to Mr. Freedman’s limitation defence, amounted to a violation of procedural fairness under s. 46(1) 6.
[134] Reasonableness as determined however is the review standard pursuant to s. 46(1) 6.
[135] Mr. Freedman acknowledged in argument that the standard of review must be determined for each of ss. 46(1) 3, 6 and 7 and that there can be different review standards amongst those subsections.
[136] The Divisional Court in Queensway, relied upon by Mr. Freedman, held that the duty to give reasons and the sufficiency thereof is to be dealt with in the assessment whether the decision is reasonable and not as part of the procedural analysis assessment. That court stated:
Sufficiency of Reasons
79 Queensway argues that the reasons set out by the FWO in its March 29 letter were insufficient.
80 The duty to give reasons may arise by statute or by virtue of the duty of procedural fairness. Where reasons are given, the sufficiency of those reasons is normally dealt with as part of the assessment of the reasonableness of the decision in question, and not as part of the procedural fairness analysis: Les Supermarchés Jean Labrecque Inc. v. Flamand, 1987 CanLII 19 (SCC), [1987] 2 S.C.R. 219, at p. 233: N.L.N.U. v. Newfoundland & Labrador (Treasury Board), 2011 SCC 62, [2011] 3 S.C.R. 708 ("Newfoundland Nurses"), at para. 14.
[137] There is no reason to justify that the review standard on a s. 46(1) 7 application to set aside an award for failure to follow any procedure in the Act should attract a review standard of correctness, rather than the standard of reasonableness as in an application under s. 46(1) 3 and s. 46(1) 6.
[138] There are multiple procedural levels provided for in the Act and which occur upon commencement of and during an arbitration with different levels of impact and importance. Review thereof on a reasonableness standard can accommodate those differences, rather than correctness which invites and permits court intervention in every case.
[139] The court concludes for the above reasons that reasonableness is the appropriate review standard on an application pursuant to s. 46(1) 7.
Application of Doctrine of Laches to Limitation Period Defence
[140] The Arbitrator in the Decision as to the Companies’ claims and Mr. Freedman’s then December 2017 particularized defence that such claims were barred by the expiry of the two-year limitation period, applied the doctrine of laches by acquiescence and determined that Mr. Freedman could not rely upon his limitation period defence to bar the Companies’ claims: Decision, para. 44.
[141] The application of the doctrine of laches preventing Mr. Freedman’s reliance upon an expired limitation period was based upon numerous findings by the Arbitrator regarding Mr. Freedman’s conduct, the concealment thereof and the delay he caused in the identification and adjudication of his conduct and associated issues in the arbitration.
[142] The findings of fact in the Decision as to the above and the determination that Mr. Freedman was prevented by the doctrine of laches from relying upon his limitation period defence to bar the Companies’ claims include the Arbitrator’s:
a. interpretation of s. 5 (1) (iv) of the Limitation Act, 2002, S.O. 2002, c.24, Sched. B. (“Limitations Act, 2002”) provision as to when the limitation period commenced, namely whether a proceeding would have been appropriate, depends on the facts of the case which will impact that issue: Decision paras. 34 to 36;
b. finding that Mr. Freedman’s use of corporate credit cards included his comingling of his personal and business expenses, the specific identification of which remained unknown: Decision paras. 21 and 47;
c. finding that Mr. Freedman’s control of the Companies and their information ignored the Audit Committee’s recommended corporate changes, prevented his sister’s prior attempts to access corporate information and prevented disclosure and knowledge of material facts until after his May 7, 2017 termination: Decision paras. 21, 25, 37, 38, 50, 77 and 91;
d. finding that Mr. Freedman, supported by Mr. Goldberg, instigated numerous civil proceedings being brought after Mr. Freedman’s May 7, 2007 termination for his own benefit, which caused delay, prevented the arbitration from proceeding and cost the Companies hundreds of thousands of dollars to defend: Decision paras. 19, 20, 24, 26, 36, 41 and 44;
e. finding that Mr. Freedman failed to pursue the original arbitration he commenced on June 7, 2007 whilst he orchestrated and instigated the above civil proceedings and then only issued his second arbitration notice upon direction by the Arbitrator: Decision paras. 20, 26 and 41. This finding repeats that same finding in the Arbitrator’s earlier January 4, 2016 decision; para. 13;
f. finding that despite Mr. Freedman’s belief in August 2009 that the Companies’ claims had been brought beyond the two year limitation period, he failed to act, to advance and pursue that limitation defence, to the detriment of the Companies, until his December 4, 2017 summary judgment motion and his December 19, 2017 supplementary factum on the limitation issue, notwithstanding several prior dismissal motions in the arbitration: Decision paras. 29, 30 and 44;
g. finding that Mr. Freedman had caused delay in preventing disclosure of information which included his evasiveness on his discovery and cross-examination on his affidavits and his refusal to produce relevant documentation: Decision para. 21;
h. identification of the issue was whether Mr. Freedman’s concealment of information and resulting delay could be used by him as a limitation shield to block the claims of the Companies: Decision para. 21; and
i. interpreted the essential elements of the equitable doctrine of laches including whether the delay caused was excusable, what was done during the delay period and the impact of that delay on the parties: Decision paras. 42 and 43; and
j. conclusion that Mr. Freedman’s conduct in equity constituted laches by acquiescence and prevented him using his limitation defence as a bar to the claims of the Companies: Decision para. 44.
[143] Mr. Freedman requests that the Decision be set aside on the basis such determination as to the doctrine of laches constituted a breach under ss. 46(1) 3, 6 and 7.
[144] Mr. Freedman submits:
a. he was not given notice that the Arbitrator might apply the doctrine of laches;
b. the doctrine of laches was not properly before the arbitrator as it had not been pled by the Companies with particulars as required pursuant to Clause 10.3 of the Arbitration Agreement, which thereby prevented the Arbitrator applying that doctrine as Clause 10.3 g (ii) required that he make his award with respect to the substantive issues raised by the parties. The Arbitrator’s decision to apply laches thereby is a decision beyond the scope of the arbitration agreement contrary to s. 46(1) 3;
c. the Arbitrator was not free to expand his mandate to rule upon the doctrine of laches which had not been pled “beyond a lone and unsupported paragraph” in the Companies’ post hearing written submissions as to Mr. Freedman’s limitation defence to the Companies’ counterclaims;
d. The Arbitrator in applying the doctrine of laches to preclude Mr. Freedman’s properly pled limitation defence, violated his s. 19(2) procedural right to know the case and to respond to laches in relation to his limitation defence, thus constituting grounds under s. 46(1) 6;
e. The Arbitrator’s failure to give notice that he intended to base his decision on laches breached the s. 19(1) requirement that he treat the parties equally and fairly by not affording Mr. Freedman the opportunity to join issue and respond pursuant to s. 19(2) to the laches argument, which thereby violated s. 46(1) 6 and 7;
f. In treating Mr. Freedman unfairly by denying him the s. 19(2) opportunity to respond to the doctrine of laches, the Arbitrator thereby breached ss. 46(1) 3, 6 and 7 and the Decision therefore should be set aside;
g. Alternatively, the portion of the decision as to laches may, pursuant to s. 46(1) 3 and s. 46(2), be set aside and allow the other portions of the decision to stand.
[145] Mr. Freedman’s arguments that the Decision, or at least the decision as to laches pursuant to s. 46(1) 3 and s. 46(2), be set aside due to the Companies’ failure in 2009 to plead laches in reply to his statement of defence to their claims and that he was denied the right to respond to the 2018 pleading of laches, ignores the events and context as to how he dealt with and brought forward his 2009 limitation defence of “statute barred” to the Companies’ claims and the timing of the Companies’ response including their January 15, 2018 pleading of the doctrine of laches.
[146] Clause 10.3(c) of the Arbitration Agreement requires that an arbitration claimant shall deliver a summary of its position, with particulars and written submissions in support thereof.
[147] Clause 10.3 of the Arbitration Agreement:
a. requires the Claimant to deliver a written summary with particulars of the claims;
b. requires the Respondent to deliver a written summary of its position as to the claims; and
c. permits, but does not require that the Claimant deliver a reply to respondent’s answer or defence to the Companies’ claims.
[148] The above “pleadings” requirements in the Arbitration Agreement contradict Mr. Freedman’s argument that the Companies were required to and failed to plead the doctrine of laches in a reply to his defence that the counterclaims were “statute barred”.
[149] Section 25(2) of the Act also requires that the parties’ statements shall indicate the facts supporting their positions, the points at issue and the relief sought.
[150] Mr. Freedman’s June 7, 2007 and March 2, 2009 Notices of Arbitration list only questions, contain no claims, no statement of facts which he relied upon and do not comply with Clause 10.3(c) of the Arbitration Agreement or s. 25(2) of the Act.
[151] Mr. Freedman for nine years failed to comply with Clause 10.3(c) of the Arbitration Agreement or s. 25(2) of the Act, namely from March 2, 2009 until December 4 and 19, 2017.
[152] As to his limited statement of defence reference that the Companies’ claims were “statute barred”, Mr. Freedman during the same nine years continued his claim for retroactive salary back to 2001, which appeared to contradict his reliance upon a two-year limitation period defence.
[153] It is the alleged non-compliance to the same Clause 10.3 by the Companies until responding to his December 4, 2017 motion which first articulated the grounds as to his limitation defence, that Mr. Freedman now relies upon as meeting his onus to establish that the Decision should be set aside because laches was not pled until the Companies’ January 15, 2018 written submissions in response to his December 4, 2017 first articulated and particularized defence of limitations in his motion to dismiss the Companies claims and his December 19, 2019 supplementary factum on the limitation issue.
[154] The Companies on March 31, 2009, served a detailed notice of defence and counterclaim against Mr. Freedman. That pleading notes their impairment to plead given the lack of particulars in Mr. Freedman’s March 2, 2009 notice of arbitration, but complies with Clause 10.3 in summarizing and particularizing their defence in presuming his position, together with their counterclaims in para. 23 that:
a. he account and pay back all amounts he as President improperly charged the Companies together with interest paid for third party financing at the time by the Companies;
b. repayment of Shoresh Liability money Mr. Freedman had improperly diverted from the Companies for his personal investment in Shoresh; and
c. and an accounting of other monies owing by Mr. Freedman to the Companies.
[155] Mr. Freedman on August 25, 2009, served a four paragraph reply and a two paragraph defence to the Companies’ counterclaims in paras. 23(a), (b) and (c). Such reply contains no particulars as to any claims he had against the Companies.
[156] Mr. Freedman’s two paragraph defence to the Companies’ counterclaims consists of a blanket denial of any wrongdoing and of specified paragraphs in the counterclaim and that the claims in the above paras. 23(a), (b) and (c) of the counterclaim “have been raised by the individual respondents since 2005”, with no particulars as to who raised what or when and then concludes that the Companies’ claims are therefore “statute barred”, or condoned in the alternative, again with no particulars.
[157] Clause 10.3(c), (d) and (e) of the Arbitration Agreement require the parties to present a detailed and particularized claim and defence. A reply thereunder is permitted, not required and requires no particulars.
[158] Mr. Freedman’s argument on this ground ignores his failure to properly plead his limitation defence during nine years and the opposing parties’ resulting ability to plead and reply to that unarticulated “statute barred” defence pleading.
[159] Mr. Freedman did not consider or act on the basis that the Rules, such as the r. 25.06 requirement that material facts be pled in a claim or a defence, applied to this arbitration. He acknowledged that the Arbitration Agreement does not make applicable such Rules and the Arbitrator made no such ruling.
Interim Motions
[160] Mr. Freedman and the Companies argued several motions between 2009 and prior to this December 2017 arbitration hearing, including motions for summary judgment by the Companies. Mr. Freedman did not on those motions between 2009 and 2017 seek dismissal of the Companies’ claims as barred by limitations, until December 4 and 19, 2017, in response to the Companies’ September 2017 summary judgment motion.
[161] The Arbitrator between January 2010 and June 2017 made a number of preliminary rulings in this arbitration on motions brought by the parties which included motions to strike the claims of the other party.
