SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: CV-21-657322-0000 DATE: 20210514
RE: Monica Rosenzweig Armour AND: Nicolaas (Niek) Maarten De Groot
BEFORE: J.T. Akbarali J.
COUNSEL: Paul Michell, for the Applicant Nicolaas (Niek) Maarten De Groot, in person
HEARD: In writing
ENDORSEMENT
Overview
1In this application, the applicant seeks to have the court appoint an arbitrator under a dispute resolution clause in an agreement between the parties concerning the ownership and use of an antique double bass.
Background
2The parties to this application together own a valuable, antique double bass. Their ownership interests and rights are governed by an Agreement of Shared Ownership dated October 17, 2016, as amended.
3The applicant is an 85-year-old resident of Toronto. She has an interest in classical music and instruments, but she is not an expert on antique musical instruments, nor a professional musician. She does, however, support musicians and musical festivals, both as a volunteer, and financially.
4The respondent is an almost 60-year-old internationally renowned classical double bass player. He lives in the Netherlands.
5Under their agreement, the applicant owns a 91% share of the instrument, while the respondent owns the remaining 9% share. The respondent uses the instrument professionally. The instrument is an investment for the applicant.
6Unfortunately, several issues have arisen between the parties respecting the instrument.
7The parties received an attractive offer to sell the instrument, which the applicant wanted to accept but which did not interest the respondent.
8The applicant also sought to transfer her interest in the instrument to her grandchildren as part of her estate planning, but the respondent appeared disinclined to engage in those discussions.
9At the same time, the respondent appears to have been interested in perhaps making some changes to the instrument, and insuring it for a higher value. The applicant appeared to have little appetite for spending money to alter the instrument.
10It is apparent that the parties were not communicating well or making progress in their disagreements related to their co-ownership of the instrument.
11Against the backdrop of these issues, an issue that should have been very simple arose. Under the parties’ agreement, the applicant has the right to inspect the instrument. Beginning on May 4, 2020, she sought to do so. She says that, despite numerous requests, the respondent failed to make the instrument available to her.
12The record indicates the respondent claimed that the applicant was only entitled to inspect the instrument herself, while the applicant wanted to have an expert inspect it for her. The applicant’s position was entirely reasonable: she is 85 years old, was due to have major surgery, and was in Canada during a global pandemic, when travel restrictions applied. Moreover, she does not have the expertise to inspect the instrument, and perhaps not the strength to even lift it. The applicant’s position that the instrument should be made available to an expert acting on her behalf who was physically in the Netherlands to inspect the instrument was both, consistent with the agreement and consistent with common sense.
13Despite his position that inspection by an expert was not contemplated by the agreement, the respondent agreed that the applicant could have an expert inspect the instrument, but disagreed with her choice of expert. He made reference to a different expert; the applicant agreed to use that expert. The applicant asked the respondent to make arrangements with the expert in the Netherlands to have the instrument inspected – a practical request given her location and the need to coordinate between the respondent and the expert – but the respondent instead did nothing, and later indicated that the expert had never contacted him. It may have been reasonable for the respondent to expect the applicant’s expert would contact him to make the arrangements. Regardless of who is at fault for the delay, clearly something fell through the cracks with respect to the inspection, and the parties’ communications about it. In the result, the instrument was not inspected.
14After repeated attempts to address the problem, and in accordance with the agreement, the applicant gave the respondent notice on September 30, 2020, that he was in breach of the relevant section of the agreement, and required him to remedy the breach within five days. The respondent failed to produce the instrument for inspection.
15As a result, on October 13, 2020, through counsel, the applicant advised the respondent that, given his failure to cure his breach of the agreement and make the instrument available to her for inspection, she was terminating the agreement in accordance with its terms. Under the terms of the agreement, she asserted that, as the non-defaulting party, she was entitled to immediate possession of the instrument, at which time she would be obliged to sell the instrument and distribute the net proceeds in accordance with the parties’ respective ownership interests.
16The respondent did not provide possession of the instrument to the respondent’s agent. He continues to have the instrument in his possession, although a Dutch court has made an order granting interim prejudgment attachment of the instrument pending resolution of the parties’ dispute.
17On October 16, 2020, the applicant’s counsel wrote the respondent to notify him that the applicant was invoking the dispute resolution clause of the agreement, and proposed Douglas Harrison as mediator pursuant to the terms of the clause. Although it appears the respondent may have earlier suggested mediation, the respondent did not respond to the applicant’s proposal.
