Court File and Parties

COURT FILE NO.: CV-21-00657697-00CL

DATE: 20210622

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Vikram Dua, Applicant

AND:

BGD LLP and Vishal Grover, Respondents

BEFORE: C. Gilmore, J.

COUNSEL: Bradley Phillips, for the Applicant (Moving Party)

David Ward and Erin Craddock for BGD

HEARD: June 9, 2021

ENDORSEMENT on motion

OVERVIEW

[1] The Applicant, Vikram Dua, seeks to set aside the arbitration award of Ronald Dash (“the Arbitrator”) dated January 10, 2021 in the amount of $289,406.47 to the Respondent BGD LLP (“BGD”). The Applicant also seeks to set aside the costs award of the Arbitrator dated February 26, 2021 awarding BGD costs of the arbitration of $335,144.72 (the combined amount of costs and damages is referred to as “the Award” in this endorsement).

[2] The Applicant seeks to set aside the Award on the grounds that the Arbitrator failed to substantively consider and follow the common law thereby denying the Applicant natural justice. The Applicant also purports that the Arbitrator denied the Applicant procedural fairness in failing to order certain productions which precluded the Applicant from responding to key issues in the arbitration.

[3] BGD’s position is that this is simply a thinly veiled and meritless attempt to raise purported legal errors in the Award. In any event, the Applicant is prohibited from raising such grounds of appeal under the Partnership Agreement signed by the parties.

[4] As will be set out below, there was no denial of procedural fairness nor a lack of natural justice. The Arbitrator provided detailed reasons for his findings which were supported by the evidence. The Arbitrator’s decision was within a range of reasonable decisions based on the standard of review.

BACKGROUND FACTS

[5] The Applicant and Vishal Grover (“Grover”) are parties to a Partnership Agreement (“the Agreement”) dated November 2, 2015. The Agreement created BGD (the “Partnership”). The Applicant and Grover are the founding partners of BGD.

[6] BGD is an accounting partnership with related corporations that are involved in various corporate financing and consulting services. Grover is BGD’s managing partner.

[7] Article 22.1 of the Agreement provides that the partners waive their right to dissolution of the Partnership and that Article 22.1 may be raised in any claim of estoppel of an action commenced by a partner.

[8] Article 22.2 of the Agreement further provides that disputes were to be resolved by way of an arbitration conducted by a single, mutually appointed arbitrator. Further, the Arbitrator’s award is final and binding with no right of appeal.

[9] By Notice of Arbitration dated August 27, 2019, the Partnership and Grover commenced an arbitration seeking a declaration that the Applicant was no longer a partner, requesting that the Applicant rectify his negative equity balance in the Partnership and that damages be awarded for breaches of the Agreement.

[10] The Applicant denied that Grover was entitled to maintain any claim against him on the basis that only the Partnership had the right to commence the arbitration. The Applicant also brought a counterclaim against the Partnership for damages for loss of income as a result of being forced out of the Partnership and for an accounting and dissolution of the Partnership and related BGD entities.

[11] On January 7, 2020 the Arbitrator issued a procedural direction which determined that the BGD entities would not be parties to the arbitration but would be bound by the results.

[12] A production motion was brought before the Arbitrator on April 14, 2020. Following the usual exchange of documentary productions, the Applicant made requests for 75 additional documents from BGD and BGD made 13 requests for documents from the Applicant. The Arbitrator ruled that 52 of the Applicant’s document requests had already been answered, 21 requests were denied and two were answered by BGD. Of BGD’s 13 requests, six were ordered to be produced, three were denied and four answered by the Applicant prior to the motion.

[13] On August 28, 2020 the Applicant served a motion returnable on September 4, 2020 to amend his Answer and Counterclaim. The Applicant provided no reason as to the delay in bringing this motion. The Applicant asserted a new counterclaim that all claims were required to be dealt with in an accounting following the dissolution of the Partnership. BGD opposed the motion. The Arbitrator dismissed the motion on September 4, 2020 stating that the Applicant’s new defence was inconsistent with the Applicant’s earlier admission in his Answer and Counterclaim that only the Partnership had standing to claim against the Applicant.

