COURT FILE NO.: CV-21-00671623-0000
DATE: 20220923
SUPERIOR COURT OF JUSTICE – ONTARIO
IN THE MATTER OF the Arbitration Act, 1991, S.O. 1991, c. 17;
AND IN THE MATTER OF: an arbitration between Charlotte Schickendanz[^1] and Wagema Holdco (CDS) ULC, Claimants, and Waldemar Schickendanz, Gerhard H. Schickendanz, Manfred Schickendanz, Arthur Schickedanz, Wagma Holdings Limited, Wagma Holdco (AAS) ULC, Wagema Holdco (MMS) Ltd., Southdanz Inc., Old Florida Family Inc., Myron Dzulynsky and Gowling WLG, Respondents;
AND IN THE MATTER OF AN APPEAL of the Award of the Arbitrator, the Honourable Frank J.C. Newbould, Q.C., dated October 8, 2021
RE: Charlotte Schickedanz and Wagema Holdco (CDS) ULC, Claimants (Appellants on Appeal)
AND:
Wagema Holdings Limited, Respondent (Respondent on Appeal)
BEFORE: Madam Justice A.P. Ramsay
COUNSEL: James Doris and Eileen Church Carson, for the Claimants (Appellants on Appeal)
Paul Fruitman and John Carlo Mastrangelo, for the Respondent (Respondent on Appeal)
HEARD: In Writing
ENDORSEMENT
[1] This is a motion by the respondent (on the appeal) Wagema Holdings Limited (“Wagema”) to quash an appeal of the costs award of an arbitrator, the Honourable Frank J.C. Newbould, Q.C, dated October 8, 2021. The parties were involved in a commercial arbitration under the Arbitration Act, 1991, S.O. 1991, c. 17.
A. Background
[2] The underlying dispute is between five siblings (four brothers and one sister) and involves a corporation incorporated in Alberta (Wagema) and real property located in Ontario. The land sold in 2017 for $300 million. Each of the siblings is a director and shareholder (directly or indirectly) of Wagema, which holds real estate assets in Ontario and elsewhere. The siblings inherited shares in Wagema from their father. A corporate reorganization of Wagema was completed to divide the sale proceeds of the land and separate the siblings’ respective interests in the business. Wagema retained the law firm of Gowling WLG (Canada) LLP (“Gowling”) to act as counsel with respect to the sale of the land and the corporate reorganization.
[3] The appellants, Charlotte Schickendanz and her holding company, Wagema Holdco (CDS) ULC, instituted arbitration proceedings on October 28, 2020, against a number of individuals, including her four brothers and Wagema. She ultimately discontinued the arbitration in 2021. Certain parties to the arbitration agreed to go out without costs. Ms. Schickedanz’s brothers and Wagema sought their costs of the arbitration.
[4] After receiving submissions by the parties, the Arbitrator released his decision on October 8, 2021, awarding Ms. Schickedanz’s brothers costs in the amount of $409,426.48 plus applicable HST. The Arbitrator also awarded $48,380 plus HST to Wagema’s litigation counsel (Tyr LLP), and costs in the amount of $172,150.34 that Wagema had paid to Gowling litigation assistance.
[5] On November 8, 2021, the appellants delivered a Notice of Appeal to the Superior Court of Justice from the costs award of the Arbitrator in favour of Wagema.
[6] Wagema now moves to quash the appeal on the ground that leave to appeal was not sought pursuant to s. 133(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43.
B. Issue and Position of the Parties
[7] The sole issue to be decided is whether the appeal from an arbitral costs award should be quashed.
[8] Wagema submits that an appeal of a costs award of an arbitrator, like that of a trial judge, requires leave of the court. Wagema argues that, as the appellants did not seek leave to appeal the costs award within the 30-day period prescribed by the Arbitration Act, the Court has no discretion to extend the time for seeking leave and, in the result, the appeal must be quashed.
[9] The appellants argue that leave is not necessary to appeal an arbitral costs award made under the Arbitration Act. They further argue that the parties have an arbitration agreement and had agreed to the broadest appeal rights from any final decision of the arbitrator on any questions of fact, law or mixed fact and law, in accordance with ss. 45(2) and (3) of the Arbitration Act. The appellants submit that the appeal framework in the Courts of Justice Act does not apply to commercial arbitrations, which they maintain are governed entirely and exclusively by the Arbitration Act. The appellants argue that if leave is required, the court can direct a motion for leave to appeal. The appellants further point to Wagema’s delay in raising the issue with respect to the requirement for leave.
C. Analysis
[10] The court has the power to quash an appeal by virtue of s. 134(3) of the Courts of Justice Act.
