COURT FILE NO.: CV-21-0169-AP
DATE: 2021-05-28
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: HORNEPAYNE FIRST NATION
v.
ONTARIO FIRST NATIONS (2008) LIMITED PARTNERSHIP
HEARD: May 26, 2021
BEFORE: Fitzpatrick J.
COUNSEL: R. Bodnar, for the Appellant (moving party)
D. Outerbridge and H. Allen, for the Respondent
Endorsement on Motion to Stay
[1] Hornepayne First Nation (HFN) moves to stay the award of an arbitrator, Clifford Lax dated April 6, 2021 (the Award). The Respondent Ontario First Nations (2008) Limited Partnership (OFNLP) opposes the motion.
[2] There is some urgency to the matter. The Award was based on an earlier decision of Arbitrator Lax where he found he did have jurisdiction to proceed to determine a dispute concerning the terms of a partnership agreement where OFNLP and HFN are limited partners. HFN has appealed that decision to the Ontario Superior Court. The matter is returnable on June 28, 2021.
[3] I understand the appeal of the main award that followed Arbitrator Lax conducting the arbitration is currently scheduled for late August 2021.
[4] The parties agree the legal test on this motion is the well know three-part test (the RJR Test) articulated by the Supreme Court of Canada in the RJR-MacDonald Inc. v Canada (Attorney General) 1994 117 (SCC), [1994] 1 SCR 311. The test requires a stay to be granted where:
There is a serious issue to be tried;
The moving party will suffer irreparable harm if the stay is not granted; and
The balance of convenience favours the moving party.
Background
[5] This case involves a limited partnership made up of all First Nations in the Province of Ontario (save one). The limited partnership administers a revenue sharing agreement, distributing a portion of provincial gaming revenues to the limited partners. For the purposes of this motion, HFN admits it is a signatory to the limited partnership agreement from which Arbitrator Lax derived jurisdiction to adjudicate a dispute between HFN and OFNLP. The dispute involves some 2.8 million dollars of gaming revenue (the Funds) that have been withheld from HFN.
[6] Arbitrator Lax found that HFN was in breach of its obligations under the limited partnership agreement with regard to its financial reporting obligations. Among other things, Arbitrator Lax ordered that HFN had 60 days to submit an acceptable audited financial statement for fiscal 2014.
[7] This was an important finding, as it is common ground between the parties that failure to submit an acceptable audited financial statement is grounds for a declaration of forfeiture of the Funds. In that event, the General Partner would be entitled to distribute HFN’s 2.8 million dollars to the other limited partners.
[8] OFNLP has undertaken not to distribute the Funds to the other limited partners until HFN’s two appeals are heard and decided. In my view, this is an important concession governing my disposition of the motion.
[9] Arbitrator Lax also declared that if HFN did two other important things within 60 days of the release of the Award, it would be entitled to receive distribution of the 2.8 million dollars. It was directed to conclude a Sister First Nation agreement with another limited partner and to enter into a Third Party Management Agreement (TPMA) with said Sister First Nation and the General Partner.
[10] I was advised by counsel those requirements have not been fulfilled as of the date of the hearing.
[11] The parties provided a great deal of background as to the facts and the evidence placed before the arbitrator which formed the basis for the Award. The description of the facts varies to a degree, but not in a way that would materially impact my decision regarding the application of the RJR test. Also, I am faced with a practical concern regarding the hearing of the appeals. Given the small size of our bench in the Northwest Region, and the ever-evolving situation with the pandemic, it is entirely possible that I will be assigned to hear the appeals in this matter. I am therefore reluctant to express my views of the first branch of the test as it would go to the merits of the appeals.
[12] However, on the issues of irreparable harm and balance of convenience, I find that HFN has not convinced me that a stay of the Award is appropriate. I will not be ordering a stay. I say so for the following reasons.
No Irreparable Harm
[13] An important aspect of the submissions of HFN on this motion is that the Award did not provide relief from the forfeiture so found by the arbitrator. I disagree with that submission. In my view, it is plain and obvious that the arbitrator gave HFN a “last chance” by providing a 60- day window for HFN to do certain things before the General Partner would be able to treat the Funds as forfeit. This is an important fact militating against a finding of irreparable harm.
[14] Since the Award was released, and for twelve days after my decision is released, the parties will still be subject to the findings of the arbitrator as to a methodology to resolve the dispute. If HFN determines it does not wish to comply with these terms and the appeal is then disposed in their favour, no damage to their position will have been done. As OFNLP has undertaken not to distribute until the appeals are finished, the Funds will be still available to HFN. HFN will not have to do what they have resisted doing to date. In my view, the preservation of the Funds is what is at essence in any consideration of a question of irreparable harm. They are being preserved. This protects HFN from irreparable harm pending resolution of the appeals.
