Court File and Parties
COURT FILE NO.: CV-21-00670957
DATE: 20220711
ONTARIO SUPERIOR COURT OF JUSTICE
RE: CONCETTA BIANCUCCI and ANTONIO BUTTARAZZI, Plaintiffs
-and-
PIETRO BUTTARAZZI, VERA D'ALESSANDRO, SILVANA BUTTARAZZI, IBL INVESTMENT GROUP LTD., LUIGI BROS. PAVING COMPANY LIMITED, 2443390 ONTARIO LIMITED and L.A.B. CAPITAL VENTURE INC., Defendants
BEFORE: FL Myers J
COUNSEL: Stephen Schwartz, for the Plaintiffs
Fernando Souza, for the Defendants
HEARD: July 6,2022
ENDORSEMENT
[1] The defendants move to stay this action in favour of arbitration under s. 7 of the Arbitration Act, 1991, S.O. 1991, c. 17. The parties ask me to determine whether the dispute in this action falls within an arbitration agreement. The arbitral panel has not addressed its jurisdiction to hear the dispute as yet. It awaits the court’s decision as to whether to stay this action.
[2] Five warring adult siblings have been embroiled in litigation and arbitration for a decade over who gets how much of their parents’ money. The plaintiffs want to fight their next internecine battle in court. The defendants want to fight the battle as a continuation of their arbitration.
[3] Both sides ask me to interpret the arbitration agreement to decide whether the issues in this lawsuit are within or beyond the jurisdiction of the arbitral panel. But the question for me under cases such as Haas v. Gunasekaram, 2016 ONCA 744 and Eggiman v Martin 2019 ONSC 1388 is not to decide the jurisdiction issue. Rather, under s. 7 of the statute, I am only to decide if there is an arguable basis that the panel might have jurisdiction. If that is so, then it is for the arbitrators to decide the issue.
[4] For the reasons that follow the action is stayed pending arbitration.
[5] In Haas, the Court of Appeal directs that on a motion such as this, the court proceeds in the following way:
[17] An analytical framework has emerged from the jurisprudence. It breaks the judge’s task of considering a stay under s. 7 down into a number of sub-issues:
(1) Is there an arbitration agreement?
(2) What is the subject matter of the dispute?
(3) What is the scope of the arbitration agreement?
(4) Does the dispute arguably fall within the scope of the arbitration agreement?
(5) Are there grounds on which the court should refuse to stay the action?
[6] (1) There is no dispute that the settlement agreement between the parties contains an arbitration agreement.
[7] (2) The subject matter of this lawsuit is whether the defendants violated their fiduciary duties as directors and officers of a family corporation when the corporation sold two properties pursuant to a prior settlement in the arbitration. The plaintiffs allege that the defendants, as directors and officers, oppressed the plaintiffs, as shareholders, by failing to disclose material facts about the value of the properties being sold under the prior settlement agreement.
[8] (3) The scope of the arbitration agreement has some uncertainty. There was initially an arbitration of the issues at large among the parties. That arbitration was settled on the eve of the hearing. In the first settlement, the parties agreed to liquidate several corporate properties. Then further issues emerged concerning the accounting for costs incurred in association with certain of the properties and other somewhat narrower matters. Those issues were referred to the same panel for arbitration under the first settlement agreement.
[9] Now that second set of issues has settled. The new or second settlement agreement says it is a full and final settlement of the arbitration. It allows specifically for two pieces of litigation to proceed in court against third parties. It also expressly reserves all of the parties’ rights in respect of the claims that have since been made the subject of this litigation.
[10] The current settlement agreement provides in para. 10:
- Any disputes arising hereof will be determined by the arbitration panel.
[11] Mr. Schwartz submits that it undermines the intention of the agreement as a full and final settlement if the issues in this action remain for arbitration. The plaintiff Concetta Biancucci says that in entering into the full and final settlement agreement it was the plaintiffs’ intention that the arbitration to be finished. But para. 10 needs to have some meaning. Something has been left for further arbitration. Mr. Schwartz submits that it relates only to an issue of tax planning that is dealt with elsewhere in the settlement agreement. But then he must be conceding that, in respect of that issue at least, the settlement agreement did not bring the arbitration to a complete end despite his client’s inadmissible evidence of her subjective intention.
[12] The plaintiff Concetta Biancucci swears that when she and her co-plaintiff first heard facts suggesting the misconduct alleged in this action, they did not seek an adjournment of the arbitration to investigate and deal with the issues in the arbitration. As they wanted a final end to the arbitration, they settled the existing issues and expressly reserved their rights on issues arising from the sale of the two properties under the prior settlement. She says they would not have entered into the new settlement agreement if they had known that the issues now characterized as oppression may be resolved in yet further arbitration.
[13] Ms. Biancucci’s evidence does not help her current argument however (even if it was admissible to help interpret the agreement). By saying that the plaintiffs did “not request an adjournment of the hearing to permit us to pursue the new claim in the Arbitration” she implicitly postulates that the issues were arbitrable. I understand that the plaintiffs want to litigate the issues arising from the defendants’ alleged failure to disclose information concerning two properties during the sale process implemented the under the initial settlement of the arbitration. But, the defendants assert that the parties have already agreed to submit those issues to arbitration. And I am trying to decide who makes the determination of whether that is correct.
[14] The reservation of rights paragraph of the recent settlement agreement says :
- The parties further reserve their respective rights regarding the sale of the properties at 126-146 Peelar and 63-69 Maplecrete Road and 77 Maplecrete Road.
[15] That paragraph says nothing about whether disputes concerning the rights reserved will be advanced in arbitration or in litigation. It does not address whether the dispute mechanism in para. 10 applies or not. Neither, for that matter, do the tax planning paragraphs elsewhere in the settlement agreement. There is no basis in the settlement agreement to say that para. 10 applies to the tax planning issues any more, less, or any different than to the outstanding issues reserved in para. 8.
[16] Paragraph 10 defines the scope the arbitration as “[a]ny disputes hereof”. In this usage “hereof” means “of this” or “of the matter or document under discussion”. So, is the litigation arising from the rights that were expressly reserved in the settlement agreement a dispute of or under the settlement agreement? It is murkier than that because the rights reserved is itself a dispute that arose in the context of the implementation of a sale of properties under a prior settlement agreement with its own and different arbitration provision.
[17] Mr. Schwartz submits that the reservation of rights in the context of a full and final settlement of the arbitration must mean that the reserved rights were intended to be litigated in court. Mr. Souza submits the opposite is the better construction of the settlement agreement especially on the objectively known factual matrix.
[18] (4) Yes. See the immediately preceding paragraphs. Both sides advance arguable interpretations of the scope of the arbitration agreement.
[19] Not only does the law favour deference to the arbitrators under the competence-competence principle, but here, the issues are infused with facts arising from various aspects of the arbitration itself. Mr. Schwartz argues, for example, that the directors’ duty to disclose information to shareholders in the liquidating sale process under the first settlement agreement is not a matter that was part of the arbitration or the prior settlement. I can think of no one better situated to decide that factual issue than the arbitral panel.
[20] (5) No.
[21] This action is stayed pending the outcome of the arbitration. If the arbitrators decide that the issues are not within the scope of their jurisdiction, then the matter will be heard in court. If the arbitrators find that the merits are within their jurisdiction, then the parties will have to wait and see whether anything will remain of this action.
[22] Counsel agreed that costs $12,500 all-inclusive ought to be awarded to the successful parties. Therefore the plaintiffs shall pay the defendants costs fixed at $12,500.
FL Myers J
Date: July 11, 2022