[11] However, I am not persuaded that the appeal should be quashed.
[12] Wagema relies upon s. 133(b) of the Courts of Justice Act in support of its argument that the appellants required leave to appeal the arbitral costs award. The section reads as follows:
133 No appeal lies without leave of the court to which the appeal is to be taken,
(a) from an order made with the consent of the parties; or
(b) where the appeal is only as to costs that are in the discretion of the court that made the order for costs. [Emphasis added].
[13] The jurisdiction of a court to order costs is rooted in s. 131 of the Courts of Justice Act, which provides that:
131 (1) Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.
[14] The parties did not refer me to any provision in the Arbitration Act which refers to s. 131 of the Courts of Justice Act. Section 1 (1) of the Courts of Justice Act defines two types of “civil proceedings”, namely an “action” and an “application” and set out the methods by which those proceedings may be commenced. There is no reference to an arbitration.
[15] Pursuant to s. 133 of the Courts of Justice Act, the application for leave must be made to the court to which the appeal is to be taken. Wagema relies on the decision of Di Luca J. in Flowers v. Eickmeier, 2017 ONSC 3376, 100 R.F.L. (7th) 175, for the proposition that, absent express language in s. 133(b), the parties are not free to contract out of the requirement for leave to appeal costs even in the case of arbitrations. In Flowers, Di Luca J. allowed an appeal from an arbitrator's decision, which limited the costs awarded by the arbitrator to those incurred in the mediation and arbitration process. The arbitration agreement in that case was silent as to what the reference to “Costs” meant. Leave was granted in that case, and the time to seek leave was extended. Di Luca J. noted at para. 16:
In my view, leave to appeal is required in this case. Neither the Agreement nor s. 45 of the Arbitration Act specifically address the issue of leave to appeal in relation to a costs award. It seems incongruous that a party needs leave to appeal a costs order made by a trial judge but where an arbitrator sits in the position of a trial judge, the parties can contract out of a leave requirement in relation to an appeal of a costs award. In my view, in the absence of express statutory language in the Arbitration Act, the parties are not free to contract out of s. 133(b) of the Courts of Justice Act and thereby confer jurisdiction on the Court to consider a costs appeal without leave of the Court.
[16] Di Luca J.’s reasoning in Flowers is in fact contrary to that of Grace J.’s reasoning in Pagliaroli v. Rite-Pak Produce Co. Limited, 2010 ONSC 3729. On the authority provided by the parties, there are therefore two lines of authority as to whether leave is required. Pagliaroli involves facts which are similar to the current case as the parties in that case had also entered into an arbitration agreement with broad appeal rights. Grace J. noted at para. 65, “Given the breadth of the arbitration agreement and s. 45(3) of the Arbitration Act, leave to appeal the issue of costs is not required”.
[17] The appellants point to the right of parties in a commercial arbitration to negotiate and agree on their own appeal process. The notion that the parties can agree, in some cases, on the appeal process is grounded in the Arbitration Act itself. An arbitration agreement is a contract. Section 3 of the Arbitration Act provides that the “parties to an arbitration agreement may agree, expressly or by implication, to vary or exclude any provision of this Act…”, except for in certain situations in clauses 3.1 and 3.2, the latter dealing only with family arbitration agreements. Clause 3.2.v. refers to s. 45 appeals, but again, this provision only deals with family arbitration agreements. Therefore, none of the exceptions appear to apply.
[18] The Supreme Court of Canada has recognized the freedom of parties to negotiate the arbitral process. In TELUS Communications Inc. v. Wellman, 2019 SCC 19, [2019] 2 S.C.R. 144, at para. 131, a decision which postdates Flowers, Moldaver J., speaking for the majority stated:
Ontario’s Arbitration Act, 1991 was enacted to allow parties to design their own settlement processes and resolve their disputes outside the courts. It anticipated two or more parties freely negotiating their arbitral process. Prior to the 1991 legislation, judges exercised considerable discretion to stay arbitration proceedings — even where all the parties had agreed to submit their differences to arbitration. The courts’ use of this power was controversial because it was seen to represent judicial interference with the parties’ freedom to contract. [Emphasis added].
[19] In this case, the parties negotiated and agreed upon a broad appeal process, without carving out a leave requirement for costs. In my view, imposing a leave requirement to appeal costs would amount to judicial interference with the parties’ right to contract.