[162] The Arbitrator in his decision dated:
a. January 5, 2010, dismissed Mr. Freedman’s 2009 motion to find the 3 Siblings as Directors of FHI had breached their fiduciary duty and should be removed as Directors were issues beyond his jurisdiction. The Arbitrator did not grant the Companies’ motion to dismiss several heads of relief in Mr. Freedman’s March 2009 Fresh Notice of Arbitration for delay. The Arbitrator narrowed the arbitration issues to Mr. Freedman’s damage claims for termination of his employment, his claim for prior compensating dating back to 2001 and the Companies’ claims in their paras. 23(a), (b) and (c), for an accounting by Mr. Freedman, his payment of past expenses improperly paid as business expenses together with interest and his payment of the Shoresh Liability with interest;
b. March 31, 2010, struck the prior interim order limiting the activities of FHI and its Directors;
c. January 4, 2016, dismissed Mr. Freedman’s motion to examine all 3 Siblings for discovery, limited his right to examine one sibling on behalf of the Companies and directed that examinations for discovery were to proceed;
d. June 20, 2017, adjourned the Companies’ March 2017 motion to dismiss Mr. Freedman’s arbitration claims for delay and his refusal to re-attend to complete his discovery examination, directed Mr. Freedman to produce all records and financial information regarding the Shoresh Liability and to produce his 2000 to 2010 tax returns as relevant to the allegations regarding past improperly charged business expenses. The Arbitrator dismissed several heads of relief sought by Mr. Freedman including his claim that the Companies 2009 report from their accountant, Pittman, should be struck, without prejudice to reconsideration of that issue if requested during the scheduled upcoming arbitration hearing. The Arbitrator determined, that due to the lack of materials before him, he was unable to determine whether Mr. Freedman was behind most of the civil proceedings commenced between 2007 and 2014 as alleged by the Companies.
[163] Mr. Freedman was examined for discovery initially in March 2016. The Companies were required to obtain the above order from the Arbitrator to compel him to attend to complete his discovery, which finally occurred one year later in July 2017.
[164] In its September 2017 summary judgment motion, the Companies sought;
a. dismissal of Mr. Freedman’s claims for salary for damages in the form of notice upon the termination of his employment as well as his claims for prior salary and bonuses;
b. judgment for the Shoresh Liability based on admissions made by Mr. Freedman during his prior examination or cross-examination, together with interest thereon;
c. directions regarding determination and quantification of the balance of the counterclaim.
[165] The Companies did not seek summary judgment in their September 2017 motion on their other claims beyond the Shoresh Liability.
[166] Mr. Freedman’s counsel as stated notified the Arbitrator and the Companies on November 21, 2017 that he would bring a cross-motion returnable at the scheduled December 19-20, 2017 arbitration, seeking judgment for damages for wrongful dismissal if the Companies fail to prove just cause, which should not therefore extend the scheduled two-day hearing. Such notice is silent as to his limitation defence.
[167] Mr. Freedman served a cross-motion for summary judgment dated December 4, 2017.
[168] In his cross-motion, Mr. Freedman sought:
a. a declaration that he was wrongfully dismissed in May 2007 and sought payment in lieu of notice consisting of 36 months salary;
b. retroactive pay from 2001;
c. an award for past bonuses;
d. that his Shoresh Liability should be offset against the awards of his above damage claims; and
e. that the Companies’ other claims should be dismissed due to the Companies’ failure to prove the same and because such claims were “statute barred”.
[169] Mr. Freedman’s materials at the arbitration hearing included three affidavits from himself dated December 4, 15 and 18, 2017, an affidavit from and attached report of his expert accountant, affidavits of others, his December 4, 2017 factum and his supplementary December 19, 2017 factum as to his limitation period defence. Whether his late service of materials was intentional or not, Mr. Freedman’s late December delivery of his cross-motion materials impacted the Companies’ response thereto prior to the December 19th commencement of the arbitration and resulted in the Companies’ request and the Arbitrator’s decision to schedule times for further submissions regarding Mr. Freedman’s limitation defence.
[170] This is the context for the Arbitrator’s Decision statement that Mr. Freedman’s December 4 and 19, 2017 resurgence and presentation of his limitation defence as grounds to dismiss the claims of the Companies beyond the Shoresh Liability, came as a surprise. Mr. Freedman now incorrectly argues that this statement by the Arbitrator is another error as his “statue barred” defence was in his 2009 six paragraph defence and reply statement.
[171] Mr. Freedman’s December 4, 2017 delivery of his cross-motion for summary judgment resulted in the Companies seeking additional time to respond to Mr. Freedman’s motion to dismiss their claims based on the then articulated prior “statute barred” limitation defence. The Arbitrator as a result ordered the parties to file further written submissions on specified dates following the arbitration hearing regarding Mr. Freedman’s limitation defence issue. That as stated resulted in written submissions after the arbitration hearing from:
a. the Companies, dated January 15, 2018, which contains their pleading of the doctrine of laches as to Mr. Freedman’s limitation defence argument;
b. Mr. Freedman, dated January 31, 2018; and
c. the Companies in reply, dated February 5, 2018.
[172] The Companies in their January 15, 2018 submissions as to Mr. Freedman’s then articulated limitation defence submitted that:
a. the two-year limitation period or clock under s. 5(1)(a) of the Limitations Act, 2002, did not begin and the cause of action does not arise until they could first have brought an action and proved sufficient facts to sustain it: Consumers Glass Co. Ltd. v. Foundation Co. of Canada Ltd., (1985) 1985 CanLII 159 (ON CA), 51 O.R. (2d) 385, at pp. 398-399 and Foglia v. Coccimiglio, 2013 ONSC 1114;
b. Mr. Freedman as President and a Director fully controlled the Companies until his May 7, 2007 dismissal, with the support of two other Directors, Mr. Moon and Jacob Freedman until the latter lost confidence in December 2006;
c. Rose-Anne Freedman testified that she had been unsuccessful in her attempts to access the Companies’ records to investigate and determine her suspicion that Mr. Freedman had misappropriation corporate monies prior to his termination, that such record access only became possible upon his termination whereupon magnitude of Mr. Freedman’s credit card expenses and his Shoresh Liability were determined;
d. Mr. Freedman in the fall of 2007 after being terminated refused to answer questions by Jacob Freedman as to the Shoresh Liability and denied responsibility in relation to the same on his 2009 cross-examination, until his March 2016 discovery but continued to refuse disclosure regarding the same;
e. Mr. Freedman claimed and was paid expenses for the purchase of clothing including female apparel during his 2005 trip to visit his daughter attending a university course in Boston and testified during the arbitration hearing that these items were purchased as business promotions;
f. The Companies’ claims against Mr. Freedman were not discoverable prior to his May 2007 termination;
g. Mr. Freedman’s prior to his termination concealed his misconduct including numerous cited incidents, which given his position as head of and his control of the Companies, constituted fraudulent concealment;
h. Mr. Freedman’s fiduciary relationship and resulting obligations to the Companies and his deliberate concealment of information and dishonest acts do not permit him to rely upon a limitation period to allege the limitation clock commenced while he controlled the management of the Companies and covered up his wrongdoing;
i. Mr. Freedman upon termination immediately issued his June 7, 2007 arbitration notice which listed issues but contained no pleadings;
j. Events following Mr. Freedman’s May 2007 termination delayed and prevented the Companies claim against him as he thereupon obtained an interim court order limiting FHI’s operations and providing him with veto power on major decisions. He then supported the commencement of a series of civil proceedings aimed at removing the authority of the 3 Siblings including their removal as FHI Directors, as trustees of the RFT, in an attempt to reintroduce himself as President;
k. The parties engaged a mediator in the 2007 and 2008 court proceedings and that mediation period in 2008 is to be excluded for the limitation period relied upon, pursuant to s. 11 of the Limitations Act, 2002;
l. Mr. Freedman in his August 25, 2008 Affidavit, para. 25, admits that in order to avoid multiple proceedings, the arbitration was on hold pending determination of the central issue in the civil proceedings which was whether the siblings should be removed from their positions as corporate Directors and RFT trustees, which was scheduled to proceed before Parfett J. in September 2008;
m. Mr. Goldberg then issued a new court application to remove the siblings as FHI Directors and Mr. Freedman’s daughter was seeking a court order to appoint an institutional trustee of FHI and that such proceedings impaired their ability to instruct counsel to commence and pursue a claim by the Companies against Mr. Freedman;
n. The Arbitrator ordered Mr. Freeman to serve his claim by December 15, 2008, which was then extended on January 15, to March 2, 2009 to accommodate Mr. Freedman change of legal counsel and the Companies’ response as occurred by March 30, 2009;
o. Mr. Freedman accordingly was estopped from alleging the limitation period during the above events during which he held interim decision authority regarding major decisions, during his support of the various court proceedings brought by his daughter Liat and others to remove the 3 Siblings from control and management of FHI and prevent them from pursuing the arbitration;
p. Mr. Freedman failed to pursue his limitation period defence and seek dismissal of the Companies’ counterclaims despite the numerous motions since his 2009 defence that the Companies’ counterclaims were “statute barred”, until his last moment and procedurally unfair December 4, 2017 motion for summary judgment which lacked a proper evidentiary record as to the Companies.
[173] The above submissions by the Companies are their pleading of the appropriate material facts and particulars in support of their reliance upon the doctrine of laches, which Mr. Freedman failed to provide regarding his “statute barred” limitation defence from March 2009 until December 2017. Such facts and particulars by the Companies were detailed, adequate and provided Mr. Freedman pursuant to s. 46(1) 6 with the opportunity to respond thereto.
[174] Based on such allegations of fact and law, the Companies thereupon concluded this part of their January 15, 2018 submissions with the following submission:
69 Having failed to bring such a motion in 2009 when the issues were being defined for the arbitration and having thereafter participated in productions and discoveries in respect of the counterclaims, it is submitted that Jonathon is barred by the doctrine of laches and estopped from now seeking to dismiss the counterclaim as statute-barred.
[175] Mr. Freedman present argument therefore is incorrect that the Companies’ pleading of laches is a passing, unexplained, “lone and unsupported paragraph” lacking in particulars as required by Clause 10.3(c) of the Arbitration Agreement.
[176] The Companies’ pleading of laches with full particulars was made in response to Mr. Freedman’s December 4 and 19, 2017, first particularized limitation defence and included events which were subsequent in time to the parties’ March 2009 claim and counterclaim.
[177] The Companies’ January 15, 2018 written submissions conclude with the following statements:
a. The Companies required and were obtaining an expert report addressing some of the issues raised in the December 4, 2017 report of Mr. Freedman’s expert, including how to quantify his liability for improper expense claims and whether he had repaid expenses he had identified as personal;
b. The Companies indicate several additional individual claims to recover debt against Mr. Freedman which they state were discovered subsequent to his May 2007 termination for which relief would be sought against him; and
c. The Companies sought directions from the Arbitrator as to the balance of their counterclaims.
[178] The detailed allegations of fact and legal principles in the Companies’ January 15, 2018 submissions which proceeded their above para. 69 conclusions, complied under the circumstances with the pleadings requirements of Clause 10.3(c). The application of the doctrine of laches and the Decision should not be set aside on this basis.
[179] The Companies pleading of laches, in response to Mr. Freedman’s December 4, 2017 pleading that the limitation period bared the Companies’ claims, could be added as an amendment pursuant to s. 25(4), was appropriately permitted by the Arbitrator at that point in response to the requirement that all parties be treated fairly. That amendment on the circumstances at that time also met the pleading requirements of Clause 10.3(c) of the Arbitration Agreement.
[180] The scope of review under s. 46(1) 3 is limited as determined in Alectra Utilities Corporations v. Solar Power Network Inc., 2019 ONCA 254, 145 O.R. (3d) 481, which held:
24 These grounds for setting aside an arbitration award are, in general, not concerned with the substance of the parties' dispute. They concern issues such as the establishment and composition of the arbitration tribunal, compliance with Ontario law, and the requirements of procedural fairness.
