COURT FILE NO.: CV-21-00669855-0000
DATE: 20230123
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
COSTCO WHOLESALE CORPORATION
Applicant
– and –
TICKETOPS CORPORATION
Respondent
Matthew P. Sammon and Nikolas De Stefano, for the Applicant
Nancy J. Tourgis and Melvyn L. Solmon, for the Respondent
HEARD: July 28, 2022
REASONS FOR JUDGMENT
VERMETTE J.
[1] The Applicant, Costco Wholesale Corporation (“Costco”), seeks an order enforcing:
a. the Judgment of the United States District Court (Western District of Washington at Seattle) (“District Court”) dated September 20, 2021 (“Judgment”) and the Supplemental Judgment on costs of the District Court dated October 20, 2021 (“Supplemental Judgment”); and/or
b. the arbitral awards of the arbitrator Peter R. Day (“Arbitrator”) dated April 19, 2021, June 3, 2021, and July 23, 2021 (“Awards”).
[2] Costco also seeks an order, in accordance with the Judgment and/or the Awards, requiring the Respondent, TicketOps Corporation (“TicketOps”), to pay an amount in Canadian currency sufficient to purchase the amounts awarded in the Judgment and/or the Awards plus accrued interest.
[3] In response to the Application, TicketOps brought a motion for an order converting the Application into an action, and for an order that the converted Application be consolidated with or, alternatively, heard together with three other actions in Ontario involving the same or related parties.
A. FACTUAL BACKGROUND
1. The parties
[4] Costco is a company incorporated pursuant to the laws of the State of Washington in the United States of America. It is a publicly traded company carrying on business across the United States operating membership-based warehouse clubs and an online sales platform called Costco.com.
[5] TicketOps is an Ontario company that has provided digital services to Costco for its electronic ticket/voucher program, through which Costco has sold electronic tickets for third-party vendors (such as ski hills, spas, and other attractions) to its customers through its online platform.
2. The Master Tickets and Program Agreement and the arbitration clause
[6] In July 2018, Costco and TicketOps entered into a Master Tickets and Program Agreement (“MTPA”), which attached an Amended and Restated Ticket/Gift Card Program Agreement (“TPA”) and a Hosting Agreement. The two agreements attached to the MTPA are defined as “Supplemental Agreements” in the MTPA. Pursuant to the governing law clause contained in the MTPA, the MTPA is governed by and is to be construed in accordance with the laws of the State of Washington.
[7] The MTPA also contains the following arbitration clause:
Arbitration. All claims and disputes that (a) are between TicketOps and Costco or either Party’s subsidiaries, parents, affiliates, officers, directors and/or employees, and (b) arise out of or relate to the Supplemental Agreements or its subject matter, interpretation, performance or enforcement, or any other agreement, transaction or occurrence between TicketOps and Costco (including without limitation any tort or statutory claim) (“Dispute”) will be arbitrated under the Commercial Arbitration Rules of the American Arbitration Association (“AAA”), in English at Seattle, Washington, before one neutral arbitrator who may be a national of any Party who is a member of the AAA’s Large, Complex Case Panel. All documents and information relevant to the Dispute in the possession of any party will be made available to the other party not later than sixty (60) days after the demand for arbitration is served, and the arbitrators may permit such depositions or other discovery deemed necessary for a fair hearing. The arbitrator will have the power to require discovery of third parties (including testimony and documents) to the fullest extent allowed by the laws of the State of Washington. The hearing may not exceed two days. The award will be rendered within one hundred twenty (120) days of the demand. The arbitrators [sic] may award interim and final injunctive relief and other remedies, but may not award punitive, exemplary, treble, or other enhanced damages. To the fullest extent permitted by law, no arbitration under the Supplemental Agreements may be joined to an arbitration involving any other party, whether through class arbitration proceedings or otherwise. No time limit herein is jurisdictional. Any award of the arbitrators [sic] (including awards of interim or final remedies) may be confirmed or enforced in any court having jurisdiction. Notwithstanding the above, Costco or TicketOps may bring court proceedings or claims against each other (i) solely as part of separate litigation commenced by an unrelated third party, or (ii) if not first sought from the arbitrator, solely to obtain in the state or federal courts in King County, Washington, temporary or preliminary injunctive relief or other interim remedies pending conclusion of the arbitration. In the case of contradiction between the provisions of this Section and the Commercial Arbitration Rules of AAA, this Section will prevail. The limitations on remedies described above may be deemed inoperative to the extent necessary to preserve the enforceability of the agreement to arbitrate. If any provision of the Supplemental Agreements to arbitrate is held invalid or unenforceable, it will be so held to the minimum extent required by law and all other provisions will remain valid and enforceable. Any claim or other action subject to this section will be subject to any statute of limitations applicable to such claim or action.
[8] The Arbitrator described as follows a typical transaction pursuant to the TPA:
A typical transaction would be that a Costco member would order tickets to a live event, ski area, fitness center, etc. The order would be sent electronically to TicketOps, and an electronic ticket (barcode) would be transmitted directly to the Costco member. Normally Costco would pay TicketOps every 25 days, and TicketOps would ultimately pay the suppliers. If refunds were given to Costco members or the purchase was canceled, this amount would be deducted from payments to TicketOps.
[9] In early March 2020, i.e. at the beginning of the COVID-19 pandemic, TicketOps, after receiving normal payments from Costco, stopped paying its suppliers and, in addition, stopped payment on checks previously sent to suppliers. Costco subsequently stopped making payments to TicketOps.
3. The arbitration
[10] On April 23, 2020, Costco commenced an arbitration against TicketOps by filing a Demand for Arbitration with the American Arbitration Association International Centre for Dispute Resolution. The Demand for Arbitration also included Leisure Pass, one of the suppliers. Costco filed an Amended Demand for Arbitration on June 3, 2020, which no longer included Leisure Pass, and a Second Amended Demand for Arbitration on September 30, 2020. Costco’s Second Amended Demand for Arbitration described the dispute as follows:
Costco Wholesale offers Costco members attraction tickets, memberships, gift cards, and other products (“Products”) purchased by TicketOps, as Costco’s agent, and sold through Costco.com. Costco Wholesale has paid TicketOps, but TicketOps has not paid in full all suppliers of the Products. TicketOps must return to Costco the funds Costco paid TicketOps for that purpose, which TicketOps received in its role as Costco’s agent, and retention of which constitutes unjust enrichment. Costco Wholesale is also entitled to the return of payments for Products subsequently returned by members or cancelled by suppliers. Once it obtains necessary information from TicketOps and can project future refunds to members, Costco will determine the exact amount TicketOps owes.
TicketOps agreed to arbitration in the Master Tickets and Program Agreement, which Costco Wholesale attached to its June 3, 2020 amended demand. Costco Wholesale seeks an audit, accounting, and prejudgment or post-judgment attachment of amounts it has paid TicketOps but that TicketOps has not paid suppliers; damages; interest; and attorney’s fees.
[11] TicketOps’ Answer was filed on June 17, 2020, and its counterclaims were filed on September 30, 2020. Costco submitted a response to the counterclaims on October 16, 2020.