[20] Without deciding the issue, I tend to agree with the appellants that s. 133(b) of the Courts of Justice Act applies to an appeal from an order “as to costs that are in the discretion of the court that made the order”. The parties have not put forward any authority to suggest that the word “court” should be read broadly to include commercial arbitrations governed by the Arbitration Act. If the legislature intended the provision to apply to arbitral disputes, would they not have included similar language to that found in s. 134(1) of the Courts of Justice Act which governs the court’s powers on appeal? That provision includes the “court or tribunal” language. The relevant clause reads:
134 (1) Unless otherwise provided, a court to which an appeal is taken may,
(a) make any order or decision that ought to or could have been made by the court or tribunal appealed from [Emphasis added].
[21] In this case, the parties were involved in a commercial arbitration. Moreover, nothing in the Arbitration Act indicates that the Courts of Justice Act would apply to a private commercial arbitration. In contrast, the appellants have pointed to provisions in the Act which expressly refer to the application of the Courts of Justice Act, indicating that the legislature intended the Act to apply. For example, in the context of family arbitration awards, s. 45(6) of the Arbitration Act expressly states that “any appeal of a family arbitration award lies to a) the Family Court, in the areas where it has jurisdiction under subsection 21.1 (4) of the Courts of Justice Act [and] b) the Superior Court of Justice, in the rest of Ontario.” Another example is interest on an award, covered by s. 57 of the Arbitration Act: “Sections 127 to 130 (prejudgment and postjudgment interest) of the Courts of Justice Act apply to an arbitration, with necessary modifications.”
[22] I am therefore not persuaded that leave is required, on a plain reading of s. 133(b) of the Courts of Justice Act, and in the absence of any reference to that provision in the Arbitration Act in relation to an appeal (of costs).
[23] In this case, there is another factor at play – that is, an arbitration agreement. The right to appeal an arbitral award is governed by s. 45 of the Arbitrations Act, which reads as follows:
45(1) If the arbitration agreement does not deal with appeals on questions of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that,
(a) the importance to the parties of the matters at stake in the arbitration justifies an appeal; and
(b) determination of the question of law at issue will significantly affect the rights of the parties.
(2) If the arbitration agreement so provides, a party may appeal an award to the court on a question of law.
(3) If the arbitration agreement so provides, a party may appeal an award to the court on a question of fact or on a question of mixed fact and law.
[24] Paragraph 12 of the arbitration agreement between the parties reads:
- The Parties further agree that all Parties shall have appeal rights from any final decision in this Arbitration as set out in ss. 45(2) and 45(3) of the Arbitration Act, 1991, S.O. 1991, c. 17, including, for the avoidance of doubt, an appeal on an issue of fact, law or mixed fact and law.
[25] As the arbitration agreement contained broad appeal rights of any final decision without the necessity of leave, I am not persuaded that the appellants’ argument on this point could not possibly succeed.
[26] Wagema also argues that the court has no jurisdiction to extend the time for leave and suggests that it would be tantamount to extending the time limit under s. 47 of the Arbitration Act. I disagree. The provision reads:
47 (1) An appeal of an award or an application to set aside an award shall be commenced within thirty days after the appellant or applicant receives the award, correction, explanation, change or statement of reasons on which the appeal or application is based.
[27] Where leave to appeal an arbitral costs award is necessary, the court has granted leave (see Flowers) or was inclined to grant leave (see Pagliaroli). Wagema relies on an Alberta Queen’s Bench decision of Mailer v. Mailer, 2021 ABQB 423, 30 Alta. L.R. (7th) 246. I agree with the appellants’ submission that Mailer is distinguishable. As the judge noted at para. 30 in that case, “the application to appeal was filed pursuant to s. 44(1) [the straight-to-appeal provision] rather than s. 44(2) [the leave-to-appeal provision]”. That is to say, the Alberta statute includes a basis for appealing as of right or an application for permission (leave) to appeal. The relevant portion of the Alberta Arbitration Act, R.S.A. 2000, c. A-43, states:
The following must be commenced within 30 days after the appellant or applicant [for leave] receives the award … on which the appeal or application is based:
a) an appeal under section 44(1); [or]
b) an application for permission to appeal under section 44(2).
[28] In contrast, s. 47 of the Ontario Arbitration Act merely states that the appeal must be “commenced” within the 30 days from the events specified, including receipt of the award. The appellants delivered a Notice of Appeal within 30 days of receipt of the arbitral costs award. Without deciding the issue, I am not persuaded that the appellants could not succeed with their position that the appeal of the arbitral costs award was commenced within the 30-day window as prescribed.