25 Although the court cannot apply s. 46 (1)3 without having regard to an arbitrator's decision, the court's authority to set aside an arbitration award under that subsection depends on the mandate the arbitration agreement confers on the arbitrator to resolve a particular dispute. In order to succeed on an application to set aside an arbitration award, an applicant must establish either that 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 arbitration agreement.
27 In short, s. 46(1)3 requires that arbitrators act within the bounds of the authority granted by the arbitration agreement pursuant to which they are appointed -- no less, but no more. Section 46 (1)3 is not an alternate appeal route and must not be treated as such.
[181] Mr. Freedman on this ground did not address the relevant procedural directives and safeguards in the Act.
[182] Section 25 of the Act states:
Procedural directions
25 (1) An arbitral tribunal may require that the parties submit their statements within a specified period of time. 1991, c. 17, s. 25 (1).
Contents of statements
(2) The parties’ statements shall indicate the facts supporting their positions, the points at issue and the relief sought. 1991, c. 17, s. 25 (2).
Changes to statements
(4) The parties may amend or supplement their statements during the arbitration; however, the arbitral tribunal may disallow a change that is unduly delayed. 1991, c. 17, s. 25 (4).
Oral statements
(5) With the arbitral tribunal’s permission, the parties may submit their statements orally. 1991, c. 17, s. 25 (5).
[183] Section 25(4) permits the very amendment or supplement to the Companies’ arbitrations statement in adding and relying upon the doctrine of laches in response to Mr. Freedman’s December 2017 then articulation of his limitation defence. The Arbitrator acted within his jurisdiction in permitting the Companies to argue laches in response to Mr. Freedman’s December 2017 particularized limitation pleading and not in breach of s. 46(1) 3.
[184] The ability of parties, with permission of the arbitrator, to orally submit their statements or pleading under s. 25(5), also demonstrates the greater flexibility available in arbitrations. That example of flexibility supports the Arbitrator’s decision in allowing Mr. Freedman to argue his December 2017 particularized limitation defence and the Companies’ responding plea and reliance upon the doctrine of laches in response to such limitation defence.
[185] The above context indicates that Mr. Freedman’s failure from March 2009 until December 4, 2017, to properly plead his “statute barred” limitation defence without particulars as required in Clause 10.3, and the context and sequence of events before and after his May 2007 termination until December 2017, indicate that the Arbitrator treated Mr. Freedman and the Companies equally and fairly, as required in s. 19 and as to ss. 46(1) 6 and 7 of the Act.
[186] Such equal and fair treatment of the parties included permitting the Companies on January 15, 2018, to plead that Mr. Freedman “was barred by the doctrine of laches and estoppel from now seeking to dismiss the counterclaim as statute-barred”, because of the articulated particulars alleged in support thereof. To have prevented presentation of that pleading of laches would have denied the Companies’ rights under s. 19 and rewarded Mr. Freedman for his failure to plead particulars of and pursue his limitation defence until the eve of the arbitration hearing on December 19, 2017.
[187] There is no question on these facts and context that the pleading and issue of laches was pled, was in issue and was within the jurisdiction of the Arbitrator to determine as occurred in the Decision. Pursuant to s. 46(1) 3. This is not a case of an arbitrator exceeding jurisdiction or deciding a matter which was not in issue.
[188] Following the Companies’ January 15, 2018 submissions on the limitation and laches issues, Mr. Freedman then had 2 weeks until January 30, 2018, to file reply submissions as occurred. The Arbitrator thereby provided Mr. Freedman with the opportunity to engage and respond to the Companies’ pleading that he should pursuant to the doctrine of laches and estoppel, be prevented from relying upon a two-year limitation period.
[189] That procedure and opportunity complied with the requirements of Clause 10.3 of the Arbitration Agreement, s. 19 of the Act regarding a matter in issue within the Arbitrator’s jurisdiction and defeats Mr. Freedman’s challenge on this ground under ss. 46(1) 3, 6 and 7.
[190] Mr. Freedman in fact had an additional opportunity to address this ground as to laches pursuant to ss. 40 and 44 of the Act, which state:
Explanation
40 (1) A party may, within thirty days after receiving an award, request that the arbitral tribunal explain any matter. 1991, c. 17, s. 40(1).
Corrections and additional awards
Errors, injustices caused by oversights
44 (1) An arbitral tribunal may, on its own initiative within thirty days after making an award or at a party’s request made within thirty days after receiving the award,
(a) correct typographical errors, errors of calculation and similar errors in the award; or
(b) amend the award so as to correct an injustice caused by an oversight on the part of the arbitral tribunal. 1991, c. 17, s. 44(1).
[191] Mr. Freedman elected to not exercise the relief available pursuant to s. 44(1)(b), namely to seek to correct any alleged injustice and permit him a second opportunity to argue and make submissions regarding the doctrine of laches. Failure to exercise that right undermines this ground of his application to set aside the Decision other than the Shoresh Laibility award, on the basis he was denied procedural fairness under s. 19 of the Act.
[192] Whether the analysis and decision by the Arbitrator was correct in applying the doctrine of laches to prevent Mr. Freedman’s reliance on a limitation period as a bar to the Companies’ claims, is not the issue on this application. Mr. Freedman acknowledges this application is not an appeal.
[193] For the above reasons, the court refuses to set aside the Decision on the basis that the Companies were permitted to plead the doctrine of laches in response to Mr. Freedman’s limitation defence and the Arbitrator’s decision that such doctrine applied and prevented Mr. Freedman’s reliance upon a statutory limitation period to bar the other claims of the Companies.
[194] Mr. Freedman’s right were not breached pursuant to ss. 46(1) 3, 6 or 7. This conclusion is determined upon reasonableness as the appropriate standard of review.
[195] The court in the alternative, would reach the same conclusion on a correctness standard of review.
[196] The court in the further alternative, concludes that Mr. Freedman on this ground was not denied procedural fairness pursuant to s. 46(1) 6 on a correctness standard or on a “whether or not” test.
[197] Had the court in the alternative upheld this ground of the application under s. 46(1) 3, it would have:
a. set aside this award as to laches only pursuant to s. 46(2), as this issue and the decision as to laches is separate and independent of the other awards in the Decision; and
b. based on the above context in this arbitration and Mr. Freeman’s conduct in delaying arbitration and resolution of the issues therein for the above reasons and findings of fact made by the Arbitrator, would in the further alternative have ordered pursuant to s. 52(2) that the “period from the commencement of the arbitration be excluded from the computation of the time within which an action may be brought on a cause of action that was a claim in the arbitration.” Mr. Freedman first commenced this arbitration on June 7, 2007.
[198] Mr. Freedman in argument acknowledged the court’s authority under s. 46(2) to strike only this determination as to laches had his argument thereof been accepted and that the court thereupon was not required to set aside the Decision and the other awards therein.
Finding of Discoverability as to Mr. Freedman’s Limitation Defence
[199] Mr. Freedman brings this second ground of the application to set aside the Decision pursuant to s. 46(1) 6 and 7.
[200] Mr. Freedman on this second ground of the application submits that:
a. the Arbitrator made a discoverability finding as to his limitation’s defence which lacks supporting reasons and flowed from a breach of procedural fairness;
b. The Decision fails to address Mr. Freedman’s arguments as to the discoverability by the Companies of their claims against him, the prior events he relied upon and in particular, Rose-Anne and Joshua Freedman’s draft crossclaim against Mr. Freedman in the 06 Action brought in the name of FHI, which their counsel in discussions sent to FHI’s counsel on March 17, 2006, that such events and that draft March 17, 2006 crossclaim against Mr. Freedman, were more than two-years before the Companies’ March 30, 2009 arbitration claims against him, which thereby bared such claims against Mr. Freedman;
c. The Arbitrator’s failure in the Decision to address this draft March 2006 crossclaim pleading evidence from the 06 Action was the “centerpiece” of Mr. Freedman’s defence of limitations and in determining that the Companies’ causes of action against Mr. Freedman were not discoverable prior to his termination on May 7, 2007, the Arbitrator breached the s. 38(1) requirement that an award shall state the reasons upon which it is based.
d. The Decision’s determination as to discoverability regarding Mr. Freedman’s defence of limitations and the resulting breach of s. 38(1) warrant setting the Decision aside pursuant to s. 46(1) 6 and 7, for the failure to provide reasons as to such draft crossclaim pleading evidence and its impact on the determination as to discoverability.
[201] Mr. Freedman in argument of this second ground submitted that the record before the Arbitrator and Rose-Anne and Joshua’s March 2006 draft crossclaim in particular, contradict the Arbitrator’s finding that the Companies could only discover Mr. Freedman’s wrongdoing after his May 7, 2007 termination.
[202] The appellate nature of the challenges in the above paras. 199(c), 200 and below are obvious.
[203] This argument directly contradicts and ignores the Arbitrator’s consideration of discoverability under s. 5(1) of the Limitations Act, 2002, and his findings of fact as to when the Companies knew and were capable of commencing an action.
[204] The findings of fact made by the Arbitrator as to discoverability are numerous, detailed, contradict the allegation the Arbitrator failed to address the discoverability issue in detail and include the following:
a. that until his termination and until approximately 2005, Mr. Freedman had free rein as to what he could do as President of FHI, that he ran FHI as his personal fiefdom, as his own, between the late 1990s and early 2000s: Decision paras. 21 and 76;
b. that Mr. Freedman’s diversion of funds of the Companies to finance his personal investments including the Shoesh Liability began in 1999, was unknown upon the signing of the Arbitration Agreement and that it was not until 2007 that such Shoresh Liability advances could be identified on the financial statements of the Companies as prior to that, those amounts were only identified as expenses and were then in 2006 shown incorrectly as a Shoresh loan which it was not, which the 3 Siblings were unaware as to the nature thereof, rather than it being appropriately being identified as a related party receivable: Decision paras. 46, 49, 50, 93, 94 and 106;
c. that even after the Mr. Freedman mislead the 3 Siblings and comingled personal and business expenses which he had the Companies pay, the other FHI Directors did not question or object to the way or manner Mr. Freedman operated FHI until approximately 2005: Decision paras. 21 and 76;
d. that although Jacob and Rose-Anne Freedman were also FHI Directors, there were sporadic Board meetings, particularly before 2000 and Mr. Freedman did what he wanted as to the Companies: Decision para. 76;
e. that Rose-Anne and Jacob Freedman in 2005 unsuccessfully sought an accounting as to their Leima funds from Mr. Freedman however it was only in May of 2006 that they learned that 50% of his Leima funds were into a trust account however Mr. Freedman did not then acknowledge and denied that he had reduced payment of his share of the operating costs of City Center: Decision paras. 59 to 63;
f. that Rose-Anne began asking questions about the expenses being run through the companies however staff of the Companies never satisfactorily answered her inquiries: Decision para. 77;
g. that the 3 Siblings only found out on June 27, 2006 that Mr. Freedman had not paid approximately $200K towards the City Center expenses however the true or full nature of the Leima issue remained unknown. The parties thereupon signed the 06 Action and the Arbitration Agreement in September 2006: Decision paras. 46 and 64;
h. that the Audit Committee reporting letter with critical general comments about Mr. Freedman is dated November 26, 2006 and that such committee then stood down as requested by Mr. Freedman and Mr. Moon: Decision paras. 66-71;
i. Jacob Freedman stated he continued to support Mr. Freedman during 2005 and 2006 until he learned that his sister and brother Joshua had been right to ask questions about Mr. Freedman’s actions and management of the FHI and that Mr. Freedman in fact was deceiving the other Directors, and upon learning in June 2006 that Mr. Freedman had cheated the 3 Siblings by withholding 50% of his share of Leima funds which were to be contributed to the Companies’ City Center property which led to the parties entering into the 06 Agreement the creation of the Audit Committee which Mr. Freedman and Mr. Moon then unilateral dismissed in January 2007 its November 2006 report indicating that Mr. Freedman had: a) comingled his personal interest, b) acted as if he controlled the Board and c) put his interests ahead of FHI interests: Decision paras. 67 – 71, 77 – 79, 92 and 93;
j. that the Companies and the 3 Siblings only learned on June 27, 2007 that Mr. Freedman was not paying his share of City Center expenses: Decision para. 64;
k. that the true nature of Shoresh and the Shoresh Liability upon the signing of the 06 Agreement remained unknown as the undisclosed withdrawal of such monies were buried in the Companies’ books. The 3 Siblings and Directors of the Companies had no knowledge Mr. Freedman was funding his Shoresh investment from FHI: Decision para. 46;
l. that the Shoresh Liability had merely be shown as an unidentified receivable of the books of the Companies, was not shown as a receivable from Shoresh until June.18, 2017 but it continued to an unknown until they learned after Mr. Freedman’s May 7, 2017 termination about such advances to Shoresh, that it was not a loan and that Shoresh was insolvent: Decision para. 50;
m. that Mr. Freedman’s support, orchestration if not control of and instigation of numerous civil proceedings after Mr. Freedman’s May 7, 2007 termination for his own benefit and costing hundreds of thousands of dollars to the Companies; caused delay in the arbitration proceeding first commenced on June 7, 2007 and then only re-commenced on March 2, 2009 upon being ordered to do so by the Arbitrator which then resulted in the Companies’ March 31, 2009 claims, prevented the arbitration from proceeding: Decision paras. 19, 20, 24, 26, 35-41, 44, 90 and 101;
n. that Mr. Freedman’s control of the Companies and their information and the failure to respond to his sister’s prior attempts to access corporate information prevented disclosure and knowledge of material facts until after Mr. Freedman’s May 7, 2017 termination. The Companies did not condone Mr. Freedman’s misconduct justifying grounds for dismissal as they were unaware of the full extent thereof: Decision paras. 21, 25, 37, 38 and 47;
o. that Mr. Freedman in running the Companies as his own, did not follow directions from the Board. The FHI Board did not exercise control of corporate affairs including Mr. Freedman, as such control would have resulted in his progressive discipline leading to termination for cause which did not occur until May 7, 2017; Decision paras. 87 and 88: and
p. that it was only after Mr. Freedman’s May 7, 2007 termination that the 3 Siblings could review the Companies’ records, became aware of and learned discoverable details and the material facts as to Mr. Freedman’s activities and how he as President and CEO had operated the Companies: Decision paras. 21, 37, 38, 50 and 91.
