COURT FILE NO.: CV-20-2772-0000
DATE: 2022-11-21
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
MOHAMMAD AZAM
Muhammad Zafar, for the Plaintiff
Plaintiff
- and -
MULTANI CUSTOM HOMES LTD.
Dennis Touesnard, for the Defendant
Defendant
HEARD: November 14, 2022
REASONS FOR DECISION
C. Chang J.
[1] The defendant brings this motion for an order staying the action herein pursuant to s. 7 of the Arbitration Act, 1991, S.O. 1991, c. 17, as amended.
[2] Some of the moving and responding materials referred to s. 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, and requested orders compelling answers to undertakings/refusals. However, in oral argument, counsel confirmed that the only motion properly before me was that brought by the defendant pursuant to s. 7 of the Arbitration Act.
Material Facts
[3] The material facts relevant to this motion are not in dispute:
a) the plaintiff and the defendant entered into an agreement of purchase and sale dated February 9, 2017 respecting a pre-construction residential condominium unit in Brantford, Ontario (the “APS”);
b) at the time that the parties entered into the APS, the defendant was registered with Tarion Warranty Corporation (“Tarion”) pursuant to the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31;
c) included in and forming part of the APS was an Addendum prepared by Tarion (the “Tarion Addendum”) that included, among other things, section 6 respecting early termination of the APS and section 11 respecting the parties’ right to terminate the APS, including pursuant to section 6;
d) the Tarion Addendum also included section 16(a) respecting arbitration (the “Arbitration Clause”), which is as follows:
The Vendor and Purchaser agree that disputes arising between them relating to termination of the Purchase Agreement under section 11 shall be submitted to arbitration in accordance with the Arbitration Act, 1991 (Ontario) and subsection 17(4) of the ONHWP Act;
e) on May 14, 2019, the defendant invoked the Tarion Addendum and terminated the APS;
f) the plaintiff commenced the action herein by statement of claim issued July 31, 2020, in which he claims that the defendant improperly terminated the APS and thereby breached same;
g) the defendant delivered its statement of defence dated October 14, 2020;
h) the parties agreed to a discovery plan in March 2021, exchanged affidavits of documents and productions in May 2021, revised the discovery plan in August 2021, and scheduled examinations for discovery on two separate occasions;
i) on both occasions, the examinations were cancelled by the plaintiff;
j) by counsel’s letter dated October 15, 2021, the defendant complained about the plaintiff’s repeated cancellations of the examinations for discovery and, for the first time, raised the issue of the Arbitration Clause, stating:
It is clear and obvious that the Superior Court does not have jurisdiction to hear this matter. At this point, I am prepared to seek instructions to bring a motion to dismiss or alternatively, to stay your client’s action for want of jurisdiction;
k) the defendant brought this motion by notice of motion dated December 8, 2021; and
l) this motion was originally returnable on February 25, 2022, but was adjourned at the defendant’s request by Barnes J., who also ordered that the cross-examinations proceed by way of examinations for discovery.
Sole Issue to be Determined
[4] The sole issue for determination is whether or not I should stay the action herein pursuant to s. 7 of the Arbitration Act.
Decision
[5] For the following reasons, the requested stay of proceedings is denied.
Applicable Law
[6] Sections 7(1) and (2) of the Arbitration Act state as follows:
7 (1) If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.
(2) However, the court may refuse to stay the proceeding in any of the following cases:
A party entered into the arbitration agreement while under a legal incapacity.
The arbitration agreement is invalid.
The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law.
The motion was brought with undue delay.
The matter is a proper one for default or summary judgment.
[7] As a general rule, where there is an arbitration clause, challenges to the arbitrator’s jurisdiction are to be referred to the arbitrator (see: Uber Technologies Inc. v. Heller, 2020 SCC 16, at para. 34).
[8] However, the court may hear such a challenge where it concerns a question of law or “where the necessary legal conclusions can be drawn from facts that are either evident on the face of the record or undisputed by the parties” (see: Uber Technologies, at paras. 34-35). The court must also be convinced that the challenge is not a delaying tactic or will not prejudice recourse to an arbitrator (see: Uber Technologies, at para. 34)
[9] In deciding a motion for a stay under s. 7 of the Arbitration Act, the motion judge is to address the following sub-issues:
a) Is there an arbitration agreement?
b) What is the subject matter of the dispute?
c) What is the scope of the arbitration agreement?
d) Does the dispute arguably fall within the scope of the arbitration agreement?
e) Are there grounds on which the court should refuse to stay the proceeding?
(see: Haas v. Gunasekaram, 2016 ONCA 744, at para. 17).
[10] A party to a court proceeding involving an agreement that contains an arbitration clause does not, simply by pleading, waive its right to rely upon that arbitration clause; something more is required (see: Elgin Mills v. Farhanian, 2020 ONSC 6435, at para. 9).