18On October 26, 2020, the applicant’s counsel wrote to the respondent to advise that, given his failure to engage on the question of mediation, she sought arbitration under the dispute resolution clause of the agreement, and proposed Joel Richler as arbitrator. Again, the respondent did not respond.
19Finally, on November 23, 2020, after the respondent retained Dutch counsel, he made the instrument available for inspection by the expert whose credentials he had earlier endorsed. Through counsel, the parties began negotiations, which were interrupted by some surgery the applicant underwent. Unfortunately, by late January 2021, the respondent had discharged his counsel. Notwithstanding the completion of the inspection, issues between the parties related to the instrument remain unresolved.
20On January 26, 2021, the applicant’s counsel advised the respondent that the applicant would commence a court proceeding to appoint an arbitrator if the matter could not be resolved. Once again, the respondent did not respond.
21The applicant then commenced this application. A timetable was set for delivery of materials by Myers J. The respondent did not file any evidence on the application. I was advised that the respondent eventually did send a factum to the applicant, but it appeared not to have been filed with the court. I learned about it when the court office got in touch with applicant’s counsel to obtain copies of some other material that was not uploaded to caselines. As a result, the court asked counsel to provide a copy of the respondent’s factum, which I then reviewed.
22In the factum, the respondent relates a version of events that, to be properly received in evidence, should have been included in a sworn affidavit. In any event, the information relayed in the factum is, by and large, related to the underlying dispute between the parties, not the discrete issue before me on the application. With respect to the question of the appointment of an arbitrator, the respondent indicates that he would like to proceed to mediation. Elsewhere he indicates that he would like me to declare the applicant’s request inadmissible and reject any other request from her, so that the parties can proceed to find a proper solution, be it through mediation or arbitration. Elsewhere, he indicates that he is not opposed to arbitration or choice of arbitrator.
23The respondent’s position reflects a lack of understanding of the process that is before me. Although he appears to have an excellent command of English, he indicates that some legal terminology is outside his understanding, and he has had difficulty accessing information about Canadian legal processes.
24I take from the respondent’s factum that he seeks an out-of-court process to resolve the disputes between him and the applicant. He might prefer mediation, but he appears willing to accept arbitration. The application before me seeks the appointment of an arbitrator, not a mediator.
25I thus turn to consider the issue before me, that is, whether the court should appoint an arbitrator, and if so, who.
Analysis
26The agreement between the parties contains a dispute resolution clause that provides for a two-step process. It states:
In the event of any dispute arising under, out of or pursuant to this Agreement, the parties agree to mediate such dispute and appoint a mediator in connection therewith. If the parties are unable to agree on a mediator or reach a resolution agreeable to both parties through mediation the dispute shall be resolved by arbitration in the City of Toronto, Canada, pursuant to and under the Arbitration Act 1991 (the “Act”), and any decision rendered under the Act shall be final, binding upon the parties and not subject to appeal.
27Although the instrument was eventually produced for inspection by the applicant’s expert, I am of the view that the parties continue to have a dispute given the other issues that they were discussing, without progress. The applicant invoked the dispute resolution clause and proposed a mediator. The parties were unable to agree on a mediator; the respondent refused even to engage in the question. Accordingly, the applicant appropriately invoked the second step of the dispute resolution process by requesting an arbitration. Nothing in the clause suggests that the court has jurisdiction to appoint a mediator; rather, if the parties are unable to agree on a mediator, the dispute shall be resolved by arbitration.
28The clause is silent on how to appoint an arbitrator. The applicant proposed Mr. Richler. The respondent did not respond. He has neither objected to her proposed arbitrator, nor has he proposed any potential arbitrators himself. In the circumstances, the applicant had no option but to seek the court’s assistance, to give meaning and effect to the dispute resolution clause in the parties’ agreement.
29I accept the applicant’s argument that the Arbitration Act 2001, S.O. 1991, c. 17 (the “Act”) governs the parties’ dispute:
a. The subject matter of the parties’ dispute falls outside the scope of the International Commercial Arbitration Act, 2017, S.O. 2017, c. 2, Sch. 5 (“ICAA”). Under s. 2(1) of the Act, the Act applies to arbitrations in Ontario unless the ICAA applies. The ICAA only applies where arbitrations are both international and commercial: Uber Technologies Inc. v. Heller, 2020 SCC 16, at paras. 20-27. In this case, the arbitration is international; the parties’ habitual residences are in different states. However, I accept the applicant’s argument that the agreement between the parties is not commercial. Although “commercial” agreements are broad in scope, not all contracts are commercial. I agree that a contract for the ownership and use of an antique instrument is not a commercial agreement; the agreement between the parties is not designed for any commercial, or trade-related, purpose.
b. In any event, the parties specifically agreed to arbitration governed by the Act, which is a sensible agreement. Among other things, it means the arbitral tribunal consists of a single arbitrator, not three as would be the default under art. 10 of the Uncitral Model Law on International Commercial Arbitration, which applies to international commercial arbitration agreements by virtue of s. 5(3) of the ICAA, where the parties themselves did not specify the number of arbitrators. Although the instrument is valuable, it is not so valuable that it would make sense to incur the costs of three arbitrators in resolving the parties’ dispute.
