COURT FILE NO.: CV-20-84212
DATE: 20201211
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
THE CORPORATION OF THE TOWNSHIP OF SOUTH STORMONT
Applicant
– and –
THE KRAFT HEINZ COMPANY
Respondent
Thomas G. Conway/Natalia Rodriguez/Julie Mouris, for the Applicant
Richard B. Swan, for the Respondent
HEARD: November 25, 2020
REASONS FOR decision
McNamara J.
[1] This application is brought by the applicant municipality seeking an order to recommence an arbitration and for the appointment of an arbitrator.
Background Facts
[2] The Township of South Stormont is a rural municipality located in Eastern Ontario. Within the Township is the community of Ingleside. The Township operates the Ingleside Wastewater Treatment Plant which receives and treats sewage from both the residents of Ingleside and the only significant industry in the area, a cheese processing plant operated by the respondent, the Kraft Heinz Company.
[3] In 2011, the applicant and respondent put in place a sewage agreement that required the respondent to pay its annual “fair share” of the operating costs of the treatment plant. That same agreement, at paragraph 3.7, provided a limited arbitration provision.
[4] In 2015, the Township commenced an arbitration proceeding pursuant to section 3.7. The arbitration sought an adjustment to the respondents’ annual fair share of the operating costs of the plant for the years 2012 - 2017. After an arbitrator was selected, the parties entered into an arbitration agreement, and set a hearing date.
[5] Prior to the arbitration hearing, the parties engaged in a mediation conducted by the Honourable Warren Winkler, which failed.
[6] On the first day of the scheduled arbitration, but before it got underway, settlement discussions resumed between the parties and they reached a resolution. By comprehensive Minutes of Settlement dated May 12, 2017, the parties reduced their agreement to writing. At paragraphs 19 through 21, a process was set out to ascertain the respondent’s fair share of operating costs for the years 2012 through 2017. In short, with reference to data collected during the year 2018, the respondent’s responsibility for costs would be determined and applied retrospectively. The Township assumed responsibility for the collection and measurement of the data gathered during the 2018 calendar year (reference year data).
[7] Pursuant to paragraph 39 of the Minutes, under the heading, Disputes, the parties provided a process should certain disputes arise. It provided in part:
- Any dispute or disagreement over the interpretation or implementation of these Minutes of Settlement, or in respect of any necessary and ancillary definitive agreements to implement the terms of these Minutes of Settlement, including the nature and scope of any such definitive agreements, or in respect of the process to be carried out under paragraphs 19-21 hereof to determine responsibility for 2012 through 2018 fair share costs, will be submitted to the Honourable Warren Winkler ……
[8] The parties also agreed in paragraph 24 of the Minutes that “section 3.7 of the 2011 agreement will remain unchanged as it relates to the arbitration rights of the parties.”
[9] In accordance with the Minutes of Settlement, the Township constructed a new metering chamber at the Kraft plant to assist with the data collection process.
[10] On this application, the Applicant Township argues that the data collected over the year 2018 was flawed and in consequence the calculated residential loadings for the Village of Ingleside were much higher than they should have been. It is their allegation that these unexplained loadings could not have been only as a result of Ingleside’s residential wastewater, and had to be a result of sludge beads escaping from the respondents’ wastewater treatment facility and not being captured in the samples collected at the metering station. The respondent disagrees totally with these allegations.
[11] The dispute continued, and in consequence the applicant filed an Amended Notice of Continuation of Proceedings and asks the court to order the arbitration resume and that the court appoint a new arbitrator.
[12] The respondent argues that the issues raised are caught by the exclusive jurisdiction conferred by paragraph 39 of the Minutes and must, therefore, be referred to Mr. Winkler for determination.
Issue
[13] The primary issue to be determined is whether the matter in dispute is one that is captured by the dispute resolution clause so that it should be referred to Mr. Winkler, or should the court appoint an arbitrator to continue the arbitration
Position of the Parties
[14] The position of the applicant in short is that the Township seeks an adjudication of a new factual dispute which was not within the contemplation of the parties when they executed the minutes of settlement, including the effect of the sludge beads on the respondents fair share of the operating costs. That, they submit, is a dispute that does not involve an interpretation or implementation of the Minutes, and therefore it must be arbitrated.
[15] The respondent argues that the common law courts have consistently held an arbitrator does not have jurisdiction over a settlement agreement executed in the context of an existing arbitration, unless the parties expressly confer that jurisdiction as a term of the settlement agreement. In this case, they submit, the Minutes do the exact opposite by providing for a separate dispute resolution procedure to be conducted by Mr. Winkler. The dispute here, they submit, falls squarely within the wording of paragraph 39 of the Minutes.
Analysis
[16] Clearly, there can be no dispute that if this Court determines that the issues as described in the materials fall within the parameters of paragraph 39 of the Minutes, then it is to be submitted to Mr. Winkler.
[17] Paragraph 19 of the Minutes provides that beginning on January 1, 2018 and ending on December 31, 2018, the data required for the determination of the respondents’ fair share of the costs will be collected and recorded by the Township with a representative of the respondent present, if requested. It goes on to provide that that data will then be shared between the parties and that the data collected and recorded during this 365 day period will be used to determine Kraft Heinz’s fair share of costs under the 2011 agreement for the years in question.
[18] Paragraph 20 provides that the data collected in 2018, once adjusted for any changes in the annual population and septage deposit variations at the Ingleside Works, will then be used to do certain calculations all geared to determining the respondents fair share of costs.
[19] Again, it is the position of the applicant that the 2018 data was flawed caused by the sludge beads escaping from the respondent’s wastewater treatment facility, and as such was not within the contemplation of the parties when they executed the Minutes. In consequence, they submit, paragraph 39 does not apply.
[20] I disagree with the applicant’s position.
[21] When the Minutes were executed in 2017 it was clear to all involved that the determination of the respondents’ fair share was going to be determined at a future date based on the outcome of future events. Again, paragraph 19 provided the data required for the determination of the respondents’ fair share over the relevant years would be collected during the reference year using the procedure set out in paragraphs 19 to 21. They did not, of course, know what that data would provide. Surely, then, it must have been within the contemplation of the parties that the results of the data might be controversial and give rise to a dispute or disagreement as to interpretation of that data and its effect. How is that not a dispute or disagreement relating to the interpretation of the minutes or “in respect of the process to be carried out under paragraph 19- 21 hereof to determine responsibility for 2012 through 2018 fair share costs….”.
[22] In my view the dispute falls within the wording of paragraph 39, and the parties granted exclusive jurisdiction to Mr. Winkler to determine the issue. Pursuant to that same paragraph, he may make a summary determination based on brief written representations by counsel. He also has jurisdiction to direct an oral hearing be held if he feels one is necessary in view of the nature of the matter in dispute.
[23] The application is therefore dismissed.
[24] If the parties are unable to agree on costs, they may make brief written submissions within the next 30 days.
Mr. Justice James McNamara
Released: December 11, 2020
COURT FILE NO.: CV-20-84212
DATE: 20201211
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
THE CORPORATION OF THE TOWNSHIP OF SOUTH STORMONT
Applicant
– and –
THE KRAFT HEINZ COMPANY
Respondent
REASONS FOR decision
McNamara J.
Released: December 11, 2020