[11] A party to an action “should not be permitted to change horses late in the race by moving to enforce an arbitration clause” (see: Elgin Mills, at para. 13).
Analysis
Court Should Determine Arbitrator’s Jurisdiction
[12] In the case-at-bar, I find that I am able to determine whether or not the matter should be referred to arbitration. In determining the enforceability of the Arbitration Clause, I am able to draw the necessary legal conclusions from facts that are both evident on the face of the record and undisputed by the parties.
[13] I find that the plaintiff’s opposition to this motion is not a delay tactic. There is neither allegation nor evidence of any such tactic by the plaintiff.
[14] I also find that the plaintiff’s opposition to this motion will not prejudice recourse to an arbitrator. Among other things, the Tarion Addendum prescribed no applicable deadlines for referral to an arbitrator that have passed or are in jeopardy.
[15] Therefore, I am able to determine the question of the arbitrator’s jurisdiction in the matter herein.
Existence of Arbitration Agreement
[16] It is undisputed that the APS contains the Arbitration Clause.
[17] Although the plaintiff disputed this issue in his written materials, in oral argument, he conceded that the APS contains the Arbitration Clause.
[18] Further, and in any event, it is clear from a plain reading of the APS that it contains the Arbitration Clause.
Nature of Dispute
[19] It is also undisputed that the nature of the parties’ dispute is the defendant’s alleged breach of the APS through its alleged unlawful termination of the APS.
[20] Again, in his written materials, the plaintiff disputed this, but, in oral argument, he conceded that the nature of the dispute is as set out above.
[21] Further, and in any event, it is clear from a plain reading of the pleadings herein that the nature of the parties’ dispute is the defendant’s alleged breach of the APS by virtue of its alleged wrongful termination under the Tarion Addendum.
Scope of Arbitration Clause
[22] It is also undisputed that the Arbitration Clause applies to disputes relating to termination of the APS under the Tarion Addendum.
[23] Again, the plaintiff, in his motion materials, argued that the scope of the Arbitration Clause was narrower than as set out above, but he conceded the said scope in oral argument.
[24] Further, and in any event, the applicable scope is clear from a plain reading of the Arbitration Clause itself.
Parties’ Dispute Arguably Falls Within Scope of Arbitration Clause
[25] It is also undisputed that the dispute herein arguably falls within the scope of the Arbitration Clause.
[26] Again, in his written materials, the plaintiff argued that his claim herein did not arguably fall with the scope of the Arbitration Clause, but, in oral argument, he conceded that it does.
[27] Further, and in any event, it is clear that the parties’ dispute herein arguably falls within the scope of the Arbitration Clause. The plaintiff’s claim arises from what he alleges is the defendant’s improper termination of the APS under the Tarion Addendum. The defendant denies that it improperly terminated the APS.
Grounds to Refuse Stay
[28] There are three grounds upon which I should refuse to stay the action herein:
a) the defendant unduly delayed bring its motion to enforce the Arbitration Clause;
b) the Arbitration Clause is invalid as a result of the defendant having waived its rights under it; and
c) the action herein is an appropriate one for summary judgment.
Defendant’s Undue Delay
[29] After the defendant terminated the APS on May 14, 2019, the plaintiff disputed the propriety of the purported termination, including by way of his counsel’s letter dated October 30, 2019. There being no acceptable resolution of the dispute, the plaintiff commenced the action herein on July 31, 2020.
[30] Notwithstanding this, the defendant did not bring its motion to enforce the Arbitration Clause until December 8, 2021: more than two years after the plaintiff first disputed the termination of the APS and more than 16 months after the action was commenced.
[31] The issue of the defendant’s delay is not limited to its temporal aspect, as, during that time, the defendant attorned to this court’s jurisdiction and fully and actively participated in the court process.
[32] During more than 16 months in the court process, the defendant defended this action, negotiated and renegotiated a discovery plan, fully availed itself of its documentary discovery rights under the discovery plan and participated in scheduling examinations for discovery. Those examinations would have proceeded but for the plaintiff’s cancellations.
[33] Only after all of this did the defendant decide to invoke the Arbitration Clause and attempt to assert its rights thereunder.
[34] It is also worth noting that, at no time prior to invoking the Arbitration Clause on October 15, 2021 did the defendant directly or indirectly refer thereto; in its pleading or otherwise. In fact, the statement of defence specifically pleads, among other things, that the action should be transferred to the court at Brantford and dismissed on the merits.
[35] The defendant’s pleading and its conduct before bringing this motion in December 2021 directly contradict the position taken in the October 15, 2021 letter from its counsel; that it is “clear and obvious that the Superior Court does not have jurisdiction to hear this matter”.
[36] In my view, the defendant’s motion to stay the action herein in favour of arbitration is the definition of forum shopping.
[37] After having attorned to this court’s jurisdiction and spent almost one and a half years in the court’s process, the defendant decided that it was no longer satisfied with this particular horse and that it wanted to – late in the race – change to a different one.
[38] The October 15, 2021 letter from defendant’s counsel is emblematic of this strategy. In that letter, the defendant opens by complaining about the plaintiff’s repeated cancellations of the examinations for discovery “with minimal notice” and then immediately proceeds to invoke the Arbitration Clause. Those are the only two issues addressed in the letter.
[39] The invocation of the Arbitration Clause was a belated afterthought, in which the defendant thought that it could abandon one adjudication process for another.
[40] The defendant argues that there is insufficient evidence upon which to ground a finding of delay.
[41] I do not accept that argument.
[42] It is undisputed that the defendant did not bring this motion until more than 16 months after the action herein was commenced, during which time the defendant:
a) received and reviewed the statement of claim,
b) prepared and delivered its pleading,
c) negotiated and agreed to a discovery plan,
d) prepared and delivered its affidavit of documents and productions,
e) received and reviewed the plaintiff’s affidavit of documents and productions,
f) further negotiated and agreed to revise the discovery plan,
g) participated in scheduling examinations for discovery,
h) participated in rescheduling examinations for discovery, and
i) complained about the plaintiff’s obstruction in moving the matter forward.
[43] It is clear that the defendant was a fulsome, willing and active participant in the court process in this matter and that it only chose to resort to the Arbitration Clause as a strategic maneuver or in an exercise of forum shopping.
[44] Both the defendant’s delay and its waiver of the Arbitration Clause are plainly evident on the undisputed facts.
The Arbitration Clause is Invalid
[45] As outlined above, the defendant attorned to the jurisdiction of this court to resolve the parties’ dispute and fully and actively participated in the court process. Given this, I find that the defendant waived its rights under the Arbitration Clause causing same to no longer be valid.
[46] I find that the defendant was aware of the Arbitration Clause, unequivocally and consciously abandoned its rights thereunder and communicated that abandonment (see: Technicore Underground Inc. v. Toronto (City), 2012 ONCA 597, at para. 63).
[47] In oral argument, the defendant conceded that it was, at all materials times, aware of the Arbitration Clause. It was part of the APS when executed on February 13, 2017.
[48] I find that, with knowledge of the Arbitration Clause, the defendant unequivocally and consciously abandoned its rights thereunder by its attornment to the court’s process and its fulsome and active participation in that process for more than 16 months before bringing this motion.
[49] I also find that the defendant communicated to the plaintiff its abandonment of the Arbitration by its said conduct attorning to and participating in the court’s process.
[50] In addition to its argument respecting delay, the defendant also argues that there is sufficient evidence upon which I can find that it waived the Arbitration Clause.
[51] For the reasons set out above relating to the defendant’s argument about delay, I also reject the defendant’s argument about waiver.
Action Herein is Appropriate for Summary Judgment
[52] In the statement of claim, the plaintiff claims damages for breach of the APS by the defendant’s allegedly unlawful and bad faith early termination thereof. The plaintiff alleges that the defendant should have completed its sale of the subject condominium unit to him and that it breached the APS when it unlawfully terminated the contract.
[53] In the statement of defence, the defendant pleads the APS, pleads that it complied with its obligations thereunder, denies that it acted in bad faith and pleads that the claimed damages are “exaggerated, remote, and are not recoverable at law.
[54] Based on a review of the pleadings and the cross-examination-and-discovery transcripts, it is evident that the essential facts necessary for adjudication are not in dispute, the relevant evidence is almost entirely documentary, the determination of the issues herein involves primarily the application of the law to the facts and the use of the summary judgment procedure would serve the goals of timeliness, affordability and proportionality (see: Nutzenberger v. Mert, 2021 ONSC 36, at para. 3).
[55] Therefore, in my view, a summary judgment motion judge would be able to make the necessary findings of fact and apply the law to the facts and such motion would be a proportionate, more expeditious and less expensive means to achieve a just result (see: Hryniak v. Mauldin, 2014 SCC 7, at paras. 49-50).
[56] In summary of this issue, I find that there are three grounds upon which to refuse the requested stay of proceedings.
[57] I acknowledge that the law favours giving effect to arbitration agreements (see: Haas, at para. 40). However, in the case-at-bar, the defendant’s delay in bringing this motion, the invalidity of the Arbitration Clause and the fact that this matter is a proper one for summary judgment are all compelling grounds to refuse a stay of proceedings.