[14] The arbitration was scheduled to be heard during the week of September 14, 2020 having been adjourned twice because of the pandemic. In the result, the Partnership was completely successful, and the arbitrator awarded costs and damages totalling $625,551.19.

[15] In the Arbitrator’s 54-page decision, he found that the Applicant had withdrawn from the Partnership and was a defaulting partner under the Agreement because he had repeatedly preferred his own interests to that of the Partnership. The Arbitrator also considered and dealt with the Applicant’s arguments regarding standing and estoppel.

[16] After the Applicant brought this Application to set aside the Award, the Partnership commenced an Application on March 23, 2021 to enforce the Award.

[17] On May 7, 2021 the Partnership brought an urgent motion for interim relief because the Applicant granted a $600,000 private mortgage to the children of a friend one day after counsel attended to fix a schedule for this hearing. The Partnership asserted that the mortgage consumed all of the equity in the only real property owned by the Applicant.

[18] At a Case Conference on May 13, 2021 the parties agreed to a “no dealings” order such that the Applicant would not sell, encumber, mortgage or charge the mortgaged property.

LEGAL ISSUES

A. The Alleged Failure of the Arbitrator to Consider and Follow the Common Law

The Applicant’s Position

[19] The Applicant submits that the minimum requirements for an arbitration are that each party must have an opportunity to present a case and respond to the case of the other party. In this case, the Partnership confirmed it was seeking relief against the Applicant who was one of its partners.

[20] The Applicant submits that despite this admission, the Arbitrator failed to consider the common law principles of partnership law and whether the Partnership could pursue relief against one of its own partners. The Applicant relies on Hurst v. Bryk and Others [2000] UKHL 19, [2000] 2 All E.R. 193 in which the House of Lords noted, at p. 200, that:

Neither during the continuance of the relationship nor after its determination has any partner any cause of action at law to recover moneys due to him from his fellow partners. The amount owing to a partner by his fellow partners is recoverable only by the taking of an account in equity after the partnership has been dissolved.

[21] The Applicant submits that Hurst has been followed in Canada, and specifically by the Supreme Court of British Columbia in Greg Dowling Architect Inc. v. J. Raymond Griff Architect Inc. 2009 BCSC 960 as well as in Brew v. Rozano Holdigns Ltd. 2006 BCCA 346, 19 B.L.R. (4th) 201. On appeal in Brew, the Court found that the plaintiff’s repudiation of the partnership agreement did not give rise to damages but rather a suit in equity for dissolution (at para. 10).

[22] The Applicant highlights that a similar finding was made in Ning v. Li, 2017 BCCA 156 in which the B.C. Court of Appeal overturned a decision awarding damages arising from breach of a partnership agreement and determined that the partnership should have been dissolved in accordance with the B.C. Partnership Act (at para. 17).

[23] The Applicant’s position is that the Arbitrator simply ignored the case law in this area and awarded damages rather than a dissolution. Further, when this issue was raised earlier in a request for an amendment to the Applicant’s claim, the Arbitrator refused the relief claiming it had been requested too late in the process.

[24] The Applicant submits that it was fundamentally unfair for the Arbitrator to refuse to consider this defence by way of an amendment to the claim and also to refuse to consider it in his reasons.

[25] The Applicant argues it was unreasonable for the Arbitrator to make reference to s. 20 of the Partnerships Act, R.S.O. 1990, c. P.5 for the first time when he concluded that this section enabled the parties to circumvent the common law. The Applicant submits that the Arbitrator did not request submissions on this newly raised issue and disagrees that s. 20 of the Partnerships Act permits parties to agree to terms that run afoul of the common law.

[26] Further, the Applicant submits that the Arbitrator had no jurisdiction to determine that the Applicant was a “defaulting partner” because there was no such provision in the Agreement and BGD had admitted that the Partnership was the sole entity seeking relief on the arbitration.

[27] In summary, the Applicant submits that the Arbitrator, who is bound by Ontario law, was precluded from awarding damages to the Partnership when the Partnership cannot seek damages against one its own partners; a dissolution and accounting was required. The Arbitrator, in refusing to consider this substantive and fundamental issue, denied the Applicant natural justice.