[12] TicketOps was represented by two sets of counsel in the arbitration, i.e. U.S. counsel and Toronto counsel.
[13] Prior to being appointed, the Arbitrator was required to complete an Arbitrator Oath Form. One of the questions in the form was whether he had had any professional or social relationship with counsel for any party in the proceeding or the firms for which they worked. The Arbitrator’s answer to this question was yes. He added the following comments:
From 1977 through 2002 I was in-house counsel at Boeing, and Perkins Coie [Costco’s law firm] was the primary outside counsel. During that time, I worked with a number of Perkins lawyers and met Mr. Burman [Costco’s counsel] several times during that period, although I don’t believe we worked on any matters together. Since 2002, I have had little contact with the firm except for social activities with a retired partner and current support staff member. I recall attending a large social event at Mr. Burman’s residence in the early 2000’s.
Around 2002 I briefly consulted Perkins on a personal real estate matter, but withdrew due to a potential conflict with another client and engaged another law firm.
Because the law firm is not a party to the case, and I have had no professional contact with the firm for almost 20 years, I believe I could decide the case impartially.
[14] A number of motions were brought before the Arbitrator. On December 1, 2020, TicketOps brought a motion to strike the arbitration clause’s two-day limit on final hearings on the ground that it was unconscionable and, therefore, unenforceable. The Arbitrator denied the motion in his Procedural Order No. 10 dated January 4, 2021. The Arbitrator’s ruling includes the following statements:
The arbitration clause here imposes the same provisions on both parties, including the limitation on damages. Furthermore, the broad scope of the arbitration clause, including claims that “arise out of or relate to the Supplemental Agreements” and “any other agreement, transaction or occurrence between TicketOps and Costco (including without limitation any tort or statutory claim),” does not support the argument that the nature and scope of the issues in this case exceed what could reasonably expected [sic] to fall within the bounds of the agreement to arbitrate.
As seen from RCW 7.05.350,[^1] it is not uncommon in international arbitration for the case to be decided on the documents alone, although admittedly this is less likely when both parties follow the common law. Since an oft-stated reason for choosing arbitration is to reduce the cost of dispute resolution, limiting the length of the hearing is a common provision included in arbitration argreements [sic] to achieve that goal.
On the other hand, the parties also included in the arbitration clause a provision to permit discovery “to the fullest extent allowed by the State of Washington,” which would typically exceed the discovery permitted in arbitration. The expanded discovery may provide evidence that would otherwise be presented in a longer hearing.
In reviewing the arbitration clause in its entirety, and the two-day hearing limitation in particular, there is no basis to conclude that it is substantively unconscionable.
[15] In January 2021, TicketOps brought a motion to compel the depositions of two witnesses. On February 3, 2021, in his Procedural Order No. 11, the Arbitrator granted the motion with respect to one witness (with a time limit) and denied it with respect to the second witness.
[16] The hearing of the arbitration proceeded virtually on March 10 and 11, 2021. Prior to the hearing, TicketOps conducted depositions of nine Costco witnesses, and Costco conducted depositions of four TicketOps witnesses. At the hearing, Costco called five witnesses and TicketOps called three witnesses. In addition, the parties filed evidence by way of witness statements, pre-hearing deposition transcripts and exhibits. The parties had the opportunity to submit both pre-hearing and post-hearing briefs.
4. The Awards
[17] The Arbitrator released a Partial Final Award on April 19, 2021 (which is part of the Awards). Pursuant to that award, Costco was successful in its claims and TicketOps’ counterclaims were dismissed.
[18] In his reasons, the Arbitrator stated that “[b]oth parties had a full opportunity to present evidence, examine and cross-examine witnesses under oath, to offer exhibits, to object and to offer arguments.”
[19] The Arbitrator found that it was clear and unambiguous that the TPA created an agency relationship between Costco and TicketOps. He also found that, given the agency relationship, TicketOps: (a) was obligated to pay to suppliers all amounts paid to it by Costco representing the contract price for products purchased by Costco’s end consumers; and (b) was not entitled to keep the payments for its own use. The Arbitrator expressed the view that Costco’s actions in dealing with suppliers after the dispute arose between Costco and TicketOps should not affect the issues before him.
[20] The following conclusions are set out in the Partial Final Award:
The TPA created an agency relationship between Costco and TicketOps.
By withholding money received from Costco and failing to pay Suppliers the amounts owed for the sale of Products to Costco End Consumers, TicketOps breached the TPA and its obligations as agent.
By failing to give timely notice to Costco of its stopping payment to Suppliers and provide other related information, TicketOps breached its duties as agent of Costco.
Subject to adjustment for returns, refunds and cancellations, TicketOps is obligated to return all amounts paid to it by Costco for the sale of Products to Costco End Consumers.
The counterclaims of TicketOps have not been proven.
[21] The formal part of the Arbitrator’s Partial Final Award reads as follows:
PARTIAL FINAL AWARD
Claimant Costco Wholesale Corp. is awarded from Respondent TicketOps Corp.:
An amount which represents funds TicketOps received from Costco for acquisition of consigned ticket products at the prices negotiated between Costco and the Suppliers and that TicketOps failed to either pay such Suppliers or return to Costco, subject to adjustment for returns, refunds and cancellations, and
To avoid a duplicate recovery, to the extent Costco obtains any judgments by pursuing claims assigned to it by Suppliers, the amount awarded herein shall be reduced by the amount of such judgments.
Interest from April 1, 2020, through February 4, 2021, as calculated at 3% per annum.
Additional pre-award interest as calculated at 3% per annum from February 4, 2021 until the date of this award.
The amount due will be determined following additional submissions from the parties as directed by Procedural Order No. 12.
TicketOps counterclaims are denied.
Costco is hereby awarded reasonable attorneys’ fees, expenses and costs, to be determined in accordance with the provisions set forth in Retained Jurisdiction below.
RESOLUTION OF CLAIMS
This Partial Final Award is in full and final resolution of all claims submitted by the parties to this arbitration excluding (i) the amount of money owed by TicketOps to Costco for the award issued herein, (ii) attorneys’ fees to be awarded to Costco, (iii) the administrative fees and expenses of the American Arbitration Association and (iv) the compensation and expenses of the Arbitrator. All other claims not specifically addressed herein are denied.
[22] After receiving further submissions from the parties, the Arbitrator released a Second Partial Final Award on June 3, 2021 (which is part of the Awards) that quantified the amounts owing to Costco.
[23] The Second Partial Final Award reads, in part:
The Arbitrator can rule only on the claims submitted by the parties to the arbitration. The Arbitrator has ruled on the agency relationship between the Claimant and the Respondent, but no claim was submitted regarding any liability between the Claimant and Suppliers, nor was any Supplier a party to the arbitration.
With respect to the provisions in the Partial Final Award regarding the effect of judgments against TicketOps obtained from claims assigned from Suppliers, while the assignee is Costco Wholesale Canada Ltd., which is not a party to the arbitration, that fact does not affect the obligation of Costco to reduce the award herein by the amount of any such judgments.