[205] The above finds of fact contradict Mr. Freedman’s submissions to the Arbitrator that the Companies were aware of and capable of commencing an action against him not later than March 2006. These findings of fact also contradict Mr. Freedman’s position on the arbitration and on this application as to the significance of Rose-Anne and Joshua Freedman’s earlier March 2006 draft 06 Action statement of defence, crossclaim and counterclaim.
[206] It again is undisputed that this application is not an appeal and that an appeal of the Decision, including the above findings of fact, is prohibited by Clause 10.3 of the Arbitration Agreement.
[207] The Arbitrator in the Decision states that Mr. Freedman’s argument was that material facts were known to the Companies which commenced the limitation period more than two years prior to their March 31, 2009 counterclaim and their claims were therefore barred pursuant to the Limitations Act, 2002: Decision para. 35.
[208] Mr. Freedman in his December 16, 2017 arbitration factum and in his January 31, 2018 written reply submissions on the limitation issue cites reasons and events between the year 2000 and March of 2006 which he argued evidenced that the Companies had knowledge that they had a claim against him and failed to commence a claim and did not do so in the arbitration until March 31, 2009, which was beyond the then two-year limitation period. He accordingly in citing those grounds in December 2017, submitted that the Companies’ claims therefore were barred by expiration of that two-year limitation period, as he had “pled” in his April 24, 2009 defence to the Companies’ claims.
[209] Mr. Goldberg who was then sole trustee of the RFT, the solicitor of the Companies and a supporter of Mr. Freedman, caused FHI to commence the 06 Action on February 3, 2006 against the 3 Siblings and Mr. Freedman for declaratory relief and an accounting: Decision para. 20.
[210] The record indicates that counsel for Rose-Anne and Joshua Freedman in sending over a draft of their statement of defence and crossclaim in the 06 Action to counsel for FHI in March 2006 stated it would be filed unless certain conditions were met.
[211] This draft pleading was never filed as the 06 Action did not proceed and was settled upon the Freedman siblings, the Companies and others entering into the 06 Agreement in September 2006 which included the Arbitration Agreement.
[212] In argument of this ground, Mr. Freedman pointed to his reliance in argument before the Arbitrator of the importance of this draft March 2006 crossclaim as conclusive proof that the Companies would then have known that Mr. Freedman had caused damage to FHI for which an action could have commenced against him. Mr. Freedman in his January 2018 submissions submitted that at the latest, this March 2006 draft crossclaim began the two-year limitation clock and the Companies’ March 31, 2009 claims were therefore bared under by the Limitations Act, 2002.
[213] The above argument to the Arbitrator equates knowledge or suspicions of his sister and does not address Mr. Freedman’s control of the Companies until his May 7, 2007 termination and the Companies’ resulting inability to take action prior to that against someone who controlled those corporations. The Arbitrator in the Decision made the above numerous findings of fact as to Mr. Freedman’s extensive historical and ongoing control and direction of the Companies which he ran until his May 2007 termination as his own and his failure to follow directions of the Boards: Decision paras. 21, 76, 87 and 88.
[214] In the Decision, the Arbitrator as to discoverability addressed in detail the issues pursuant to s. 5 of the Limitations Act, 2002 as to when the Companies would have known:
a. of the damages occasioned to them;
b. that such damages were caused by an act or omission by Mr. Freedman;
c. and that a proceeding would be appropriate to remedy or recover such damages.
[215] The Arbitrator held that whether an action is appropriate pursuant to s. 5(1)(a)(iv) of the Limitation Act, 2002, is dependant upon the specific factual or statutory setting of each individual case and that many factual issues will influence that outcome. (para. 36)
[216] The central issue as determined by the Arbitrator was that the essential elements of the doctrine of laches were met on the facts in that case. The Arbitrator determined that Mr. Freedman’s conduct and delay in the arbitration which he originally commenced in 2006 and did not proceed with, his support and orchestration of several civil actions commenced in 2007 and 2008 for his benefit and his failure after being ordered to issue a new notice of arbitration in 2009 which then led to his August 2009 “statute barred” defence pleading to the counterclaims and his failure to not articulate and act upon that limitation defence between April 2009 and December 2017, operated to the detriment of the Companies and prevented him from relying upon a limitation period which he alleged commenced in 2006 to defeat or bar the Companies’ claims.
[217] The Arbitrator decided that the limitation period defence could not be relied upon as a shield to the Companies’ claims. That limitation defence was therefore determined against Mr. Freedman based on the application of the doctrine of laches. The issue and that decision was not based upon when the limitation period against the Companies commenced and matured and whether the Companies, still controlled by Mr. Freedman until his May 7, 2007 termination as determined by the Arbitrator, failed to commence their counterclaims against him within a two-year limitation period.
[218] Mr. Freedman in para. 86 of his application factum acknowledges that the s. 38(1) requirement to provide reasons for an award does not require reasons as to all issues, but only material issues to the decision made.
[219] Given that the limitation issue was not determinative of and that the matter was determined on the basis of laches, there is no merit to the argument that the Decision breaches s. 38(1) for failing to give reasons whether prior events and the March 2006 draft crossclaim did or did not commence the limitation period and bar the Companies’ claims.
[220] The fact the limitation issue was determined upon the application of the doctrine of laches, as well as the findings of fact as to the lack of knowledge of material claims which remained unknown until after the May 7, 2017 termination, determine that the Decision should not be set aside under ss. 46(1) 6 and/or 7 because the Arbitrator failed to determine and provide reasons whether prior events or the draft 2006 crossclaim against Mr. Freedman resulted in the commencement of a limitation period against the Companies. The issue as to when the limitation period commenced was not relevant or determinative to the Arbitrator’s decision that Mr. Freedman’s limitation defence did not constitute a shield against the Companies’ claims based upon the application of the doctrine of laches. The Arbitrator in any event as stated, found as a fact that the relevant material facts of Mr. Freedman’s wrongdoing were not discovered until after May 7, 2007.
[221] Although not relied upon as to this court’s above conclusions on this second ground of the application, it is noted that the allegations in this draft defence, crossclaim against Mr. Freedman and counterclaim against FHI pleading in the 06 Action in fact mirror many of the findings of fact made by the Arbitrator and contradict his arguments as to the relevance of that draft pleading made to the Arbitrator and on this application, as:
a. twelve of this sixty-one paragraph draft pleading allege and details Mr. Freedman’s absolute level of control of the Companies and their information: Paras. 9, 18, 27, 33, 40, 42, 45, 52-54 and 61;
b. nineteen of the sixty-one paragraphs of this draft pleading allege the denial by Mr. Freedman and resulting inability to access financial and operational information about the Companies: paras. 11, 15, 17, 19, 21, 33, 35, 38-40, 48-51, 54, and 59-61;
c. contain allegations in the counterclaim based on what is acknowledged presumptions: para. 59; and
d. of the eight crossclaims allegedly against Mr. Freedman, six of them seek orders against FHI, including the request for an order directing the investigation of FHI and an order that FHI be required to account in a form to be determined by the court.
[222] Mr. Freedman on this ground has failed to establish that the Decision should be set aside under ss. 46(1) 6 or 7.
[223] This conclusion is determined upon reasonableness as the standard of review.
[224] The court in the alternative, would reach the same conclusion on a standard of review of correctness or pursuant to a “whether or not” test.
[225] Had the court in the alternative determined the Arbitrator’s decision on this second ground breached ss. 46(1) 6 or 7, it would have held that Mr. Freedman’s success on this ground impacted no other award in the Decision other than laches. In that event, the court would have set aside the decision as to laches pursuant to s. 46(1) 3 and s. 46(2) only and on the terms indicated above on the first ground but would not have set aside the other awards in the Decision.
[226] Mr. Freedman however submits that if the court acknowledges the validity of this second ground of the application, it’s jurisdiction under s. 46(1) is limited to striking the full Decision and may not sever and leave standing other parts of the Decision, because the court he submits lacks jurisdiction to “vary” the Decision except as permitted under s. 46(2) as he does not on this second ground rely upon s. 46(1) 3.
Scope of Remedy If Contravention of s. 46(1) 6 or s. 46(1) 7
[227] Mr. Freedman submits that upon establishing a ss.46(1) 6 or 7 breach by the Arbitrator as to any of the decisions or awards to the Companies in the Decision:
a. The court must set aside all decisions or awards in the Decision as the court lacks jurisdiction to “vary” the Decision by striking one award and permitting the other awards upheld or not challenged to stand; and
b. allowing the other awards in the Decision to stand is only permissible pursuant to s. 46(2), namely upon a breach pursuant to s. 46(1) 3 on jurisdictional grounds.
[228] The Decision as indicated contains seven final decisions or awards and one final determination by the Arbitrator who:
a. dismissed Mr. Freedman’s claim for damages for wrongful dismissal;
b. dismissed Mr. Freedman’s claim for past income at a higher level than he was paid;
c. dismissed Mr. Freedman’s claim for prior bonuses;
d. awarded damages to the Companies in determining that Mr. Freedman was required to pay the Shoresh Liability to them;
e. determined that Mr. Freedman under the doctrine of laches was prevented from relying upon his limitation period defence as a bar to the claims of the Companies;
f. awarded the Companies 12% interest on the Shoresh Liability to December 31, 2008;
g. awarded the Companies 6% interest on the Shoresh Liability commencing January 1, 2009, until payment; and
h. directed that Mr. Freedman was required to account regarding his past business expense claims and any other indebtedness he allegedly owed to the Companies.