[15] It is clear from the materials before me that OFNLP was, and is, attempting to find every way it legitimately has within the context of the limited partnership agreement to flow monies to the members of HFN. The undertaking not to distribute the Funds until the appeal is resolved is the best example of this. The breach of obligation by HFN so found by the arbitrator goes back almost seven years. The submissions of the parties outline the efforts made to try and resolve the dispute. Despite the history of the matter, in making the Award, the arbitrator gave the parties more time to try and resolve the dispute. This is a clear benefit to HFN.
[16] I agree with the submission of counsel for OFNLP that the purpose of a stay is to preserve the position of an appellant in the event they are successful on an appeal. As noted above, if HFN is successful on the appeal they will have lost nothing. The 2.8 million dollars will still be available, and the parties again will be in position to negotiate or litigate about their disposition. HFN will have suffered no irreparable harm.
[17] I also agree with the submission of OFNLP that the equitable remedy of a stay is not designed to allow a hedge for a party who was initially unsuccessful, and was nevertheless granted relief from forfeiture, to maintain a status quo position. A stay is not designed to allow a party to continue to “take their chances” without any risk regarding issues that are not irreparably changed in the meantime. In my view, the tangible, real and only important risk to HFN going forward has been completely mitigated by the undertaking of OFNLP not to distribute the Funds pending resolution of the appeals.
[18] I find HFN has failed to demonstrate that not granting a stay would lead to an occasion of irreparable harm should their appeal be successful.
Balance of Convenience Favours OFNLP
[19] The parties to the partnership agreement are First Nations. I accept the submissions of counsel for OFNLP that the successful operation of the limited partnership agreement is an important long-term goal of the signatories to the agreement. It is significant both in terms of the evolution of self-government for Indigenous people in Ontario, the relationship between First Nations and the Province of Ontario, and the important goal of sharing revenues with all limited partner First Nations. In this respect, the balance of convenience favours not granting a stay.
[20] The arbitration was initiated by OFNLP after years of trying to deal with a dispute over allegations of non-compliance by HFN with the limited partnership agreement. The Award granted relief from forfeiture. The parties were given what I view as a commercially reasonable period of time, given the history of the matter, to try and resolve the dispute even after a clear finding of breach on the part of HFN. The other limited partners have an important interest in maintaining financial accountability. Most significantly, they have decided the terms under which this agreement will operate and committed them to writing in the form of the limited partnership agreement. As the relationship is unique due to the involvement of the Province of Ontario in the creation of the gaming revenues at first instance, OFNLP has a legitimate right to ensure the limited partnership is administered in a way that they, in their discretion, see as appropriate and fair. In my view, a stay of the Award would create uncertainty and risk for the OFNLP that is significantly greater than any inconvenience potentially suffered by HFN if a stay is not granted.
[21] At the conclusion of the hearing, I advised the parties I would be staying the operation of the Award pending release of this endorsement. I did this so as not to affect the time remaining in the 60 days granted by the relief of forfeiture of by the Award. As this decision is being released on a Friday, I am directing that the temporary stay will be lifted as of 9:00 a.m. Monday June 1, 2021.
[22] For all these reasons the motion for a stay is dismissed.
[23] At the conclusion of the hearing I asked the parties if they had reached any preliminary agreement as to the disposition of costs. They had not.
[24] Costs for this motion will be payable by HFN to OFNLP on a partial indemnity basis. The parties will make written submissions regarding costs. Submissions will be limited to two pages plus a bill of costs.
[25] As there may be some urgency in this file in respect of other matters in the next two weeks, I direct that OFNLP shall make its costs submissions after June 14, 2021, but before June 18, 2021. HFN will then have until June 25, 2021, to provide its responding submission. In the event no submissions are received by July 2, 2021, the court will treat the issue of costs as having been resolved.
Disposition
[26] Motion dismissed with partial indemnity costs payable by HFN to OFNLP to be agreed or fixed by the Court.
“original signed by” The Hon. Mr. Justice F.B. Fitzpatrick
DATE: May 28, 2021
COURT FILE NO.: CV-21-0169-AP
DATE: 2021-05-28
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: HORNEPAYNE FIRST NATION
v.
ONTARIO FIRST NATIONS (2008) LIMITED PARTNERSHIP
HEARD: May 26, 2021
COUNSEL: R. Bodnar, for the Appellant (moving party)
D. Outerbridge and H. Allen, for the Respondent
ENDORSEMENT ON MOTION TO STAY
Fitzpatrick J.
DATE: May 28, 2021
/cjj