PARTIAL FINAL AWARD
The terms of the Partial Final Award are incorporated herein by reference. The following provision from the Partial Final Award is clarified to read as follow:
“To avoid a duplicate recovery, to the extent Costco or any of its related entities obtains any judgments by pursuing claims assigned to it by Suppliers, the amount awarded herein shall be reduced by the amount of such judgments.” [“Duplicate Recovery Clause”]
Claimant Costco Wholesale Corp. is awarded from Respondent TicketOps Corp:
(a) the sum of $13,013,043, which represents funds TicketOps received from Costco for acquisition of consigned ticket products at the prices negotiated between Costco and the suppliers and that TicketOps failed to either pay such suppliers or return to Costco, and
(b) the sum of $1,863,369, which represents funds that would have been returned to Costco but for the failure of TicketOps to fulfill its refund processing duty after March 2020, and
(c) pre-award interest of $457,230, as calculated at 3% per annum from March 31, 2020, through April 19, 2021, using Lorraine Barrick’s May 3, 2021 model.
(d) The total amount awarded is $15,333,641. Post-judgment interest of 5% per annum, or $2,097 per day, shall be added to that amount beginning on April 20, 2021.
Costco shall present documentation of its reasonable attorneys’ fees, expenses and costs (including expert fees) within ten business days of this award. TicketOps will respond within ten business days, and Costco will reply within five business days. The amount of costs and expenses determined by the Arbitrator will be the subject of an additional award.
[24] On July 23, 2021, the Arbitrator released a Final Award (which is part of the Awards) that incorporated the terms of the Partial Final Award and Second Partial Final Award and addressed Costco’s entitlement to costs and interest. The Final Award also stated that “[t]his Award is in full settlement of all claims and counterclaims submitted to this Arbitration. All claims not expressly granted herein are hereby denied.”
5. Judgment and Supplemental Judgment of the District Court
[25] TicketOps brought a petition to vacate the Awards before the District Court. In response, Costco brought a cross-petition to confirm the Awards.
[26] TicketOps argued that the Awards should be vacated because: (a) the Arbitrator exceeded his powers, or committed manifest legal error, by concluding that TicketOps was Costco’s agent and by awarding certain damages; and (b) by subjecting TicketOps to the risk of duplicative liability, the Awards were contrary to the United States’ public policy.
[27] On September 9, 2021, the District Court denied TicketOps’ petition and granted Costco’s petition to confirm the Awards. The District Court found that the Arbitrator did not exceed his powers or commit a manifest error, and it rejected TicketOps’ argument that the Awards violated public policy by subjecting TicketOps to the risk of duplicative liability. The District Court stated the following with respect to this last point:
The Award, however, plainly reveals the Arbitrator’s attempts to avoid this risk. Again, the Award indicates that Costco is liable to the Suppliers, see First Award at ¶ 70 (docket no. 1-1), but stopped short of explicitly ruling on that issue because it was outside the scope of the arbitration, see Second Award at ¶ 2 (docket no. 1-2). Furthermore, the Award repeatedly attempts “[t]o avoid [Costco’s] duplicate recovery” and emphasizes Costco’s “obligation… to reduce” the Award by the amount of any subsequent judgments it receives in connection with this dispute. Id. at ¶¶ 3 & 5; First Award at ¶ 116. Indeed, TicketOps acknowledges the Arbitrator’s attempts to limit TicketOps’s liability, and does not “mean to suggest that the [A]rbitrator should have permitted an interpleader,” likely because TicketOps objected to the inclusion of at least one Supplier. Pet. to Vacate (docket no. 1 at 31-33); see First Award at ¶ 16.
Even assuming that the risk of duplicative liability is still present, this is not one of those rare cases in which TicketOps’s public policy defense outweighs “the strong public policy favoring confirmation of foreign arbitration awards.” See Ministry of Def. of Islamic Republic of Iran v. Cubic Def. Sys., Inc., 665 F.3d 1091, 1097 (9th Cir. 2011) (noting that the public policy “defense is frequently raised, [but] it ‘has rarely been successful’” (citation omitted)). The Court rejects TicketOps’s argument that the Award is contrary to public policy, as reflected in our interpleader statutes and rules.
In sum, TicketOps has not satisfied its heavy burden to establish any defense recognized under the FAA [Federal Arbitration Act] or the New York Convention, and the Court therefore DENIES TicketOps’s petition to vacate the Award, docket no. 1. [Emphasis in the original.]
[28] On September 20, 2021, the District Court entered the Judgment against TicketOps in favour of Costco in the amount of $16,597,764.66. The Judgment reads as follows:
Judgment is ENTERED in favor of Costco Wholesale Corporation and against TicketOps Corporation in the amount of $16,597,764.66, which includes (a) $15,333,641.00 in damages and pre-Award interest (the “Award”), (b) $1,139,082.97 in arbitration-related attorney’s fees, (c) $86,398.79 in arbitration-related costs, and (d) $38,641.90 to be reimbursed to Costco for ICDR administrative expenses; together with (2) post-Award interest on the Award at the rate of 5 percent per annum from April 20, 2021, to the date of this Court’s judgment; (3) post-Award interest on the arbitration-related attorney’s fees, costs, and administrative expenses at the rate of 5 percent per annum from August 23, 2021, to the date of this Court’s judgment; (4) post-Judgment interest pursuant to 28 U.S.C. § 1961 at the rate of seven hundredths of one percent (0.07%) per annum from the date of Judgment until paid in full; and (5) costs to be taxed in the manner set forth in Local Civil Rule 54(d).
[29] On October 20, 2021, the District Court issued the Supplemental Judgment against TicketOps in the amount of $72,548.78, for legal fees incurred by Costco.
[30] On April 18, 2022, TicketOps’ Chief Executive Officer, Hugh Hall, discovered that the Arbitrator and U.S. counsel for Costco were friends on Facebook. TicketOps points out that while the Arbitrator stated in his Arbitrator Oath Form that his interactions with Costco’s law firm ended in the early 2000’s, Facebook was not open to the public until 2006 and it appears that the Arbitrator only joined Facebook in 2011.
6. Decision of the United States Court of Appeal for the Ninth Circuit
[31] TicketOps appealed the Judgment. On July 18, 2022, the United States Court of Appeal for the Ninth Circuit (“Ninth Circuit CA”) dismissed TicketOps’ appeal. The Ninth Circuit CA stated the following with respect to the issue of duplicative liability:
The district court also correctly held that the award did not violate any public policy against duplicative liability. TicketOps claims the award should be vacated on public policy grounds because it exposes TicketOps to the risk of duplicative liability – either to the suppliers to whom TicketOps remains liable or to Costco’s Canadian affiliate, to whom some suppliers have assigned their claims against TicketOps. It points to federal and state interpleader procedures that allow a party subjected to claims that would expose it to double or multiple liability to join all the claimants in a single proceeding, and therefore avoid the risk of duplicative liability, as evincing a public policy against potential duplicative liability. But TicketOps fails to explain how laws that promote efficient litigation and reduce parties’ risk of duplicative liability set forth “the forum state’s most basic notions of morality and justice.” Cubic Def. Sys., Inc., 665 F.3d at 1097 (citations omitted). Further, TicketOps has many legal options, including in agency law or by invoking collateral estoppel, to fight potential duplicative liability. Consequently, TicketOps fails to establish that the award should be vacated on public policy grounds.