[229] As stated, Mr. Freedman acknowledged the Shoresh Liability and does not on this application seek to set aside the Shoresh Liability award. That award accordingly is an exception and not impacted by his position that the full Decision otherwise must be set aside upon his establishing a breach of ss. 46(1) 6 or 7 regarding any other award to the Companies or determination.
[230] Mr. Freedman submits that:
a. the Act as to grounds in ss. 46(1) 6 and 7, does not contain language comparable to s. 46(2) which, upon contravention of s. 46(1) 3, requires a court if the matters are separable, to strike the award granted without or in excess of jurisdiction and allow the other awards to stand; and
b. upon determining a breach of s. 46(1) 6 or 7, due to the absence of wording similar to s. 46(2), may only set aside the full Decision including all awards therein and may not “vary” the award, as in the case of an appeal pursuant to s. 45(5).
[231] Mr. Freedman implicitly submits that:
a. the word “award” in s. 46(1) refers to the full decision of an arbitrator regardless of whether that decision contains one or several awards and that is why all awards in a multi-award decision must be set aside for a contravention of ss. 46(1) 6 or 7; and
b. it is the applicant’s choice and selection of the subsections of s. 46(1) he or she relies upon which determines and thereby dictates the jurisdiction of this court if it concludes a breach of ss. 46(1) 6 or 7 has occurred.
[232] While this application does not allege the Arbitrator breached any of the grounds in s. 46(1) as to the decisions dismissing Mr. Freedman’s damage claims for wrongful dismissal, past increased salary and past bonuses, he seeks the dismissal of those decisions as well and the revival of those claims in requesting that the Decision be set aside due to breach of ss. 46(1) 6 and 7 regarding one or more of the awards granted to the Companies.
[233] The issue is one of statutory interpretation and the court’s jurisdiction under the Act as well as its inherent jurisdiction.
[234] Courts in construing legislation to determine its legislative intent:
a. must consider the purpose or mischief the legislation addresses, the provisions of the legislation as a whole and the particular language of the section in issue;
b. requires consideration of the statutory provision in issue, as well as the legislative purpose of the legislation;
c. requires that the provision in issue be read harmoniously with the scheme and object of the legislation and the other provisions in that legislation: Rizzo v. Rizzo Shoes Ltd., Re 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27, at para. 21 and Glenn and Babb v. Schofield, 1928 CanLII 85 (SCC), [1928] S.C.R. 208, at para. 5.
[235] The relevant portions of s. 46(1) and s. 46(2) of the Act state:
Setting aside award
46 (1) On a party’s application, the court may set aside an award on any of the following grounds:
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.
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.
The procedures followed in the arbitration did not comply with this Act.
Severable parts of award
46 (2) If paragraph 3 of subsection (1) applies and it is reasonable to separate the decisions on matters covered by the arbitration agreement from the impugned ones, the court shall set aside the impugned decisions and allow the others to stand. 1991, c. 17, s. 46 (2). (emphasis added)
[236] The Act does not define the words “award” and “decision” in s. 1.
[237] The word “award” is used frequently in the Act, as in ss. 37, 38, 41, 42 42, 44, 45, and 46(1) 3.
[238] The Act however also uses the word “decision”, as in ss. 34, 46(1) 3 and 46(2).
[239] The words “award” and “decision” are used interchangeably in s. 46(1) 3.
[240] Blacks Law Dictionary, eighth ed., defines:
a. “award” as a noun, as a “final judgement or decision, one by an arbitrator or by a jury” and as a verb, as “to grant by the formal process or by judicial decree;
b. “decision” as a noun, as “a judicial or agency determination after consideration of the facts and the law; esp., a ruling order or judgement pronounced by a court when considering or disposing of a case.
[241] Those dictionary definitions each involve a common final determination of a claim for relief and confirm the interchangeable meaning of those words, as occurs in s. 46(1) 3.
[242] Further support that the Legislature’s intention that the words “award” and “decision” are interchangeable as to s. 46(1) is apparent in s. 42 which states:
More than one final award
42 The arbitral tribunal may make more than one final award, disposing of one or more matters referred to arbitration in each award. (emphasis added)
[243] The reference in s. 42 to several final awards in an award or decision indicates:
a. The word “award” in s. 46(1) includes and refers to an individual award in a multi-award decision and does not refer to all awards in a multi-award decision; and
b. the court’s authority under s. 46(1) to set aside an “award” on a ground thereafter listed, relates to an individual award in a single or in a multiple award decision.
[244] Section 46(1) could have but does not state that all awards in a multi-award decision must be set aside, as Mr. Freedman suggests, upon contravention of paras. 1, 2 or 4 to 9.
[245] Of importance is the fact that s. 46(2) is not an empowering provision. s. 46(2) instead obligates and limits the court upon determining a jurisdictional breach under s. 46(1) 3, to separate multiple decisions if possible, and to strike only the decision(s) made without jurisdiction or beyond the scope of the arbitration agreement.
[246] The absence in s. 46 of a similar obligation as to ss. 46(1) 6 or 7 breach does not thereby limit or determine a court’s jurisdiction in determining and granting the appropriate remedy in the case of those breaches.
[247] The Act does not address the invalidity under s. 46(1) of one of several awards in a decision. This is not an instance of the “expresso unis est exclusio alterius” rule that the expression of one thing or power, excludes another: Sullivan on the Construction of Statutes, para. 8. 89-90.
[248] In comparison, s. 45(5) of the Act states:
Appeals
45 (5) The court may confirm, vary or set aside the award or may remit the award to the arbitral tribunal with the court’s opinion on the question of law, in the case of an appeal on a question of law, and give directions about the conduct of the arbitration. 1991, c. 17, s. 45 (5).
[249] Section 45(5) codifies the inherent jurisdiction of an appellate court to confirm, vary or set aside the decision appealed from. Such inherent appellate jurisdiction:
a. exists independent of and is confirmed by s. 45(5); and
b. does not require that an appellate court must set aside all decisions upon determining to set aside one of several awards therein.
[250] This is a s. 46 application and is not an appeal under s. 45.
[251] Section 42 however specifically permits inclusions of multiple final awards in one award or decision. It is illogical, absent specific legislative language, that the s. 46(1) authority to set aside an award requires a court to set aside all awards in a multi-award decision.
[252] A court on a s. 46(1) application has inherent jurisdiction and the obligation to administer justice in a proper, fair and just manner to each of the parties. Absent legislative language to the contrary, a court under s. 46(1) should not set aside an award not challenged or not challenged successfully, in a multi-award decision.
[253] Section 45(5) indicates the distinction between confirming, varying and setting aside.
[254] A court does not pursuant to s. 46(1) have the power to vary. Setting aside for example the award of 12% interest, or the award 6% interest, pursuant to ss. 46(1) 6 or 7 however would not “vary” or change that other interest award, the determination that Mr. Freedman must account or the dismissal of his three claims.
[255] The three decisions dismissing Mr. Freedman’s claims for damages for wrongful dismissal, for arrears of salary and for unpaid bonuses similarly are:
a. separate and independent grounds and claims from one another; and
b. independent of the claims by and awards made to the Companies against Mr. Freedman.
[256] If the Arbitrator in this case had issued a separate written decision for each award in the Decision, instead of including all of the awards and the determination in one written decision, Mr. Freedman would not have this argument and would not be entitled to the relief sought, namely the setting aside all awards in the Decision including ones he did not challenge under s. 46(1).
[257] Unless indicated to the contrary in the legislation, interpretation of the Act which permits multiple awards in a single decision as provided in s. 42, should if possible avoid an interpretation and not necessitate that arbitrators in a multiple claim arbitration should issue multiple decisions to avoid the result sought by Mr. Freedman, namely a written decision for each award:
a. in order to protect the parties’ time and cost invested in the arbitration;
b. in order to protect the awards not challenged or not set aside under s. 46(1); and
c. to prevent a court having to set aside other valid or unchallenged awards recorded in a single decision.
[258] Unless the legislation requires that result, a court should not be obligated to strike awards in a multiple award decision because one award should be set aside pursuant to ss. 46(1) 6 or 7.
[259] Section 46(1) contains no requirement.
[260] The opening phrase of s. 46(1) that “the court may set aside an award on any of the following grounds”, does not address a decision containing multiple awards. The absence of such legislative intent does not thereby oblige a court to set aside all awards in a multiple award decision if the applicant establishes a breach of one of the listed grounds as to one award in the multi-award decision.
[261] In enacting s. 46, the Legislature could have but did not include a provision that setting aside one of multiple awards in a decision pursuant to s. 46(1), requires a court to set aside all awards in a multiple award decision.
[262] Courts pursuant to s. 6, are not permitted to intervene in matters governed by the Act except as to the matters therein listed. Permitted interventions include a court order to enforce an arbitration award. Mr. Freedman’s position on this issue would prevent a court from granting judgment for any valid or unchallenged award in a multi award decision if one of those awards contravened ss. 46(1) 6 or 7.
[263] The Judicial Review Procedure Act does not address a court’s authority upon determination that one of several determinations in a decision should be set aside on judicial review. Court’s frequently on judicial review however rely upon their inherent jurisdiction to strike one of several awards in a decision and not set aside other awards in that decision: Ontario (Attorney General) v. Fineberg, (1994) 1994 CanLII 10563 (ON SC), 19 O.R. (3d) 197; Transport Vares Inc. v. Feng, 2011 FC 1295, 96 C.C.E.L. (3d) 171, and Canada (Attorney General v. Davis), 2017 FC 159.
[264] Clear legislative language would be required to so limit the jurisdiction of the court, which is not present as to s. 46(1). Section 46(2) does not contain such limitation.
[265] Mr. Freedman’s position that a court is limited and required to set aside all decisions in an award if one decision therein is in breach of ss. 46(1) 6 or 7:
a. is not required or supported by s. 46(2) or other provisions in the Act;
b. encourages the issuance of multiple awards for each claim in an arbitration with the resulting additional time and costs, despite s. 42’s authority that such multiple awards are not necessary; and
c. would defeat a common preference for a more efficient and less costly final determination of disputes by arbitration rather than civil litigation.
[266] Mr. Freedman’s position on this issue also:
a. would encourage s. 46(1) applications due to the incentive that all awards recorded in a single decision must be set aside if any of the awards contravenes ss. 46(1) 6 or 7, rather than a s. 45 appeal, including the need for leave in the case of s. 45(1), where a court under its inherent appellate jurisdiction and pursuant to s. 45;
b. s. (5), may both vary an individual award and may also set aside or maintain individual decisions in the final award;
c. would prevent a court’s otherwise authority pursuant to s. 6 to enforce valid decisions in a multiple decision award; and
d. would lead as in this case to renewed arbitration of otherwise unobjectionable s. 46(1) final decisions or awards.
[267] In the absence of prohibitive legislative language, s. 46 should be interpreted to permit a court to strike one of multiple final decisions in an award and not be obliged to strike all awards if one should be set aside under ss. 46(1) 6 or 7. A court’s inherent jurisdiction in determining the appropriate remedy and administrating justice fairly to the parties on a s. 46(1) application permits and warrants that result.
[268] In conclusion, proper legislative interpretation including consideration of the above issues permits a court under s. 46(1), if appropriate, to set aside one of multiple awards in a single decision found to be in contravention of s. 4(1) 6 or s. 46(1) 7 and is not required in that case to set aside the other otherwise unchallenged or unobjectionable and unrelated awards in a multi-award decision.
[269] Mr. Freedman failure to justify that the Decisions be set aside under his above two grounds determines that he is not entitled to an order as requested that the Companies’ claims against him be set aside.