BGD’s Position

[28] BGD submits that this was a private arbitration and the parties agreed there would be no appeal of the Arbitrator’s decision per Article 22.2 of the Agreement. Such an agreement to undertake arbitration instead of litigation is valid. This was confirmed in Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254, 145 O.R. (3d) 481. At paras. 21-22 of Alectra, the Court held as follows:

In this case the parties – sophisticated commercial parties represented by counsel – chose not only to resolve their contractual dispute by arbitration rather than litigation, but also to preclude appeals to the court. Section 7.8(1) of the PAMA provides as follows:

There shall be no appeal from the determination of the arbitrator to any court. Judgment upon any award rendered by the Arbitrator may be entered in any court having jurisdiction thereof.

There is no ambiguity here: there is no appeal to the court, period. The arbitrator’s determination is final and binding.

[29] BGD submits that the Applicant was not denied procedural fairness as the Arbitrator fully addressed all arguments made by the Applicant in this appeal in paras. 117-32 of the Award. The Arbitrator’s reasons were a thoroughly supported and equitable rejection of the Applicant’s arguments.

B. The Arbitrator’s Failure to allow the Applicant to Properly Defend the Claims

The Applicant’s Position

[30] The Applicant submits he was denied natural justice in that he was not permitted to fully defend his case because the production order made by the Arbitrator limited the scope of productions required to be made by BGD. For example, no partner equity reconciliations were provided for any partners, which was the core of the dispute.

[31] The Applicant states that he was denied production of the very financial documents in the possession of BGD which would have allowed the Applicant to properly defend his case. This was a denial of natural justice according to the Applicant.

BGD’s Position

[32] The denial of productions was within the jurisdiction of the Arbitrator. The issue of productions was also specifically dealt with in the Award. In any event, the Partnership bank statements were irrelevant to the dispute and the Applicant reported his negative equity on his 2017 tax return without any dispute to CRA.

[33] The issue of productions was procedural and entirely within the Arbitrator’s jurisdiction. The fact that the Applicant was denied some of the documents requested cannot be a denial of natural justice.

ANALYSIS

Fairness Issues

[34] The Arbitration Act, 1991, S.O. 1991, c. 17 makes it clear that pursuant to s. 46(1) a court may set aside an arbitration award where:

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 the appointment of the arbitrator [Emphasis added].

[35] In Chadeesingh v. Flores, 2020 ONSC 5534, the applicants brought an application to set aside an arbitrator’s award pursuant to s. 46 of the Arbitration Act, claiming at para. 17 that “the applicant was not treated equally and fairly, was not given an opportunity to present a case or respond to another party’s case”. The Court determined that the standard of review in such cases is a deferential standard of reasonableness and not the standard of correctness (at para. 18).

[36] Importantly, in Chadeesingh¸ the Court noted that the Applicants’ complaint was not with procedural fairness but with the substantive decision made by the Arbitrator (at para. 32). That finding is similar to the situation in which the Court finds itself in this case. That is, the Applicant’s complaints about procedural fairness and natural justice are really complaints about the substantive decisions of the Arbitrator.

[37] With respect to the Applicant’s allegation that the Arbitrator failed to consider the common law principles prohibiting a partnership from suing a partner or requiring a dissolution of the partnership and an accounting as a precondition to recovery of debt owing by a partner, this was addressed in the Award in two places.

[38] First, at para. 18 the Arbitrator dealt with the Applicant’s September 4, 2020 motion. The Applicant sought to amend his Answer and Counterclaim to claim that BGD had no right to claim against the Applicant and that all claims were required to be dealt with by way of dissolution and an accounting.

[39] The Arbitrator dismissed the motion giving oral reasons and finding that the Applicant’s motion was inconsistent with the admission in his original pleading that the Partnership was the only party with a right to commence arbitration proceedings under the Agreement for the relief sought (at para. 18). The Arbitrator found that the amendments “sought to completely reframe the dispute between the parties and change the scope, direction and landscape of the arbitration that had proceeded through pleadings, productions, affidavits and memoranda for use at the arbitral hearing” (at para. 18).