[32] The decision of the Ninth Circuit CA also contained the following footnote:
TicketOps moved on May 23, 2022, to supplement the record on appeal to show Costco’s Canadian affiliate sued TicketOps in Canada on assigned claims that Costco acquired from TicketOps’ U.S. suppliers, and to reflect the longstanding Facebook connection between the arbitrator and Costco’s counsel. Dkt. No. 32. The motion as to the lawsuit is GRANTED and the motion as to the Facebook connection is DENIED. Costco’s request to submit responsive documents is DENIED. See Dkt. No. 33.
7. Litigation in Ontario
[33] On July 21, 2020, TicketOps commenced an action in Ontario against Costco, Costco Wholesale Canada Ltd. (“Costco Canada”), Costco de Mexico, S.A. de C.V. and Costco Wholesale UK Limited (Court File No. CV-20-00644351-0000) (“TicketOps Action”). The defendants have not delivered a Statement of Defence in the TicketOps Action as they have brought a motion to stay the action in favour of arbitration. The defendants’ stay motion was scheduled to be heard in mid-October 2022.
[34] On November 23, 2021, Costco Canada commenced an action in Ontario against TicketOps (Court File No. CV-21-00672551-0000) (“First Costco Canada Action”). The claim is for damages in the amount of $4,200,000.00. The Statement of Claim was served on TicketOps on December 3, 2021. In addition to Costco Canada, thirty-three suppliers of TicketOps are named as plaintiffs. The Statement of Claim states that Costco Canada brings the claim as equitable assignee of these suppliers. It also alleges that Costco Canada retained TicketOps as an independent contractor (not as an agent) to assist in delivering a ticket program.
[35] On December 23, 2021, Costco Canada commenced another action in Ontario against TicketOps (Court File No. CV-21-00674340-0000) (“Second Costco Canada Action”). The claim is for damages in the amount of US $6,500,000.00. In addition to Costco Canada, thirty suppliers of TicketOps are named as plaintiffs. The Statement of Claim states that Costco Canada brings the claim as equitable assignee of these suppliers. The Statement of Claim in the Second Costco Canada Action is, for all intents and purposes, identical to the Statement of Claim in the First Costco Canada Action.
[36] TicketOps was unaware of the Second Costco Canada Action until Costco’s counsel served the Statement of Claim on TicketOps’ counsel on May 6, 2022. Costco’s counsel’s cover letter read as follows:
I am attaching a further Statement of Claim issued by Costco Wholesale Canada Ltd. As you will see, the claim is brought by Costco Canada as equitable assignee for vendors of Costco U.S.
Given that Costco U.S. has already obtained judgment against your client, this Statement of Claim has been issued to protect against the expiry of the limitation period, pending the resolution of the appeal in the United States. Our client does not require delivery of a defence at this time.
Please confirm acceptance of service on behalf of your clients.
[37] On May 24, 2022, Costco’s counsel sent the following letter to counsel for TicketOps:
In reviewing the Notice of Motion and unsworn Affidavit of Hugh Hall delivered on May 16, 2022, we note that your client has repeatedly asserted that it is subject to “double jeopardy”. In the draft Affidavit of Mr. Hall, he claims that this alleged double jeopardy has been “cemented” by the recent service of a Statement of Claim by Costco U.S. against TicketOps claiming US$6.5 million in respect of the same monies that are the subject matters of the awards and judgment.
The evidence proffered by Mr. Hall is, with respect, misleading.
Costco has repeatedly pledged, in the U.S. proceedings, that it will not seek double recovery from TicketOps. Costco agrees that it is not entitled to double recovery. As we have previously advised you, the Statement of Claim issued under Court File No. CV-21-00674340-0000 has been issued solely to protect against the expiry of the limitation period, pending the resolution of the appeal in the United States. Our client therefore does not require the delivery of a Statement of Defence at this time and may never require one, depending on the outcome of the appeal and enforcement process.
Finally, the statement of claim issued by Costco Wholesale Canada Ltd. (“Costco Canada”) as equitable assignee of its own vendors (under Court File No. CV-21-00672551-0000) advances entirely separate claims. As you know, TicketOps also failed to pay vendors of Costco Canada, which is the foundation of that separate proceeding. To be clear, Costco Canada will not seek recovery in that proceeding of any amounts that Costco has already recovered through the U.S. arbitral proceedings and subsequent enforcement process.
B. REVIEW OF GENERAL LEGAL PRINCIPLES
[38] I review briefly below the general principles applicable to the recognition and enforcement of international arbitral awards and foreign judgments.
1. General principles applicable to the recognition and enforcement of international arbitral awards
[39] In Ontario, foreign arbitral awards are enforceable through the International Commercial Arbitration Act, 2017, S.O. 2017, c. 2, Sched. 5 (“ICAA”). The ICAA provides that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“Convention”) has force of law in Ontario. The Convention is set out in Schedule 1 to the ICAA. The ICAA also provides that the Model Law on International Commercial Arbitration (“Model Law”) has force of law in Ontario. The Model Law is set out in Schedule 2 to the ICAA.
[40] Both the Convention and the Model Law apply to the Awards. The Convention applies because the Awards were made in the territory of a State (U.S.A.) other than the State where the recognition and enforcement of the Awards are sought (Canada). See article I(1) of the Convention. The Model Law also applies because at the time of the conclusion of the arbitration agreement, i.e. the MTPA, the parties had their places of business in different countries (Costco in the U.S.A. and TicketOps in Canada). See articles 1(1) and 1(3)(a) of the Model Law and subsection 6(1) of the ICAA.
[41] Articles III, IV and V of the Convention relate to the recognition and enforcement of awards. As noted by the Supreme Court of Canada, the Convention requires each Contracting State to recognize and enforce arbitral awards made in the territory of another State. It also provides that recognition and enforcement can only be refused on the limited grounds set out in article V. See Yugraneft Corp. v. Rexx Management Corp., 2010 SCC 19 at para. 9 (“Yugraneft”).
[42] The relevant articles of the Convention read as follows:
Article III
Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.
Article IV
1 To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall, at the time of the application, supply:
(a) The duly authenticated original award or a duly certified copy thereof;
(b) The original agreement referred to in article II or a duly certified copy thereof.
2 If the said award or agreement is not made in an official language of the country in which the award is relied upon, the party applying for recognition and enforcement of the award shall produce a translation of these documents into such language. The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent.
Article V
1 Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
2 Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of that country.
[43] Like the Convention, the Model Law restricts the ability of national courts to interfere with international arbitration proceedings. Article 36 of the Model Law limits the grounds on which enforcement of an international arbitral award may be refused. These grounds are essentially identical to those set out in article V of the Convention. See Yugraneft at para. 11.