[58] The defendant argues that, as the first four parts of the 5-part inquiry in Haas have been “satisfied” (the defendant’s word), any impact of the fifth part is overcome by the “strength” (again, the defendant’s word) of the first four. In other words, even if I were to find in the case-at-bar that there are grounds to refuse a stay of proceedings, those grounds are nonetheless superseded by the fact that the scope of the Arbitration Clause encompasses the subject matter of the parties’ dispute.
[59] I do not accept that argument.
[60] Nothing in the Arbitration Act or the applicable jurisprudence lends itself to the interpretation suggested by the defendant.
[61] In my view, the 5-part inquiry in Haas does not, as suggested by the defendant, represent a legal test of interconnected synergistic factors where the strength of one factor may compensate for the weakness of another (e.g., the test for interlocutory injunctions – see: Boehringer Ingelheim (Canada) Ltd. v. Pharmacia Canada Inc., 2001 CanLII 28351, at para. 69; Thunder Bay (City) v. Canadian National Railway Company, 2018 ONCA 919, at para. 35).
[62] To the contrary, on a motion under s. 7 of the Arbitration Act, the court must conduct its inquiry into the five sub-issues set out in Haas with a view to determining, first, whether there is an arbitration agreement into the scope of which the parties’ dispute falls and, second, if there is such agreement, whether there are grounds to refuse the applicable stay of proceedings. In my view, any “strength” relating to the first determination has no impact or bearing on the second determination.
Summary & Disposition
[63] In summary, I have found as follows:
a) there is an arbitration agreement herein, being the Arbitration Clause;
b) the subject matter of the parties’ dispute is the defendant’s alleged improper early termination of the APS under the Tarion Addendum;
c) the scope of the Arbitration Clause includes disputes relating to termination of the APS under the Tarion Addendum;
d) the parties’ dispute arguably falls within the scope of the Arbitration Clause; and
e) there are sufficient grounds to refuse the requested stay of proceedings.
[64] The defendant’s motion is therefore dismissed.
Costs
[65] The plaintiff was successful in opposing this motion and is entitled to his costs.
Scale
[66] I was provided with no basis upon which to order costs on an elevated scale (including, without limitation, any relevant offers to settle) and no such basis is evident from the materials filed.
[67] Despite this, the plaintiff seeks costs on a full indemnity basis.
[68] Curiously, when I inquired of the plaintiff’s counsel about what scale of costs I should award to the defendant if it were successful on this motion, he responded that I should order costs on a partial indemnity scale. Despite my further inquiry, he was unable to provide me with any basis upon which I should make such an order.
Quantum
[69] More troubling than the claimed scale of costs is the claimed quantum. The plaintiff seeks the all-inclusive amount of $15,553.37, broken down into $12,543.00 for fees (representing 37 unparticularized hours of work) and $3,011.37 for disbursements (including the dual-purpose cross-examination/discovery transcripts).
[70] In comparison, the defendant’s costs outline seeks costs on a partial indemnity basis in the all-inclusive amount of $19,720.70.
[71] All of this on an unremarkable motion for a stay of proceedings under s. 7 of the Arbitration Act, which motion, in my view, should have been briefed and argued with much greater temporal and economic efficiency than it actually was. To characterize the amounts claimed by both parties as “excessive” would be an understatement.
[72] In argument, the defendant submitted that the quantum of the plaintiff’s claimed costs should be reduced to reflect the dual-purpose examinations and that the applicable reduction should be $7,650.00 on account of both fees and disbursements. The plaintiff agreed with both of these submissions.
[73] In the result, the plaintiff’s claimed quantum of costs decreased to $7,903.37, being the original claimed amount of $15,553.37 minus the agreed-upon $7,650.00 reduction.
Decision on Costs
[74] Taking into consideration the factors set out in rule 57.01(1) of the Rules of Civil Procedure, including, without limitation, the complexity of this motion, the experience of counsel, the rates charged and time spent (including the dual-purpose examinations), the importance of the issues and the conduct of the parties (including the plaintiff’s very late admissions respecting the existence and scope of the Arbitration Clause), I find the all-inclusive amount of $3,500.00 on a partial indemnity scale to be fair and reasonable in the circumstances of this case.
[75] These costs are to be paid within 30 days of the release of these reasons.
Orders
[76] I therefore order as follows:
a) the defendant’s motion is dismissed and the requested stay of proceedings is denied; and
b) the defendant shall pay to the plaintiff his costs of this motion on a partial indemnity scale fixed in the all-inclusive amount of $3,500.00 and payable within 30 days of the release of these reasons.
C. Chang J.
Released: November 21, 2022
COURT FILE NO.: CV-20-2772-0000
DATE: 2022-11-21
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
MOHAMMAD AZAM
Plaintiff
- and -
MULTANI CUSTOM HOMES LTD.
Defendant
REASONS FOR DECISION
C. Chang J.
Released: November 21, 2022