Lack of Notice and Denial of Opportunity to Respond to Decision that Mr. Freedman Account
[270] The Arbitrator determined that Mr. Freedman was required to account as to the Companies’ paras. 23(a) and (c) claims, namely to account for expenses he charged during his tenure as President and other monies he allegedly owed to the Companies. The Arbitrator in making that determination:
a. found that there had been no review or supervision by others of the substantial amount of expenses Mr. Freedman had submitted and approved over time;
b. indicates that Mr. Freedman’s expert confirmed that the Shoresh Liability which the applicant had taken out of the Companies had been reported on the books of the Companies as an ordinary receivable instead of as a related party transaction;
c. his self-approval and allocation of his own expense claims was contrary to business standards;
d. refers to transcript excerpts of Mr. Freedman’s July 11, 2017 cross-examination in which he acknowledges that for eight years he withheld 50% of his share of Leima revenue without disclosure of that fact to the 3 Siblings who, pursuant to their joint agreement, had contributed 100% of their Leima revenue to fund FHI’s City Center operating costs and with Mr. Goldberg’s knowledge of that fact, continued to withhold such information even after commencement of FHI’s 06 Action to account;
e. the same cross-examination excerpts include review of numerous expense claims submitted by and paid to Mr. Freedman which included the cost for religious books which he admitted might be a personal expense and incorrectly charged as a business expense, as well as items such as DVDs, small leather goods, a cowboy hat, an umbrella, a pair of snow shoes and golf tools, which he alleged he gave as gifts to business contacts who’s names he could not remember or he did not remember what the item was for; and
f. indicates that Mr. Freedman’s expense claims for a 2005 trip to Boston, where his daughter was then taking a summer course, for items such as female or youth style clothing, certainly appeared to be a personal and not a business expense as he had charged to the Companies: Decision paras. 105-110.
[271] The Arbitrator beyond determining that Mr. Freedman must account, indicated that he was unable on the evidence to allocate which of the expenses claimed and paid to him were personal expenses. He stated that the arbitrator who would replace him should direct how the balance of the counterclaims should proceed.
[272] Mr. Freedman as to this ground requests that the Decision be set aside pursuant to ss. 46(1) 3 and 6 for the following reasons:
a. The Companies on the December 19-20, 2017 hearing did not seek the accounting relief as requested in paras. 23(a) and (c) of their claims as their position was that their claims, beyond recovery of the Shoresh Liability and interest thereon as well as directions as to the determination of the balance of their counterclaims, were to be determined by the next arbitrator to be appointed;
b. The Arbitrator’s determination that he was required to account to the Companies was not one of the issues to be determined by the Arbitrator on this hearing, the order to do so exceeded the hearing submissions of the parties and exceeded the Arbitrator’s jurisdiction in deciding such issue contrary to s. 46(1) 3, as s. 33 required the Arbitrator to decide the dispute in accordance with the arbitration agreement;
c. The Arbitrator’s determination that Mr. Freedman was required to account failed to treat him fairly pursuant to s. 19(1), by preventing him the opportunity to know the case and argue such issue thereby denying him procedural fairness which contravened s. 19(2) and constituted grounds to set aside the Decision pursuant to s. 46(1) 6.
[273] Mr. Freedman’s counsel wrote the Arbitrator on December 12, 2017 and objected to proceeding with the December 19-20, 2017 arbitration hearing of the two cross summary judgment motions given the Companies’ position that their claims, other than for the Shoresh Liability and interest thereon, would later be decided by a subsequent arbitrator. His counsel stated the conflicting evidence from the parties dictated that the issues could not proceed by summary judgment and a hearing on all issues was required.
[274] The Arbitrator on December 12, 2017 replied that there would be no adjournment of the scheduled hearing which he agreed could be extended if required to include December 21, 2017, and that scheduled hearing would proceed with argument of the Companies’ claims and the two cross-motions for summary judgment.
[275] During Mr. Freedman’s cross-examination at the hearing on December 20, 2017, counsel for the Companies clarified to Mr. Freedman that the only counterclaim issue the Companies were seeking to have determined at that hearing related to the Shoresh Liability. Counsel for Mr. Freedman interjected at that point and stated the following:
MS HOOPER: To be clear that’s what the Emotion his but we have a Cross Motion, so we are not suggesting --- we’re going to be asking that everything be decided today.
MS FRANCIS: Well that’s news to me ---
MS HOOPER: But I’m just a saying-- -
MS FRANCIS: --- the Cross Motion only dealt with Jonathan’s claim for wrongful dismissal.
MS HOOPER: Yes I know but I just found out about the limitation, the 2006 Pleading, you can roll your eyes, but I just found out about that Pleading on Sunday night and I’m going to be asking that that Pleading be determinative. So I’m just saying that when you talk about what’s going to be decided today we’re going to be making the submission that Your Honor can decide everything today. (emphasis added)
[276] Mr. Freedman in this exchange during the arbitration hearing requested that the Arbitrator decide all issues as to the Companies’ claims, which included their claim since 2009 that Mr. Freedman be required to account and an award for indebtedness owed by Mr. Freedman. Mr. Freedman thereby acknowledged that the Companies’ claim that he account was an issue in that hearing and requested the Arbitrator to determine that issue.
[277] As requested by Mr. Freedman, the Arbitrator:
a. granted the Companies’ paras. 23(a) and (c) claim in ordering Mr. Freedman to account as to those matters;
b. determined that he was unable on the evidence before him to determine what part of Mr. Freedman’s expense claims were personal; and
c. made no determination of liability as to the paras. 23(a) and (c) claims beyond the Shoresh Liability and interest thereon.
[278] Given Mr. Freedman’s above request at the arbitration hearing that all claims of the Companies be then decided, he requested and placed that issue before the Arbitrator to decide in this arbitration. He is not now entitled to reverse that position on this application and have the Decision set aside on the basis that the requirement that he account was not an s. 46(1) 3 issue before and to be determinable by the Arbitrator, that he therefore was not treated fairly and was denied the opportunity to respond to such accounting issue at this hearing pursuant to s. 46(1) 6.
[279] In making the above request during the arbitration hearing, Mr. Freedman’s counsel clearly anticipated, asked for and should have been prepared to deal with that accounting issue. There was therefore no denial of Mr. Freedman’s opportunity to address or respond to the accounting issue or lack of procedural fairness pursuant to s. 19 and s. 46(1) 6.
[280] The issue whether Mr. Freedman was required to account for the above reasons was an issue before the Arbitrator in this hearing. In determining that issue, the Arbitrator did not therefore exceed his jurisdiction or go beyond the issues submitted in that arbitration pursuant to s. 46(1) 3.
[281] Mr. Freedman again acknowledges this is not an appeal of that accounting determination.
[282] This ground of the application is dismissed for the above reasons upon a reasonableness standard of review.
[283] The court in the alternative, would also dismiss this ground pursuant to s. 46(1) 6 on a correctness standard of review or on a “whether or not” test.
[284] Had the court come to the opposite conclusion pursuant to s. 46(1) 6, it would have set aside this determination that Mr. Freedman was required to account but would not set aside the Decision in its entirety or other awards therein:
a. pursuant to s. 46(2) as to the s. 46(1) 3 ground relied upon, as the determination to account as to the Companies’ other para. 23 claims is independent of and should be separated from the other determinations or awards in the Decision; and
b. for the reasons stated above as to the court’s jurisdiction to set aside separable determinations which offend the Act and not being required to set aside all awards in the Decision upon setting aside only one determination on those grounds.
Award of 12% Interest on Shoresh Liability
[285] The Arbitrator awarded the Companies summary judgment for the Shoresh Liability in the amount of $165,233, together with interest thereon at the rate of 12% until December 31, 2008 in the amount of $96,162 as calculated in a table prepared as part of a 2009 report prepared for the Companies by the accounting firm RGTC.
[286] The Arbitrator:
a. found as a fact that Mr. Freedman admitted his liability for the Shoresh Liability, being monies he took out of the Companies commencing in 1999 and totalling $165,233, as amended; and
b. held that such monies were taken at a time when the Companies were experiencing financial difficulty and were required to borrow money on the secondary lending market on which they were required to pay 12% interest; as reflected in a table attached to one of the above 2009 RCGT reports which indicated the calculation of 12% on the Shoresh Liability principal amount and that such table calculation was attached as exhibit NN to an affidavit filed by the Companies on their motion for summary judgment; and
c. awarded interest on the Shoresh Liability up to December 31, 2008 at the rate of 12% which amounted to $96,162 as referred to in the report of FHI’s accountant RCGT and confirmed on cross-examination by Mr. Rehman, the expert who testified on behalf of Mr. Freedman: paras. 52 -56 and 111.
[287] Exhibit NN from the RCGT report referred to by the Arbitrator, was attached to the affidavit of Jacob Freedman filed on this arbitration hearing. Such exhibit NN is the mathematical calculation of interest at 12% on the principal amount of the Shoresh Liability to December 31, 2008.
[288] Mr. Freedman as to this 12% interest award requests that the Decision be set aside pursuant to ss. 46(1) 3 and 6.
[289] Mr. Freedman in seeking to set aside the Decision on this ground pursuant to ss. 46(1) 3 and 6 submits the Arbitrator:
a. failed to treat him fairly pursuant to s. 46(1) 6, by not striking exhibit NN to the affidavit of Jacob Freedman which was RCGT’s calculation of interest at 12%, or alternatively by not giving him the opportunity to cross-examine the Companies’ accounting expert from RGTC, who’s calculation of interest at the rate of 12% was attached as exhibit NN to the September 17, 2017 affidavit of Jacob Freedman, which calculation the Arbitrator relied upon in awarding and fixing the amount of the 12 % on the Shoresh Liability; and
b. exceeded his jurisdiction pursuant to s. 46(1) 3, by failing to adjudicate the interest claimed by the Companies in relying upon Mr. Freedman’s admission during his cross-examination at the hearing that FHI had borrowed at 12 % interest from one lender.
[290] Mr. Freedman submits that:
a. The RGTC report containing exhibit NN was in substance an expert’s report but was not introduced as an expert’s report tendered under oath in an affidavit by the author of the report as required under r. 53.03 of the Rules which would have entitled Mr. Freedman to cross-examination the expert. The Rules applied to this arbitration. The Arbitrator breached Mr. Freedman’s rights to fair and equal treatment pursuant to s. 19 and s. 46(1) 6, in failing to apply r. 53.03 and permitting the calculation of 12% interest as contained in exhibit NN to be introduced as an exhibit to Jacob Freedman’s affidavit instead of as a r. 53.03 expert report which would permit cross-examination thereon;
b. the Arbitrator failed to adjudicate upon the Companies’ claim for interest, namely “at the rates paid by FHI for third party financing at the relevant times” and not the highest rate of interest FHI was then paying to third-party lenders. The Arbitrator thereby exceeded his jurisdiction pursuant to s. 46(1) 3, in failing to adjudicate in accordance with the claim as framed by the Companies;
c. the evidence before the Arbitrator included both primary and secondary financing rates of interest that FHI was paying at the time; and
d. by limiting his inquiry to a single data point, the Arbitrator exceeded his jurisdiction “by fettering the scope of his analysis”.
[291] The Companies’ motion for summary judgement sought an award of the Shoresh Liability together with interest. Their arbitration motion at this hearing did not seek an award of the business versus personal expenses paid to Mr. Freedman and the other debt they alleged he owed as they notified the Arbitrator and Mr. Freedman that they intended to retain and obtain an expert’s report regarding such claims.
[292] Mr. Freedman’s expert in his report was of the opinion that:
a. the prime business borrowing interest rates charged by Chartered Banks over the period reviewed was between 2.25% to 6.25%;
b. the CRA prescribed rate for shareholder loans between 2002 and 2006 ranged from 1% to 4%;
c. the appropriate interest rate applicable to the Shoresh Liability was the CRA rate to be charged on shareholder loans and was to commence one year after the date of such loan; and
d. his opinion was that the CRA interest rates of between 1% and 4% for shareholder loans was the appropriate interest rate as to the Shoresh Liability.
[293] The Arbitrator made a finding of fact that the Shoresh Liability was not a loan. The Arbitrator did not accordingly accept the above KPMG opinion as to the CRA rate of interest on shareholder loans as reflected in his award of interest at the rate of 12% to December 30, 2008 and 6% thereafter. These determinations contradict Mr. Freedman’s arguments that the Arbitrator limited his analysis to one time point and did not consider other interest rate evidence.