[44] Articles 35 and 36 of the Model Law provide as follows (as modified by subsection 6(1) of the ICAA):
Article 35. Recognition and enforcement
(1) An arbitral award, irrespective of the country in which it was made, shall be recognized as binding and, upon application in writing to the competent court, shall be enforced subject to the provisions of this article and of article 36.
(2) The party relying on an award or applying for its enforcement shall supply the original award or a copy thereof. If the award is not made in an official language of Canada, the court may request the party to supply a translation thereof into such language.
Article 36. Grounds for refusing recognition or enforcement
(1) Recognition or enforcement of an arbitral award, irrespective of the country in which it was made, may be refused only:
(a) at the request of the party against whom it is invoked, if that party furnishes to the competent court where recognition or enforcement is sought proof that:
(i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(ii) the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(v) the award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, that award was made; or
(b) if the court finds that:
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of Ontario and any laws of Canada that are in force in Ontario; or
(ii) the recognition or enforcement of the award would be contrary to the public policy of Ontario.
(2) If an application for setting aside or suspension of an award has been made to a court referred to in paragraph (1)(a)(v) of this article, the court where recognition or enforcement is sought may, if it considers it proper, adjourn its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the other party to provide appropriate security.
[45] The grounds for refusing recognition or enforcement set out in the Convention and the Model Law are to be construed narrowly: see Popack v. Lipszyc, 2018 ONCA 635 at para. 40.
[46] The grounds for refusing recognition or enforcement of an international arbitral award are substantially the same as the grounds to set aside such an award set out in article 34(1) of the Model Law. Courts have held that to justify setting aside an arbitral award under the Model Law for reasons of fairness or natural justice, the conduct of the arbitral tribunal must be sufficiently serious to offend our most basic notions of morality and justice. Judicial intervention for alleged violations of the due process requirements of the Model Law will be warranted only when the tribunal’s conduct is so serious that it cannot be condoned under Ontario law. See Consolidated Contractors Group S.A.L. (Offshore) v. Ambatovy Minerals S.A., 2017 ONCA 939 at para. 65 (“Consolidated Contractors”); application for leave to appeal dismissed: 2018 CanLII 99661 (S.C.C.).
[47] In Nelson v. The Government of the United Mexican States, 2022 ONSC 1193 at para. 34, the Court stated that a party may be said to have been “unable to present their case” when:
a. the award is based on a theory of liability that either or both of the parties were not given an opportunity to address, or based on a theory of the case not argued for by either of the parties;
b. a party was not given an opportunity to respond to arguments made by an opposing party; or
c. the tribunal ignored or failed to take the evidence or submissions of the parties into account.
2. General principles applicable to the recognition and enforcement of foreign judgments
[48] The purpose of a proceeding to recognize and enforce a foreign judgment is to allow a pre-existing obligation to be fulfilled; that is, to ensure that a debt already owed by the defendant is paid. Such a proceeding is not based on the original claim the plaintiff pursued against the defendant, but, rather, on the obligation created by the foreign judgment. Barring exceptional concerns, a court’s focus when enforcing a foreign judgment is not on the substantive and procedural law on which the judgment is based, but instead on the obligation created by the judgment itself. Since the purpose of an action for recognition and enforcement is to assist in enforcing an already-adjudicated obligation and not to evaluate the underlying claim that gave rise to the original dispute, the enforcing court’s role is not one of substance, but one of facilitation. See Chevron Corp. v. Yaiguaje, 2015 SCC 42 at paras. 43-44.
[49] Canadian courts have adopted a generous and liberal approach to the recognition and enforcement of foreign money judgments: see Chevron at para. 27. All the enforcing court needs is proof that the judgment: (1) was rendered by a court of competent jurisdiction; (2) is final; and (3) is for a definite sum of money: see Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52 at paras. 10-11 (“Pro Swing”). A foreign court will be found to have properly assumed jurisdiction where it had a real and substantial connection with the litigants or with the subject matter of the dispute, or where the traditional bases of jurisdiction were satisfied: see Chevron at para. 27 and Tracy v. Iran (Information and Security), 2017 ONCA 549 at para. 85 (“Tracy”).
[50] Once the three elements set out above have been established, the burden shifts to the objecting party to establish the availability of a defence to the recognition of a foreign judgment: see Tracy at para. 87. The defences available are fraud, public policy and lack of natural justice: see Beals v. Saldanha, 2003 SCC 72 at para. 40 (“Beals”).
[51] I will not discuss the defence of fraud as it is not relied upon by TicketOps in this case.
[52] The defence of natural justice will apply where it is proved, to the civil standard, that the foreign proceedings were contrary to Canadian notions of fundamental justice. The domestic court must be satisfied that minimum standards of fairness have been applied to the defendant by the foreign court. A fair process is one that, in the system from which the judgment originates, reasonably guarantees basic procedural safeguards such as judicial independence and fair ethical rules governing the participants in the judicial system. The defence of natural justice is restricted to the form of the foreign procedure, to due process, and does not relate to the merits of the case. See Beals at paras. 59-60, 62, 64.
[53] The defence of public policy has a narrow application and is not a remedy to be used lightly. It prevents the enforcement of a foreign judgment which is contrary to the Canadian concept of justice. This defence turns on whether the foreign law is contrary to our view of basic morality. For example, it prohibits the enforcement of a foreign judgment that is founded on a law contrary to the fundamental morality of the Canadian legal system or that is rendered by a foreign court proven to be corrupt or biased. This defence does not extend to perceived injustices that do not offend our sense of morality. See Beals at paras. 71-72, 75.
C. Defences raised by ticketops
[54] TicketOps does not dispute that there was a real and substantial connection between the foreign court and the dispute or that there was jurisdiction in the Arbitrator in Washington State. Further, it does not dispute that the Awards and the Judgment are final in Washington State.
[55] TicketOps submits that the Judgment and Awards are not for a definite and discernable amount. In particular, TicketOps refers to the Duplicate Recovery Clause in the Awards which, for ease of reference, reads as follows:
To avoid a duplicate recovery, to the extent Costco or any of its related entities obtains any judgments by pursuing claims assigned to it by Suppliers, the amount awarded herein shall be reduced by the amount of such judgments.
[56] TicketOps states the following in its Factum regarding the Duplicate Recovery Clause:
TicketOps’ response: How will TicketOps ever know? How will TicketOps monitor what Costco has received? Will there be on-going production? The questions continue.
This is contrary to public policy. The Ontario Court cannot recognize and enforce such an order. The Ontario Court cannot recognize and enforce such an uncertainty.
[57] TicketOps also relies on the defences of natural justice and public policy. Its submissions in support of each defence are summarized below.
[58] Defence of natural justice. TicketOps argues the following in support of its position that the Awards are based on a denial of natural justice: (a) the arbitration clause provided for a summary procedure of only two days; (b) the suppliers should have been part of the legal process and the arbitration clause did not permit third parties; (c) TicketOps was not permitted to depose a witness; and (d) the fact that the Arbitrator was a friend of Costco’s U.S. counsel on Facebook raises a reasonable apprehension of bias.