30Under s. 10 of the Act, the court may appoint an arbitrator on a party’s application where the arbitration agreement provides no procedure for appointing the arbitral tribunal, or where a person with power to appoint the arbitral tribunal has not done so after a party has given the person seven days’ notice to do so. Here, the dispute resolution clause does not specify an appointment procedure. It therefore falls to the court to appoint an arbitrator.
31I also note that, even if the ICAA were the governing instrument, art. 11(3) of the Model Law provides the court with substantially the same appointment power.
32The question remains as to which arbitrator should be chosen. The applicant proposes Mr. Richler be chosen, or alternatively, Mr. Harrison or Niels Ortved. All have confirmed their availability and willingness to accept the appointment. Their c.v.’s are in the record. They are all eminently qualified.
33In my view, there is no reason not to appoint Mr. Richler, the applicant’s proposed arbitrator. He was the applicant’s first choice of arbitrator, and the respondent has raised no concerns about him. Certainly, there are no objective concerns about his suitability to act as arbitrator based on a review of his qualifications.
34Accordingly, I order that Mr. Richler shall be appointed arbitrator to arbitrate the parties’ dispute under the dispute resolution clause of their agreement.
Costs
35I also directed the parties to file costs outlines on the application, and set out a timetable under which the parties could make brief written argument responding to the other’s costs outline.
36The applicant seeks her costs of this proceeding. Her bill of costs discloses partial indemnity costs of $26,089.44, plus disbursements of $4,628.98, both amounts inclusive of HST.
37The respondent has filed a summary of his legal costs, totaling €17.759,30, although this figure is, in large measure, related to the expenses of his Dutch counsel to deal with the proceedings that have been ongoing in Amsterdam, and appears not to be related in any measure to the application before me.
38The three main purposes of modern costs rules are to indemnify successful litigants for the costs of litigation, to encourage settlement, and to discourage and sanction inappropriate behaviour by litigants: Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330, at para. 22.
39Subject to the provisions of an Act or the rules of court, costs are in the discretion of the court, pursuant to s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The court exercises its discretion taking into account the factors enumerated in r. 57.01 of the Rules of Civil Procedure, including the principle of indemnity, the reasonable expectations of the unsuccessful party, and the complexity and importance of the issues. Overall, costs must be fair and reasonable: Boucher v. Public Accountants’ Council for the Province of Ontario, 2004 14579 (Ont. C.A.), 71 O.R. (3d) 291, at paras. 4 and 38. A costs award should reflect what the court views as a fair and reasonable contribution by the unsuccessful party to the successful party rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier, 2002 25577 (ON CA), 2002 CarswellOnt 4020, 118 A.C.W.S. (3d) 341 (C.A.), at para. 4.
40The applicant is the successful party on this application; she has obtained the order she sought.
41With respect to the determination of costs, I note the following:
a. The respondent did not really oppose the application, but neither did he consent to it. Rather, he declined to engage with the applicant on the question of the arbitrator in a meaningful way, resulting in this proceeding.
b. The proceeding itself should not have been necessary. The parties do not disagree that they need an out of court process to address their disputes. There is no reason agreement could not have been reached about a mediator or arbitrator between the parties.
c. The applicant’s materials were well-prepared.
d. The issues on the application were not complex.
e. Counsel’s rate is at the high end of the market. This reflects counsel’s expertise, however, a significant amount of time was spent, some of which could perhaps have been allocated to a lower timekeeper to keep costs down.
f. In his submissions on the applicant’s costs, the respondent refers to them as “surreal.” In my view, the fees sought are outside the reasonable expectations of the unsuccessful party, given the nature of the issues.
42Balancing these factors, in my view, costs of $15,000 all inclusive are fair and reasonable. The respondent shall pay $12,500, all inclusive, in costs to the applicant for this application within thirty days.
J.T. Akbarali J.
Date: May 14, 2021