[294] Mr. Freedman’s expert on cross-examination agreed with the mathematical calculation of interest reflected in exhibit NN, if 12% was the rate of interest to be awarded. The Arbitrator had this expert’s admission as to that calculation.
[295] The mathematical calculation of a percentage, times a specified amount, during a specific time period, in any event is an everyday mathematical calculation commonly preformed by non-experts and was not expert opinion evidence.
[296] Rule 53.03 relied upon by Mr. Freedman, contains the content requirements in an expert’s report for a party who intends to call such expert as a witness at trial.
[297] The Companies did not introduce an affidavit or call a witness from RCGT on this arbitration.
[298] The Arbitration Agreement does not provide and the Arbitrator made no order that this arbitration was governed by or was to proceed pursuant to the Rules.
[299] Mr. Freedman’s notices of arbitration in 2007 and 2009, with their lack of any claims for relief and absence of any material facts relied upon, evidence his understanding that this arbitration was not governed by the Rules.
[300] The fact this arbitration hearing was not governed by the Rules is not contradicted by the reference in the Decision to matters such as the legal test on a motion for summary judgment, which term legal counsel used on their originating documents seeking judgment on this arbitration hearing.
[301] This arbitration hearing was governed by the Act, the Arbitration Agreement and not the Rules. The Arbitrator created no error as to r. 53.03 resulting in a denial of a right to cross-examine someone who was not called as a witness and filed no affidavit.
[302] There are other reasons why there is no merit to the argument that Mr. Freedman was denied the right to cross-examine someone from RCGT under r. 53.03, was thereby treated unfairly and the Decision should therefore be set aside pursuant to s. 46(1) 6.
[303] The Companies did not and were not required to file an affidavit on this arbitration hearing by the RGTC author or call him as a witness who Mr. Freedman could then cross-examine as they were not relying upon his opinion as an expert on these motions.
[304] In their December 18, 2017 reply factum, the Companies stated that:
a. Mr. Freedman in his affidavits on the arbitration filed the schedules from the main RCGT report, served on him in 2009, which consisted of a compilation of his credit card expenses paid by the Companies;
b. FHI on the December 2017 motions was not relying upon any RCGT opinion to demonstrate that FHI was paying his personal expenses, but only on samples of the underlying documents; and
c. The RCGT report as to the Shoresh Liability, referring to exhibit NN of Jacob Freedman’s affidavit, is merely a calculation using the interest rate being paid by FHI at the time to borrow money while Mr. Freedman inappropriately used such corporation’s credit to pay his personal expenses.
[305] Mr. Freedman thereby knew at the start of this arbitration hearing that:
a. the Companies had not filed an affidavit from the RCGT author and were not relying upon any expert opinion of that person on the issues to be argued;
b. that the Companies intended to subsequently obtain a forensic audit report as to their monetary claims beyond the Shoresh Liability which they understood were to be determined in a subsequent arbitration hearing; and
c. the Companies had narrowed their interest claim on the Shoresh Liability and were seeking 12%, as indicated in the Affidavit of Jacob Freedman and his attachment of exhibit NN.
[306] The Companies’ above notice that 12% interest was the rate they were seeking in the arbitration informed Mr. Freedman of that, allowed him to direct his testimony and argument thereon, contradicts his argument that he was treated unfairly and that the Arbitrator failed to adjudicate on the Companies’ original broader interest claim, thereby resulting in a breach of ss. 46(1) 3 and 6.
[307] As to the right to cross-examine a RCGT representative, Mr. Freedman cites the following principles:
a. the right of cross-examination is not absolute however fairness requires cross-examination in relation to important evidence;
b. refusing the right to cross-examine is not necessarily a denial of natural justice unless such refusal interferes with a party’s ability to address key issues are essential elements of the case; and
c. arbitrators have some discretion regarding procedural decisions such as whether to allow cross examination unless it is necessary to test material prejudicial statements: National Ballet of Canada v. Glasco, 2000 CanLII 22385 (ON SC), 49 O.R. (3d) 230, at para. 23 (Ont. S.C.) and Hercus v. Hercus, [2001] O.J. No. 534, at para. 75. (emphasis added)
[308] The court in National Ballet of Canada v Glasco et al [Indexed as: National Ballet of Canada v Glasco], 2000 CanLII 22385 (ON SC), 49 O.R. (3d) 230, [2000] O.J. No. 2083, indicates that:
a. the Act contains no right to cross-examine;
b. the s. 19 right to present and respond to the other party’s case including the opportunity if necessary to cross-examine, is in relation to relevant matters in issue;
c. the opportunity and right to cross-examine is to do so of a witness testifying at the arbitration hearing;
d. denial of the right to cross-examine a witness is not necessarily a denial of natural justice as natural justice does not necessarily require that there be an oral hearing and a right to cross-examine; and
e. there is no denial of fairness in not allowing cross-examination if the applicant had the opportunity to file evidence on the issue in response to the respondents’ evidence: paras. 22 to 24 and 30. (emphasis added)
[309] The author of exhibit NN to the RCGT report was not a witness nor filed an affidavit in this arbitration.
[310] Mr. Freedman since 2009 and 2010, had pursuant to National Ballet, had the opportunity to file his own and other responding evidence as to the appropriate rate of pre and post-award interest. He exercised that opportunity in filing the affidavit of and calling his KPMG expert as a witness who’s report and opinion included a critique of the RCGT’s assumed position in using 12% to calculate interest on the Shoresh Liability as reflected in the attached schedule which Jacob Freedman attached as exhibit NN to his affidavit. The Arbitrator did not accept that expert’s opinion.
[311] The Arbitrator’s Decision was limited to and by the evidence presented, which did not include an Affidavit or testimony by someone from RCGT.
[312] There is no merit to the argument that Mr. Freedman that the Arbitrator was governed by and breached r. 53.03 and Mr. Freedman’s right thereunder to cross-examine someone from RCGT and was thereby treated unfairly and that the Decision should therefore be set aside pursuant to s. 46(1) 6.
[313] As to the rate of interest awarded, Mr. Freedman on December 4, 2017, filed an affidavit from his expert attaching a copy of KPMG expert’s report and had that expert testify on his behalf during the arbitration hearing.
[314] Mr. Freedman had the opportunity and knowledge as to the borrowing rates of interest the Companies had paid in the past. His capacity to prepare and present evidence on and argument of this interest issue was broad and not limited.
[315] During his cross-examination at the arbitration hearing, Mr. Freedman acknowledges that FHI obtained secondary financing from a lender at the rate of 12%. He stated the following in relation thereto:
Q. And do you recall the terms and rates of the borrowings?
A. They were 12%.
Q. And Mr. Iny (the lender) was arm’s-length?
A. Absolutely.
Q. And you negotiated those borrowings?
A. Yes I did.
Q. And you thought that those are reasonable interest rates to pay?
A. At the time equity money on the secondary market, those were competitive rates.
[316] The speculation of Mr. Freedman’s counsel on this application that the Arbitrator must have relied upon an assumed interest rate of 12% used in the calculation in exhibit NN, ignores Mr. Freedman’s above admission before the Arbitrator that he on behalf of FHI, had entered into secondary financing on more than one borrowing at the then competitive rate of 12%.
[317] But for Mr. Freedman’s appropriation of the Shoresh Liability funds, the Companies would have been required to borrow that much less secondary financing at 12%.
[318] The Arbitrator had Mr. Freedman’s admission that the competitive secondary financing he entered into on behalf of FHI was 12%. That 12% was the rate of interest the Companies were claiming at the arbitration hearing.
[319] The Arbitrator on the evidence before him, including Mr. Freedman’s above admissions, awarded 12% interest rate as the appropriate interest rate Mr. Freedman should be liable for as to the money he withdrew from the Companies to finance his personal interest, namely the Shoresh Liability.
[320] Mr. Freedman’s admissions at the hearing and authorities do not support his position that the Decision breaches s. 38(1) of the Act because it does not contain reasons why the Arbitrator in awarding 12% interest, did not award a different interest rate. The Decision required adequate evidence and reasons in support of the award granted. Adequacy does not require citation of and reasons for not selecting lower primary lending interest rates paid by the Companies.
[321] Mr. Freedman, the Companies’ former CEO, testified he had negotiated and accepted the 12% as the then appropriate and required secondary lending rate. That admission by Mr. Freedman was evidence before the Arbitrator and fully supports the selection of and award of interest at 12%, as sought in the arbitration hearing by the Companies.
[322] There is no merit given the evidence before the Arbitrator to the argument that the 12% interest award was arbitrary, is unsupported by the evidence or that the Arbitrator in awarding that rate limited his inquiry or consideration to that rate only and thereby exceeded his jurisdiction pursuant to s. 46(1) 3.
[323] There is no merit to the argument that the Arbitrator breached ss. 46(1) 3 or 6, because he ignored, went beyond the interest being claimed by the Companies in this arbitration or acted arbitrarily in relying upon Mr. Freedman’s admission in cross-examination at the hearing in selecting and awarding 12% interest
[324] The above conclusions are based on the court’s analysis on a reasonableness standard.
[325] The court in the alternative would also dismiss this ground of the application for the same reasons on a correctness standard, or a “whether or not” test as to procedural fairness and s. 46(1) 6.
[326] In the further alternative, had the court concluded that this 12% interest award should be set aside:
a. it would have done so pursuant to s. 46(1) 3 and s. 46(2) and would have only set aside this the 12% interest award as that award of 12 % interest is fully separable from the other awards in the Decision and does not impact the validity of or need to set aside any other award granted; and
b. in the further alternative, would only set aside this 12% interest award and not set aside the full Decision or other awards pursuant to the above remedial scope of the court’s jurisdiction upon determining a contravention under s. 46(1) 6.
6 % Interest Award After January 1, 2009 Until Payment
[327] In the Decision, the Arbitrator as stated:
a. found as a fact that Mr. Freedman admitted his liability for the Shoresh Liability, for monies he took from the Companies commencing in 1999, totalling $165,233, as amended;
b. held that such monies were taken at a time when the Companies were experiencing financial difficulty, were required to borrow money on which they were required to pay 12% interest;
c. awarded interest on the Shoresh Liability at the rate of 12% which totalled $96,162 to December 31, 2008;
d. held that the Companies since 2008 were financially doing much better; and
e. accordingly reduced the 12% interest on the Shoresh Liability to 6% commencing January 1, 2008, until payment of that liability: Decision paras. 52 -56 and 111.
[328] Mr. Freedman as to this award of 6% requests that the Decision be set aside pursuant to ss. 46(1) 3, 6 and 7.
[329] Mr. Freedman submits that:
a. the Arbitrator gave no reason why he awarded 6% interest from January 1, 2009 until payment on the Shoresh Liability, beyond the Arbitrator’s statement that FHI “is doing much better financially”, which is not a reason grounded in any evidence;
b. such 6% rate of interest determination without reasons is unsubstantiated in fact, law or evidence and is therefore an arbitrary, unreasoned decision which violated Mr. Freedman’s rights to procedural fairness and his right to be heard pursuant to s. 46(1) 3 and constituted a failure to comply with the Act pursuant to s. 46(1) 7;
c. the court may not vary the Decision and may only set aside the Decision or remitting the issue to the Arbitrator;
d. the s. 46(8) remedy of remitting this issue to the Arbitrator for reasons is not available due to the Arbitrator’s retirement;
e. no reasons or insufficient reasons are sufficient reason to and justify setting the Decision aside pursuant to s. 38 (1) and s. 46(1) 7 of the Act.
[330] Section 38(1) requires that an award state the reasons upon which it is based.
[331] The Arbitrator had evidence in Mr. Freedman’s admission in support of the 12% interest award.
[332] The Arbitrator provided reasons why that 12% interest rate awarded should be reduced commencing January 1, 2009, namely his finding of fact that the Companies since 2008 were “doing much better financially” which led to his conclusion to reduce the rate of interest to 6% commencing January 1, 2009: Decision para. 56.
[333] Reasons are not provided as to why the Arbitrator selected 6% as the rate of interest commencing January 1, 2009, as required by s. 38(1).