[59] Defence of public policy. TicketOps’ position is that damages to Costco must be compensatory and for the amount of the proven loss. TicketOps argues that Costco has suffered no loss for which the Judgment and the Awards purport to compensate it because it is Costco Canada, not Costco, that has actually paid monies out to the suppliers. TicketOps also argues that the Judgment and the Awards are for a quantum that far exceeds any amount that Costco is to be compensated for on account of amounts liable to the suppliers because the claims of some of the suppliers have been compromised and settled. According to TicketOps, because the Judgment and the Awards exceed the liability of Costco to the suppliers, it would be contrary to public policy to recognize and enforce the Judgment and the Awards as Costco would enjoy a windfall and could collect from TicketOps more than the loss that it would ever sustain.
[60] TicketOps states that there is nothing preventing a number of suppliers from proceeding against it and that this situation results in a risk of double jeopardy for TicketOps. I note, however, that there is no evidence that any supplier has initiated a proceeding against TicketOps in respect of unpaid amounts after March 2020.
[61] TicketOps also argues that it is contrary to public policy for Costco to plead two different legal theories in the arbitration (TicketOps as an agent) and in the First and Second Costco Canada Actions (TicketOps as an independent contractor).
[62] Finally, as set out above, TicketOps submits that enforcing the Awards would be contrary to public policy because of the uncertainty created by the Duplicate Recovery Clause.
[63] In the alternative, TicketOps’ position is that the Application should be converted to an action. It argues that in order to determine whether the Judgment and the Awards should be recognized and enforced, a trial of the issues is required, to be heard together with the TicketOps Action, as well as the First and Second Costco Canada Actions. According to TicketOps, there are credibility issues raised and there are genuine issues requiring a trial, including whether the Arbitrator could be found to be an impartial adjudicator and whether the Judgment and the Awards are definite and ascertainable amounts of money that should be recognized and enforced. TicketOps points out that this Application and the three Ontario actions share common facts and, to the extent TicketOps is successful, there should be a set-off.
[64] In its Factum, TicketOps only addressed the test applicable to the recognition and enforcement of foreign judgments, not the test applicable to the recognition and enforcement of international arbitral awards. In oral argument, TicketOps’ counsel took the position that the ICAA, the Convention and the Model Law did not apply as Costco was not only seeking to enforce the Awards but was seeking to enforce the Judgment as well. TicketOps also took the position that if it could raise a valid defence with respect to the Awards, such defence would automatically apply to the Judgment. Thus, according to TicketOps, if it is successful in showing a denial of natural justice with respect to the Awards, such denial taints the Judgment and there is no need to prove a defence of natural justice specific to the process in the District Court.
D. DISCUSSION
1. Appropriate analytical framework
[65] In my view, the analytical framework that should be adopted in this case is the one applicable to the recognition and enforcement of international arbitral awards.
[66] The Judgment is a derivative judgment in that it enforces an arbitral award. As TicketOps’ submissions demonstrate, using the analytical framework applicable to foreign judgments injects a certain level of uncertainty and confusion in the analysis. For instance, it is unclear whether the defence of natural justice applies to the proceeding before the Arbitrator and/or the proceeding before the District Court. As a result, I conclude that it is preferable and more appropriate in this case to focus the Court’s analysis on the source of the obligations that Costco is seeking to enforce, which is the Awards.
[67] There is no support for TicketOps’ position that the ICAA, the Convention and the Model Law do not apply in this case. The Judgment does not prevent Costco from seeking to have the Awards recognized and enforced in other jurisdictions.
[68] In order to avoid duplication and repetition, I will use the Model Law (and not both the Model Law and the Convention) for the purpose of the analysis below.
[69] Costco has met the requirements in article 35 of the Model Law in that it has supplied certified copies of the Awards. Therefore, the recognition and enforcement of the Awards may be refused only if one of the grounds set out in article 36 is established. Based on TicketOps’ submissions, the only relevant grounds are whether: (a) TicketOps was unable to present its case (article 36(1)(a)(ii)); and (b) the recognition or enforcement of the Awards would be contrary to the public policy of Ontario (article 36(1)(b)(ii)).
[70] Before discussing each of these grounds below, I address TicketOps’ argument that the Awards are not for a definite and discernable amount.
2. Whether the Awards are for a definite and discernable amount
[71] Under the Model Law, there is no support for refusing to recognize and enforce an arbitral award because it is not for a definite and discernable amount. Therefore, this is not a valid ground on which TicketOps can object to the recognition and enforcement of the Awards.
[72] Further, and in any event, I disagree with TicketOps’ interpretation of the Duplicate Recovery Clause in the Awards. The Duplicate Recovery Clause relates to any judgments obtained by Costco or any of its related entities “by pursuing claims assigned to it by Suppliers” [emphasis added]. The only possible interpretation of this clause is that it relates to judgments obtained by Costco (or related entities) against TicketOps following an assignment to Costco of claims that suppliers may have against TicketOps. This interpretation is confirmed in the excerpt of the Second Partial Final Award reproduced in paragraph 23 above. I note that a mere assignment is not sufficient to trigger the Duplicate Recovery Clause – a judgment is required. Thus, to answer the questions set out by TicketOps in its Factum (reproduced at paragraph 56 above), TicketOps will know if the Duplicate Recovery Clause is triggered as a judgment will have been obtained against it, presumably after service of an originating court process.
[73] While actions have been commenced against TicketOps in Ontario, there is no allegation or evidence that, since the Awards, any judgment has been obtained against TicketOps based on claims assigned to Costco (or related entities) by any supplier.
[74] I find that the amounts owing under the Awards are ascertainable. Further, the terms of the Awards are clear as to what is expected from TicketOps. See Pro Swing at para. 30.
3. Whether TicketOps was unable to present its case (article 36(1)(a)(ii))
[75] In my view, TicketOps has failed to establish that it was unable to present its case before the Arbitrator within the meaning of article 36(1)(a)(ii) of the Model Law.
[76] None of the fairness grounds raised by TicketOps, separately or together, are “sufficiently serious to offend our most basic notions of morality and justice” or so serious that they cannot be condoned under Ontario law: see Consolidated Contractors at para. 65. Further, the three grounds set out in paragraph 47 above do not apply in this case.
[77] The arbitration proceeding was not contrary to Canadian notions of fundamental justice. TicketOps was able to present its case before the Arbitrator and had the same opportunity to do so as Costco.
[78] I address the specific grounds raised by TicketOps below.
[79] The first ground is that the arbitration clause provided for a summary procedure of only two days. Under article 36(1)(a)(i) of the Model Law, a party resisting the recognition and enforcement of an international arbitral award on the ground that the arbitration agreement is not valid has to prove that the arbitration agreement is not valid under the law to which the agreement is subject or, failing any indication thereon, under the law of the country where the award was made. In our case, the applicable law is the law of the State of Washington. The Arbitrator found in his Procedural Order No. 10 that the arbitration clause and, specifically, the two-day limit was not unconscionable under the applicable law. The unconscionability issue does not appear to have been raised before the District Court.