[29] Wagema cites Mark M. Orkin & Robert G. Shipper, Orkin on the Law of Costs, 2nd ed, looseleaf (Toronto: Thompson Reuters, 2022) at § 8:1, for the proposition that the costs award should be quashed because it was brought without leave and argues that the court cannot adjourn the appeal to permit the appellant an opportunity to seek leave. The cases referred to in the footnote are Luciak v. Allied Engineering & Sales, [1958] O.W.N. 282 (C.A.); Braaten v. Braaten (1953), 1953 224 (SK CA), 9 W.W.R. (N.S.) 237 (Sask. C.A.); and Hibbard v. York (1915), 1915 486 (ON SC), 25 D.L.R. 836 (Ont. S.C.). However, the author goes on to add: “These cases were decided at a time when leave had to be obtained from the judge making the order. It may well be that a different result would follow under the present legislation by which leave must be obtained from the appellate court…” Under the same section, the author commented that “Leave is required only in the case of appeals with respect to party-and-party costs; leave is not required for appeals involving solicitor-and-client costs” but references a British Columbia Court of Appeal case.
[30] While I make no comment on the merit or lack of merit of the appeal or whether leave is required or an extension of time is necessary, arguably, if leave is required to appeal the costs award of the Arbitrator, the judge hearing the appeal may consider whether the “justice of the case” requires that an extension be granted having regard to the factors considered by the court: Enbridge Gas Distribution Inc. v. Froese, 2013 ONCA 131, and Rizzi v. Mavros (2007), 2007 ONCA 350. The factors established by the court include:
a) whether the moving party formed a bona fide intention to appeal within the relevant time period;
b) the length of, and explanation for, the delay in filing;
c) any prejudice to the responding parties caused, perpetuated or exacerbated by the delay; and
d) the merits of the proposed appeal.
[31] Again, without deciding the issue, in this case, the appellants formed a bona fide intention to appeal within the relevant time period because they delivered a Notice of Appeal. The appellants provided an explanation as to why a Notice of Appeal was filed as opposed to a Notice of Leave to Appeal, and it is up to the judge hearing any leave motion to decide if they have fulfilled the requirement of providing an explanation for the delay in filing. It is not clear how Wagema could be in any way prejudiced by any delay in filing a notice of leave to appeal. As for the merits of the proposed appeal, the Arbitrator granted costs on a full indemnity scale and approved Gowling’s time and services provided to Wagema as litigation support. Ms. Schickedanz argues that Gowling consented to the discontinuance of the arbitration without costs.
[32] The appellants argue that the Arbitrator erred in awarding full indemnity costs, allowed the respondents to recover costs under an improper retainer, ignored the effect of Gowling’s agreement to dismiss the arbitration on a without costs basis, and permitted Gowling to recover costs indirectly through Wagema. Ms. Schickedanz alleges that Gowling, which acted against her without her consent, breached its duty of loyalty in acting against the appellants.
[33] The appellants suggest that the Arbitrator had no jurisdiction to award costs on a substantial indemnity basis and point to the lack of caselaw to support the award.
[34] The parties had agreed in the arbitration agreement that the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, would apply to the arbitration. The appellants argue the Arbitrator erred in awarding substantial indemnity costs. The jurisprudence in Ontario establishes that no leave is required to appeal a costs award where the order is made without jurisdiction: Alexanian v. Dolinski (1973), 1973 835 (ON CA), 2 O.R. (2d) 609, 43 D.L.R. (3d) 649 (C.A.).
[35] I would underline the comments made by the Court of Appeal in Schmidt v. Toronto Dominion Bank (1995), 1995 3502 (ON CA), 24 OR (3d) 1 (C.A.) regarding quashing appeals without hearing the merits. The threshold to establish that there is some merit is low. The test for quashing an appeal on merit involves a consideration of whether the appeal is manifestly devoid of merit: Schmidt. In Schmidt, the Ontario Court of Appeal cautioned that the power is to be exercised sparingly because “it is very difficult, in most cases, to reach the conclusion that an appeal is devoid of merit without hearing the entire appeal”. The court noted that motions to quash should not be used as a “screening” tool to weed out appeals without hearing submissions on the appeal, particularly where the appeal raises an important question of law: Schmidt. The Court noted in Schmidt that there “is a minimal level of merit needed to defeat a motion to quash.”
[36] In the circumstances, I am not persuaded that the appeal is devoid of merit nor that there is no likelihood that if leave is required, it would not be granted in this case.
D. Disposition
[37] The motion to quash is dismissed. There is no need for the court to direct a leave motion as there is no formal motion before me. If leave is required, just as in the cases cited by both sides, that application can be dealt with by the judge hearing the merit of the appeal.
[38] If the parties are unable to agree on costs in the next seven days, counsel must provide two agreed upon dates to my assistant for a conference call to speak to costs.
A.P. Ramsay J.
Date: September 23, 2022
[^1]: The names of the partis are spelled differently throughout the title and other documents filed on this motion. No amendments were made to the title of proceedings as appears on the documents filed.