[334] Mr. Freedman submits that remittance of this issue under s. 46(8) to the Arbitrator with directions as to the lack of reasons, rather than setting aside this award, is not available due to the Arbitrator’s notice of retirement.
[335] That in fact is not what the Arbitrator advised the parties in September 2017.
[336] In his September 11, 2017 communication to counsel, the Arbitrator clarified that his notice of pending retirement meant that he was not “taking on any new matters after September 30, 2017. I will continue to complete matters in which I am seized, after September 30, 2017.”
[337] Providing reason for his award of 6% will complete that issue before the Arbitrator pursuant to his above undertaking.
[338] This 6% interest award is not therefore set aside due to the absence of reasons. The court pursuant to s. 46(8) instead remits this 6 % award to the Arbitrator with the request or direction that he issue supplementary reasons indicating the basis for his selection and award of 6% interest on the Shoresh Liability commencing January 1, 2009: SDS Sterling Development Corp. v. Katz, [1993] O.J. No. 2719 (Ont. C.A.), additional reasons 1994 CarswellOnt 7120 (Ont. C. A.) leave to appeal refused (1994) 74 O.A.C. 160 (S.C.C.).
[339] An audio conference at the request of the Companies was held on June 4, 2020. The Companies therein:
a. sought directions regarding what materials and submissions were to be presented to the Arbitrator to assist him in rendering the reasons for his Decision award of 6 % interest;
b. sought the amendment of the decision herein by extending the date for the Arbitrator to provide reasons for his award of 6% interest; and
c. sought the amendment of this decision by extending the date for the parties to submit their cost submissions.
[340] Counsel during this audio conference read excerpts of some of the correspondence between themselves and the Arbitrator regarding the May 5, 2020 direction in seeking that the Arbitrator provide reasons for the award of 6% interest. Such correspondence between counsel and the Arbitrator was not produced during the conference.
[341] Upon reviewing the May 5, 2020 decision herein, the Arbitrator advised the parties that:
a. He was prepared to provide his reasons for the award of 6 % interest;
b. He no longer has possession of his notes made during the arbitration hearing; and
c. He did not have possession of or access to the written record before him on the arbitration.
[342] Given his lack of access to the above documentation, the Arbitrator indicated that to enable him to provide the reasons for his 6% interest award:
a. The parties should provide the Arbitrator with a copy of the written materials from the arbitration hearing which they relied upon regarding the Companies’ interest claim; and
b. There should then be brief submissions by counsel as to the Companies’ interest claim.
[343] In response to the Arbitrator’s above direction, Mr. Freedman’s counsel apparently sent lengthy argument objecting to proceeding in that manner. Counsel for Mr. Freedman on this conference stated that his objection to the Arbitrator was, or is limited to the proposed submissions by counsel and not as to providing the written arbitration record that was before the Arbitrator.
[344] Mr. Freedman on this conference did not object to extending the dates for receipt of the Arbitrator’s reasons for the 6% award or the dates for costs submissions. The Court has amended the dates discussed during the conference given its decision herein.
[345] The remittance of the 6% award to the Arbitrator for reason pursuant to s.46(8) is to be meaningful. That requires that the Arbitrator have access to the relevant portions of the arbitration record that was before him related to the Companies’ interest claim on the Shoresh Liability.
[346] The very extensive written record on the arbitration hearing, some of which is cited in the Arbitration Decision, includes:
a. Extensive affidavit evidence on issues including the Companies’ interest claim on the Shoresh Liability. Such affidavits include information and allegations as to the financial performance of the Companies, their level of debt financing and the interest rate charged on such debt, including secondary financing interest rates that were agreed to by Mr. Freedman as CEO;
b. The report, opinion and affidavit of Mr. Freedman’s accounting expert that the appropriate rate of interest payable for the Shoresh Liability should be the lower rate of interest charged by Revenue Canada for shareholder loans after one year; and
c. Written argument filed on the arbitration hearing by legal counsel as to the evidence and issues to be determined, which includes what rate of interest should be charged on the Shoresh Liability.
[347] The entire arbitration written record is not relevant to and is not required to enable the Arbitrator to provide his reasons for the 6 % interest award. In order to avoid unnecessary delay and costs, each counsel shall provide the Arbitrator by July 17, 2020, with a copy of the portions of the written record that were before the Arbitrator on the arbitration hearing which are related, relevant to and relied upon as to the Companies’ Shoresh Liability interest claim.. In demonstration of that relevancy, counsel shall side-bar, or underline, the relevant portions of the arbitration record they are producing to assist the Arbitrator’s review of the relevant evidence as to the interest claim. Arbitration hearing documentary evidence not so designated are not to be provided to the Arbitrator. Counsel by July 17, 2020, shall also provide the Arbitrator with a copy of the Arbitration Decision and any of the interim arbitration decisions relevant to this interest claim, with the same side-bar identification of the relevant portions thereof.
[348] Given the release of the Arbitration Decision, the May 5, 2020 decision herein and Mr. Freedman’s change of legal counsel after the arbitration hearing, it is not appropriate that counsel should now make new submissions to the Arbitrator as to the Companies’ Shoresh Liability interest claim, the arbitration evidence thereon or the 6% interest award.
[349] In order to avoid any unnecessary time and associated cost to prepare and present the above arbitration hearing evidentiary record, the Arbitrator is requested and directed:
a. to advise counsel by June 22, 2020, whether he will be able to provide his written reasons for the 6% interest award given these supplementary directions as to which portions of the arbitration hearing evidentiary record are to be produced to him and without further submissions; or alternatively
b. to provide his reasons for the 6% interest award by August 21, 2020.
[350] If the Arbitrator is unable for any reason to issue such supplementary reasons by August 21, 2020, the award of 6% interest will thereupon be set aside for lack of s. 38(1) reasons pursuant to s. 46(1) 7. The next arbitrator in this ongoing arbitration in that event will thereupon be required to determine whether the Companies are entitled to interest on the Shoresh Liability on and after January 1, 2009.
[351] If this 6% award is to be set aside, the court does so:
a. pursuant to s. 46(2) as to this application under s. 46(1) 3; and
b. in the alternative, would only set aside this 6% interest award and not set aside the balance of this Decision pursuant to the above remedial scope of the court’s jurisdiction upon determining a contravention under s. 46(1) 7.
Conclusion Re Mr. Freedman’s Application
[352] For the above reasons, Mr. Freedman’s application that the Decision be set aside for the alleged s. 46(1) breaches regarding:
a. the Arbitrator’s application of the doctrine of laches preventing his reliance upon his limitation defence to the Companies’ claims;
b. the Arbitrator’s determinations as to discoverability of claims by the Companies against Mr. Freedman;
c. the Arbitrator’s determination that Mr. Freedman is required to account as to the remaining claims by the Companies; and
d. the award of 12% interest;
is dismissed.
[353] For the above reasons, Mr. Freedman’s application that the Decision be set aside for the alleged ss. 46(1) 3, 6 and 7 breaches regarding the award of 6% interest is dismissed, unless reasons are not received by Arbitrator by August 21, 2020, in which event only that award shall be set aside pursuant to s. 46(1) 7.
[354] Mr. Freedman was and remains unsuccessful as to all awards determined in the Decision, subject potentially to the 6% award of interest which was minor in comparison to the number and combined nature of the other issues and awards determined. Mr. Freedman on his application and in response to the Companies’ application did not directly challenge the basis or amount of that Cost Decision.
[355] Mr. Freedman has not established grounds to set aside the Cost Decision.
[356] The above dismissal of Mr. Freedman’s above challenges to the Decision results in this court’s refusal of his alternative remedy that the issues in the Decision be remitted to another arbitrator.
Companies’ Application
[357] The Companies in their application pursuant to s. 5(1)(vi) seek enforcement of the following awards in the Decision, namely:
a. judgment against Mr. Freedman for the Shoresh Liability in the amount of $165,233;
b. judgment against Mr. Freedman for 12% interest on the Shoresh Liability until December 31, 2008, in the amount of $96,162;
c. judgment against Mr. Freedman for the 6% interest on the Shoresh Liability from January 1, 2009 until payment of the above; and
d. judgment against Mr. Freedman in the amount of the Cost Decision, namely $297,454.56 plus 6% interest thereon commencing August 12, 2018, as awarded in the Cost Decision.
[358] Mr. Freedman’s responding affidavit and factum to the Companies’ s. 50 Application for enforcement by way of judgment, opposed judgment being granted and a stay of enforcement of such relief pending determination of his s. 46(1) application to set aside the Decision. which has now been decided.
[359] Mr. Freedman acknowledged liability for the Shoresh Liability. The Companies pursuant to s. 5(1)(vi) therefore are entitled to judgment for that award in the amount of $165,233. If that judgment for the Shoresh Liability has since been paid, that principal amount will thereupon will have been paid.
[360] This court dismissed the application to set aside the award of 12% interest on the Shoresh Liability until December 31, 2008. The Companies pursuant to s. 5 (1)(vi) therefore are entitled to judgment for that award of interest in the amount of $96,162.
[361] The Cost Decision awarded $297,454 costs on the arbitration to the Companies.
[362] The court has determined that the Cost Decision and the full Decision should not be set aside if one of the awards or decisions therein were to be set aside.
[363] The Arbitrator in the Decision dismissed all claims by Mr. Freedman which determinations he did not directly challenge on this application.
[364] The Companies were fully successful on the arbitration and have been largely, and potentially fully successful on Mr. Freedman’s application. The Decision and Cost Decision have not been set aside and, subject to the award of 6% interest, remain enforceable.
[365] The Companies for the above reasons are pursuant to s. 5(1)(vi) therefore are entitled to judgment for the Cost Decision in the amount of $297,454, plus 6% interest thereon as awarded since August 12, 2018.
Conclusions Re Companies’ Application
[366] The Companies are awarded judgment against Mr. Freedman:
a. in the amount of $165,233, being the principal amount of the Shoresh Liability;
b. in the amount of $96,162, being the Arbitrator’s 12% interest award until December 31, 2008; and
c. in the amount of $297,454, being the amount of the Cost Decision, plus 6% interest thereon since August 12, 2018.
[367] The court’s remittance of the 6% award to the Arbitrator with directions to provide reasons requires the adjournment of that part of the Companies’ application for determination until August 24, 2020. The parties are thereupon to schedule a date for resumption and completion of this interest portion of the Companies’ application. That resumed hearing shall proceed electronically without counsels’ need to attend in person.
Costs
[368] Parties seeking costs shall by September 15, 2020, or within 30 days after any notice by the Arbitrator that he will be unable to provide reasons for his award of 6% interest, serve and provide the court with concise written submissions not exceeding 10 pages, together with a Bill of Costs, a copy of legal counsel’s time dockets including dates, description of work performed, hourly rates and disbursements charged.
[369] Response to costs claimed shall be electronically served and provided electronically within 20 days thereafter and limited to 10 pages. If such response challenges the quantity of work or hourly rates claimed, such response shall include a copy of the responding party’s legal invoices on this application.
Justice P. Kane
Released: June 10, 2020
APPENDIX
On June 10, 2020, the following amendments were made:
• The date of June 12, 2020 as been deleted from paragraph 338.
• Paragraphs 339 to 349 are newly added paragraphs which are underlined.
• The original dates in paragraphs 350 and 367 have been replaced with new dates which are underlined.
• Paragraph 368, as underlined, contains a new revised date and some additional wording, all of which is underlined.
COURT FILE NO.: 18-76033
DATE: 2020/06/10
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
JONATHAN BEN-CHOREEN FREEDMAN
Applicant
– and –
FREEDMAN HOLDINGS INC and EQUITY MANAGEMENT INTERNATIONAL LIMITED
Respondents
– and between–
FREEDMAN HOLDINGS INC. and EQUITY MANAGEMENT INTERNATIONAL LIMITED
Applicants
– and –
JONATHAN BEN-CHOREEN FREEDMAN
Respondent
SUPPLEMENTARY AND AMENDED REASONS FOR JUDGMENT
Justice P. Kane
Released: June 10, 2020