[40] The matter was dealt with in the Arbitrator’s reasons again at paras. 117-32. The Arbitrator referenced his decision on the September 2020 motion stating at para. 125 (the Applicant was the Respondent in the arbitration):

That should have ended any attempt by the Respondent to argue that the Partnership had no right to claim against Dua in the absence of a dissolution of the Partnership. The Respondent has nonetheless proceeded to make the exact same arguments in his closing submissions as were denied him, twice, on the motion to amend… I find it shocking that the Respondent would nonetheless make those submissions in closing argument.

[41] In rejecting the Applicant’s arguments, the Arbitrator referenced two main reasons. First, he found that the Applicant was estopped from making the arguments as the Applicant had governed his case from the beginning on the basis that the Partnership had the right to arbitrate its claims against him; and, second, the refusal to allow the amendments by way of the September 2020 motion (at para. 119).

[42] There are also two important points of evidence which cannot be ignored. First, the Applicant did not provide an alternate calculation of his equity position nor did he dispute his negative equity filing with CRA. That is, the Applicant disputed the finding that he was in a negative equity position but did not provide any evidence to substantially refute that position.

[43] In the Brew case referenced by the Applicant, the B.C. Court of Appeal set aside the award of damages and invited either party to seek an order for dissolution and an accounting. However, the facts in that case were quite different and related to a partner who had left on two maternity leaves and was found not to have acted in good faith towards her partners. In addition, the Court referenced the B.C. Partnerships Act, R.S.B.C. 1996, c. 348 which is different from Ontario’s Partnerships Act.

[44] The Arbitrator at para. 127 of the Award deals with s. 20 of the Partnerships Act, with respect to the parties agreeing upon their rights and the process of dispute resolution in their Agreement. Both parties agreed upon the process, but the Applicant attempted to resile from that process in his September 2020 motion, during submissions at the conclusion of the Arbitration, and now on this motion.

[45] If I am wrong and the damages award is set aside, one must consider whether or not a dissolution and an accounting would have made any difference to the result. That is, the possibility that the process sought by the Applicant would not, ultimately, change matters between the parties.

[46] Given all of the above, I do not find that the Applicant was denied natural justice with respect to s. 46(1) of the Arbitration Act. The Applicant agreed to the dispute process and who would constitute the parties to that process. The Applicant attempted to change the process and was denied on three occasions by the Arbitrator. I find that the Arbitrator gave fulsome and logical reasons in this regard for his decision on the September motion and in the Award.

[47] On the required standard of review, there can be no doubt that the Award was within the range of reasonable conclusions based on all of the evidence.

Failure to Allow the Applicant to Defend the Claims

[48] The Applicant argues that he was denied procedural fairness in that he was not permitted access to the productions he required to defend his case.

[49] This is not an issue which requires much comment. The Applicant is effectively asking this Court to go behind the decision of the Arbitrator with respect to his decision on the April 2020 productions motion. This Court is not in a position to do so.

[50] First, the Applicant was denied only 21 of the 75 documents requested. Second, BGD was also denied production of certain documents. Finally, this is not a matter of procedural fairness but is really the subject of a substantive appeal which is not permitted pursuant to the terms of the Agreement’s articles on arbitration and appeal.

[51] The Applicant is asking this Court to determine whether certain documents should have been produced without the benefit of having those documents before the Court or understanding the context of the request for their production. The Court is not in a position to make such a determination in the context of this hearing.

ORDERS AND COSTS

[52] Given all of the above, the Applicant’s motion is dismissed.

[53] At the conclusion of the hearing, I requested that the parties present their position on costs. The Applicant provided a costs outline which provided all inclusive partial indemnity costs of $26,974.45. BGD sought all inclusive partial indemnity costs of $12,129. The Applicant submits that their Bill of Costs was higher as they were the moving party and more material was required.

[54] It is clear that BGD had success on all counts. Their request for all inclusive partial indemnity costs is both reasonable and proportionate in the circumstances. The Applicant shall therefore pay costs to BGD of $12,129 forthwith.

C. Gilmore, J.

Date: June 22, 2021