[80] I do not have any expert evidence on the law of the State of Washington before me. Even if Canadian law applied, I would find that unconscionability has not been established. TicketOps relies on the decision of the Supreme Court of Canada in Uber Technologies Inc. v. Heller, 2020 SCC 16 (“Uber”) to argue that the arbitration clause in this case is unconscionable. Even if I were to accept TicketOps’ submission that there was inequality of bargaining power between Costco and TicketOps, there is no evidence that the MTPA and/or the arbitration clause was an improvident bargain. I note that the facts of this case are drastically different from the facts in Uber and that TicketOps was able to fully participate in the arbitration proceeding.
[81] Further, and in any event, I am not satisfied that a two-day limit on the hearing offends our most basic notions of morality and justice. TicketOps and Costco were subject to the same rules and restrictions. As pointed out by the Arbitrator in his Partial Final Award dated April 19, 2021, both parties had the opportunity to present evidence, examine and cross-examine witnesses under oath, offer exhibits, object and offer arguments. This satisfies the Canadian notions of fundamental justice.
[82] TicketOps would have liked to have a longer hearing. Had the matter been a court proceeding in Ontario, the hearing would likely have been significantly longer than two days. However, it would be ill-advised for an Ontario court to find that: (a) a hearing in an international arbitration proceeding that does not sufficiently resemble a trial in an Ontario court proceeding is contrary to Canadian notions of fundamental justice; and (b) a party to such an international arbitration proceeding is unable to present its case. International arbitration awards usually involve parties from different States. The States in question may have different legal traditions (e.g. civil law vs. common law) and different approaches to the resolution of disputes. This was alluded to by the Arbitrator in his Procedural Order No. 10. He also noted that it was not uncommon in international arbitration for a matter to be decided on the documents alone.
[83] TicketOps agreed to the arbitration clause which contained the two-day limit. It fully participated in the arbitration and had the opportunity to present evidence and argument, after extensive discovery (with a much broader scope than in Ontario). In light of all of the evidence before me, I conclude that, despite the two-day limit, the Awards are not based on procedural unfairness and TicketOps was able to present its case.
[84] TicketOps’ second ground is that the suppliers should have been part of the legal process and the arbitration clause did not permit third parties. Again, the arbitration clause has not been shown to be invalid. In addition, I agree with Costco that TicketOps’ position that the absence of the suppliers was a denial of natural justice is “incongruous” given that TicketOps objected to participating in an arbitration with a supplier, Leisure Pass. Further, there is no evidence that there was anything preventing TicketOps from adducing evidence from suppliers at the arbitration. Thus, this ground does not offend our most basic notions of morality and justice and does not establish that TicketOps was prevented from presenting its case.
[85] The third ground is that TicketOps was not permitted to depose a witness. This ground has no merit. Prior to the arbitration hearing, TicketOps conducted depositions of nine Costco witnesses. This is substantially more than what TicketOps would have been able to do in an Ontario proceeding. Further, parties in Ontario do not have complete liberty as to the witnesses they can call or examine. Among other things, a court can quash a summons. Therefore, I find that the fact that the Arbitrator denied TicketOps’ motion to compel the deposition of one witness is not something that is so serious that it cannot be condoned under Ontario law.
[86] TicketOps’ fourth and final ground is reasonable apprehension of bias in light of the new information obtained after the hearing that the Arbitrator was a friend of Costco’s U.S. counsel on Facebook.
[87] The test for reasonable apprehension of bias applicable to an arbitrator acting in a judicial or quasi-judicial capacity is the same as the test that applies to judges: see Jacob Securities Inc. v Typhoon Capital B.V., 2016 ONSC 604 at paras. 35-37. The test has been formulated as follows: What would an informed person, viewing the matter realistically and practically – and having thought the matter through – conclude? Would the person think that it is more likely than not that the decision-maker, whether consciously or unconsciously, would not decide fairly? See Peart v. Peel Regional Police Services, 2006 CanLII 37566 at paras. 36-37 (Ont. C.A.).
[88] TicketOps was aware, based on the Arbitrator Oath Form, that the Arbitrator had had interactions with counsel for Costco in the past. TicketOps did not raise any objection based on this information. The only new information obtained since the arbitration is the Facebook friendship. I agree with the view expressed by the Saskatchewan Court of Appeal in DeMaria v Law Society of Saskatchewan, 2015 SKCA 106 at para. 49 that in today’s world, a reasonable and informed person would place little or no weight on the fact that two persons are “friends” on Facebook. As the Court of Appeal stated, “[w]ithout more, that unadorned fact is indicative of nothing more than the two individuals know each other”. The fact that two lawyers practicing in the same city would know each other – which was already disclosed to TicketOps in this case – is hardly surprising. This fact does not add anything to the analysis and is insufficient to meet the test for a reasonable apprehension of bias. See also Morin v. Enoch Cree First Nation, 2020 FC 696 at para. 51.
[89] Accordingly, I find that a reasonable apprehension of bias has not been established in this case.
[90] I also note that one ground for refusing recognition or enforcement of an international arbitral award under article 36(1)(a)(iv) of the Model Law is that “the composition of the arbitral tribunal […] was not in accordance with the law of the country where the arbitration took place.” Again, such law is the law of the State of Washington. The Facebook connection between the Arbitrator and Costco’s counsel was raised before the Ninth Circuit CA, but the latter denied TicketOps’ motion to supplement the record on that point.
[91] In light of the foregoing, I conclude that TicketOps has failed to establish that it was unable to present its case within the meaning of article 36(1)(a)(ii) of the Model Law.
4. Whether the recognition or enforcement of the Awards would be contrary to the public policy of Ontario (article 36(1)(b)(ii))
[92] In my view, the recognition and enforcement of the Awards would not be contrary to the public policy of Ontario. As stated above, this defence has a narrow application and should not be used lightly.
[93] TicketOps has failed to identify any law of the State of Washington in issue in the arbitration proceeding that is contrary to our view of basic morality. This, in itself, is sufficient to reject this defence. Nevertheless, I will discuss briefly the grounds raised by TicketOps.
[94] TicketOps’ argument regarding overcompensation seeks to relitigate the arbitration in Ontario, which TicketOps is not entitled to do. Further, and in any event, its argument is fatally flawed as the Awards do not seek to compensate Costco’s losses, but, rather, to have TicketOps return to Costco the amounts that it received as Costco’s agent and did not pay to suppliers. While TicketOps complains about a windfall to Costco, there would be a windfall to TicketOps if it were entitled to keep these amounts for itself. In addition, the public policy defence is not meant to bar enforcement of a foreign judgment or arbitral award for the sole reason that the claim would not yield comparable damages in Canada. This is illustrated by the fact that foreign judgments ordering treble damages and punitive damages have been recognized and enforced in Ontario. See Beals at paras. 66, 73, 76, 97. Here, the enforcement of the Awards would not shock the conscience of the reasonable Canadian in light of the fact that TicketOps has been found not to be entitled to keep the amounts in issue.
