Court File and Parties

COURT FILE NO.: CV-18-590864

DATE: 20211101

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Vanhof & Blokker Ltd., 41531 Ontario Ltd., Vanhof & Blokker Inc., 2386287 Ontario Inc. and Dina De Jager Applicants/Respondents in Appeal

AND:

Vanhof & Blokker Acquisition Corp. and Vanhof & Blokker Horticultural Supply Corporation Respondents/Appellants of Appeal

BEFORE: Pollak J.

COUNSEL: Howard Wolch, for the Respondents/Appellants on Appeal

Patrick Martin, for the Applicants/Respondents on Appeal

HEARD: March 9, 2021

ENDORSEMENT

[1] The Appellants, Vanhof & Blokker Acquisition Corp. and Vanhof & Blokker Horticultural Supply Corporation sold the assets of their horticultural and garden supply business to the Respondents, Vanhof & Blokker Ltd., 41531 Ontario Ltd., Vanhof & Blokker Inc., 2386287 Ontario Inc. and Dina De Jager pursuant to an Asset Purchase Agreement dated December 29, 2014 (the “Agreement”).

[2] They allege that the Respondents breached the terms of the Agreement and they therefore, as a result of the breach, refused to make payments pursuant to the Agreement, submitting that they were induced to enter into the Agreement as a result of fraudulent and negligent misrepresentations.

[3] The Respondents then commenced an action in the Ontario Superior Court of Justice. The Appellant brought a motion to stay the action and refer the dispute to arbitration pursuant to the arbitration clause in the Agreement. On consent of all the parties the claims in the action were agreed to be subject to binding arbitration by Order of Justice Faieta dated June 14, 2016.

[4] The Parties agreed to an arbitrator (the “Arbitrator”). A Notice of Arbitration was delivered May 17, 2017. A mediation was held on May 29, 2017.

[5] The parties agreed to be bound by the Rules of the ADR Chambers when they selected the Arbitrator. However, the Appellant refused to execute the Terms of the Appointment of the Arbitrator, as set out by the ADR chambers.

[6] After submitting its materials for arbitration and being advised of the arbitration date, the Appellant sent correspondence to the Arbitrator on October 6, 2017, stating that it would not attend the arbitration and that it would not execute the Arbitration Agreement sent out by the ADR chambers as a result of its alleged concerns with the Arbitration Agreement. Counsel for the Respondents responded to these concerns on October 6, 2017.

[7] The Arbitrator proceeded with the arbitration as scheduled on October 16, 2017. The Appellants did not attend. The Arbitrator released the Award on November 27, 2017, which is now being appealed.

[8] One of the issues to be decided on this Appeal, is whether the Arbitrator erred in proceeding with the hearing in the absence of the Appellant.

[9] The Arbitration Act provides the following:

s. 27(3) Failure to appear or produce evidence

If a party fails to appear at a hearing or to produce documentary evidence, the arbitral tribunal may, unless the party offers a satisfactory explanation, continue the arbitration and make an award on the evidence before it.

[10] In its correspondence to the Arbitrator dated October 6, 2017, the Appellant stated that: “for the reasons that follow, my client is not prepared to have me execute the Arbitration Agreement nor is my client prepared to participate in the arbitration as this time”. Opposing counsel addressed each concern as set out in the letter and no further communication was sent by the Appellant.

[11] The Respondent on this Appeal submits that any concern about the arbitration process or the Arbitrator’s jurisdiction must be raised in a timely manner and must have been raised before the arbitrator at the hearing. The Arbitrator has the jurisdiction to address jurisdictional issues.

[12] The Appellants did not ask for an adjournment and did not provide a satisfactory explanation as to why the arbitration should not take place in their absence. The Appellants were represented by legal counsel and submitted its documentation and evidence in support of their position.

[13] The Appellants, however, submit that they understood that the arbitration could not proceed unless the parties agreed to the terms and the contents of the arbitration agreement and therefore, they did not attend. This understanding was not correct.

[14] The Appellants submit that in his decision, the Arbitrator did not acknowledge the existence of their response/objection to the terms of the ADR Agreement. I find for the reasons that follow that he had no obligation or reason to do so.

[15] The Appellants allege that the Arbitrator erred in his decision when he stated that by virtue of Rule 10.4 of the Rules of the ADR Chambers the Appellants were deemed to accept the terms of the Arbitration Agreement.

[16] Rule 10.4 provides “In the event that ADR Chambers does not receive a response from a Party within ten (10) Business Days of sending the Terms of Appointment, ADR Chambers may assume that that Party has accepted the content of the Terms of Appointment and the arbitration will proceed.” (emphasis added). I disagree. The issue on this Appeal is not whether the terms of the appointment were accepted or not. It is whether the Arbitrator erred in proceeding with the arbitration in the absence of the Appellants. The main theme of the Appellants argument is that the Arbitrator did not have jurisdiction to hear the Arbitration.

[17] The standard of review on appeal was summarized as follows by the Court in 869163 Ontario Ltd. v. Torrey Springs II Associates Ltd. Partnership, 2004 ONSC 66298 “appellate courts should not reverse findings of fact unless the trial judge has made a ‘palpable and overriding error’ and that the same degree of deference should be paid to a trial judge’s inferences of fact. Questions of law are subject to a standard of correctness”.

[18] The Respondents submit that the Appellants knew or should have known that the arbitration would proceed in their absence and did not appear. The Appellants took a risk in not participating in the arbitration.

[19] The following provisions of the Arbitration Act, SO 1991, c. 17 are applicable:

• Section 46(6) states that if the ground alleged for setting aside the award could have been raised as an objection to the arbitral tribunal’s jurisdiction to conduct the arbitration or as an objection that the arbitral tribunal was exceeding its authority, the court may set the award aside on that ground if it considers the applicant’s failure to make an objection in accordance with section 17 justified. Reliance on s. 46(6) is discretionary. It has been held that the Court has a discretion under s. 46(6) of the Act to set aside the arbitrator’s award if it considers an applicant’s failure to make an objection in accordance with s. 17 justified.

• Section 17(1) provides that an arbitral tribunal may rule on its own jurisdiction to conduct the arbitration and may rule on objections with respect to the existence or validity of the arbitration agreement.

• Section 17(3) provide an objection shall be made no later than the beginning of the hearing or, if there is no hearing, no later than the first occasion on which the party submits a statement to the tribunal.

• The Appellants submit that s. 46(6) of the Act is not applicable because the Appellants raised an objection with respect to the validity of the Arbitration Agreement in accordance with s. 17(1) in a timely fashion. I disagree. An objection to jurisdiction must be raised at the beginning of the hearing with each party having the opportunity to make proper legal submissions and most importantly, with the Arbitrator having the opportunity to hear these submissions and making a ruling on the issue. I find that the letter sent by the Appellants is not a proper objection on an alleged lack of jurisdiction.

[20] I am of the view that the Arbitrator correctly decided to proceed in the absence of the Appellant in accordance with s. 27(3) of the Arbitration Act.

[21] I find that the Arbitrator had the jurisdiction to hear the dispute pursuant to the consent order of the parties and their agreement on the choice of Arbitrator. Most importantly, there was no objection to jurisdiction raised at the arbitration hearing. The Act requires that all objections to jurisdiction are to be made before the Arbitrator.

[22] I also find that the Arbitrator made no errors as alleged by the Appellants. The Arbitrator did not have to refer to the fact that the Appellant did not appear. The Appellant was aware of the scheduled time for the hearing and had the obligation to attend and make its arguments with respect to jurisdiction at the beginning of the hearing before the Arbitrator, who had jurisdiction, to determine if he had jurisdiction to hear the Arbitration. I find that the Appellant was not entitled to send correspondence to the Arbitrator advising that it chose not to participate in the hearing and expect that the Arbitration would not proceed in its absence. This Appeal is therefore dismissed.

Costs

[23] As the Respondents were successful on this Appeal, they are entitled to their costs on a partial indemnity basis inclusive of HST and disbursements. These costs are payable by the Respondents within 30 days.

Pollak J.

Date: November 1, 2021