[95] TicketOps’ argument about overcompensation is, in part, similar to the “double recovery” argument raised in Depo Traffic Facilities (Kunshan) Co. v. Vikeda International Logistics and Automotive Supply Ltd., 2015 ONSC 999 (“Depo”). In that case, Vikeda International Logistics and Automotive Supply Ltd. (“Vikeda”) argued that the Court should refuse to recognize and enforce an arbitral award as it was unable to present its defence with respect to double recovery and the recognition or enforcement of the award would be contrary to the public policy of Ontario. See Depo at para. 3. Chiappetta J. found that there was no reason not to recognize and enforce the award. In particular, she found that the public policy defence had no application. She noted that the arbitration commission was alive to Vikeda’s double recovery defence, that there was no evidence of misconduct, and that there was no reason to reopen the merits of the double recovery defence by relying on public policy concerns. See Depo at para. 48. The same can be said in this case.
[96] TicketOps’ argument regarding double jeopardy also does not show that the Awards are contrary to the public policy of Ontario. The Arbitrator included the Duplicate Recovery Clause in his Awards to address the issue of duplicate recovery/double jeopardy. Further, as pointed out by the Ninth Circuit CA, TicketOps has many legal options to address a double jeopardy situation. In these circumstances, it cannot be said that the Awards are contrary to our view of basic morality.
[97] I also reject TicketOps’ related argument about the uncertainty of the Duplicate Recovery Clause. Any uncertainty in that clause would not make the Awards contrary to our view of basic morality. In any event, as stated above, whether or not Costco has obtained a judgment against TicketOps is ascertainable. Again, TicketOps has many legal options if, after the Awards are recognized in Ontario, TicketOps is in a double jeopardy situation as a result of Costco trying to obtain a judgment against TicketOps based on claims assigned to Costco by suppliers.
[98] TicketOps’ last argument under this defence is that Costco is pleading a different legal theory in the Ontario litigation from the one it pleaded in the arbitration. This does not raise a public policy issue in relation to the Awards as this has nothing to do with the Awards or foreign law. Again, TicketOps has many legal options to deal with this issue.
[99] Finally, I note that the fact that TicketOps may have a viable claim for set-off does not in any way taint the Awards and it does not make the Awards contrary to principles of justice and fairness in Ontario or contrary to the essential morality of Ontario. See Abener Energia, S.A. v. Sunopta Inc., 2009 CanLII 30678 at para. 24 (Ont. S.C.J.).
[100] In light of the foregoing, I conclude that TicketOps has failed to establish that the recognition and enforcement of the Awards would be contrary to the public policy of Ontario within the meaning of article 36(1)(b)(ii) of the Model Law. As stated above, the defence of public policy does not extend to perceived injustices that do not offend our sense of morality.
[101] Since TicketOps has failed to establish any ground for refusing the recognition and enforcement of the Awards under article 36 of the Model Law, this Court must, in accordance with article 35 of the Model Law, recognize the Awards as binding and enforce the Awards.
5. Supplemental Judgment
[102] TicketOps has not raised any issues regarding the recognition and enforcement of the Supplemental Judgment of the District Court for the legal fees incurred by Costco in the District Court proceeding. I find that the criteria to recognize and enforce the Supplemental Judgment are met.
6. TicketOps’ motion to convert the Application into an action
[103] Under Rule 38.10 of the Rules of Civil Procedure, a judge may, on the hearing of an application, order that any issue proceed to trial and give such directions as are just.
[104] The following factors are relevant to the determination of whether an application should proceed as an action: (1) whether there are material facts in dispute; (2) the presence of complex issues requiring expert evidence and/or a weighing of the evidence; (3) whether there is a need for the exchange of pleadings and for discoveries; and (4) the importance and impact of the application and of the relief sought. See Collins v. Canada (Attorney General) (2005), 76 O.R. (3d) 228, 2005 CanLII 19819 at para. 5 (S.C.J.) and Family and Children’s Services of Lanark, Leeds and Grenville v. Co-operators General Insurance Company, 2021 ONCA 159 at para. 48.
[105] An application is not converted into an action simply because there is a factual dispute. The factual dispute must be material to the issues to be determined and be such that it cannot be fairly resolved by affidavits and cross-examination on affidavits. See Yen Pin v. Wang, 2019 ONSC 1497 at para. 13. Further, in the context of an application to recognize and enforce a foreign judgment or arbitral award, disputed facts that relate to the merits of the action upon which the foreign judgment/arbitral award is based are not a basis upon which to convert an application to enforce into an action. The facts underlying the judgment are irrelevant unless they legitimately relate to a potential defence to enforcement: see Hartzog v. McGriskin, 2010 ONSC 5618 at para. 21 and Zashko Entertainment Inc. v. Touchgate Global Inc., 2018 ONSC 3734 at para. 18.
[106] In my view, there are no valid grounds to convert this Application into an action. It is clear from TicketOps’ materials that it wishes to relitigate the issues decided in the arbitration. However, the grounds on which the enforcement of an international arbitral award can be refused are limited and narrow. None of the grounds raised by TicketOps come close to establish a valid defence. In light of the discussion above, there are no facts in dispute that are material to the issues to be determined on a request to recognize and enforce an international arbitral award. A trial is not required.
[107] With respect to the alleged bias of the arbitrator, suspicion and speculation are not sufficient to raise a reasonable apprehension of bias: see R. v. S. (R.D.), 1997 CanLII 324 (SCC), [1997] 3 S.C.R. 484 at para. 112. TicketOps has failed to raise a reasonable apprehension of bias and ordering a trial of an issue on this point would be to allow a fishing expedition.
[108] I also find that it would be contrary to the objectives of the ICAA, the Convention and the Model Law to convert this Application into action and to consolidate it with other actions where the substance of the arbitration would be relitigated.
[109] Accordingly, TicketOps’ motion is dismissed.
E. CONCLUSION
[110] Costco’s Application to enforce the Awards and the Supplemental Judgment is granted.
[111] I order TicketOps to pay to Costco an amount in Canadian currency sufficient to purchase the amounts awarded in the Awards and the Supplemental Judgment plus accrued interest at a bank in Ontario listed in Schedule 1 to The Bank Act (Canada) at the close of business on the first day on which the bank quotes a Canadian dollar rate for purchase of the foreign currency before the day payment of the obligation is received by Costco.
[112] Prejudgment interest and postjudgment interest are to be in accordance with the Awards and the Supplemental Judgment.
[113] TicketOps’ motion for an order converting the Application into an action, and for an order that the converted Application be consolidated with or, alternatively, heard together with the TicketOps Action, the First Costco Canada Action and the Second Costco Canada Action is dismissed.
[114] If costs cannot be agreed upon, Costco shall deliver submissions of not more than three pages (double-spaced), excluding the costs outline, by February 6, 2023. TicketOps shall deliver its responding submissions (with the same page limit) by February 20, 2023. The submissions of all parties shall also be sent to my assistant by e-mail and uploaded onto CaseLines.
Vermette J.
Released: January 23, 2023
[^1]: RCW [Revised Code of Washington] 7.05.350, which is reproduced in Procedural Order No. 10, reads as follows: (1) Subject to any contrary agreement by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials.