ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
CHARLOTTE SCHICKEDANZ and WAGEMA HOLDCO (CDS) ULC
Appellants
– and –
WAGEMA HOLDINGS LIMITED
Respondent
Paul Fruitman and John Carlo Mastrangelo, for the Appellants
James Doris and Eileen Church Carson, for the Respondent
William E. Pepall and Rebecca Shoom, for Gowling WLG and Myron Dzulynsky
HEARD: June 21, 2023
REASONS FOR JUDGMENT
VERMETTE J.
1The Appellants, Charlotte Schickedanz and Wagema Holdco (CDS) ULC (“Holdco”), appeal from the costs award of the Honourable Frank J.C. Newbould (“Arbitrator”) dated October 8, 2021 (“Award”) pursuant to section 45 of the Arbitration Act, 1991, S.O. 1991, c. 17 (“Arbitration Act”). The Appellants ask that the Award be varied to grant the Respondent Wagema Holdings Limited (“Wagema”) only its costs for litigation counsel at Tyr LLP, and only on a partial indemnity basis.
2While Gowling WLG and Myron Dzulynsky are not parties to the appeal, they were parties to the underlying arbitration and, as set out in more detail below, they have an interest in some of the issues raised by the Appellants. As a result, I heard submissions from their counsel at the hearing of the appeal, on terms that were agreed upon by the parties.
3Given that the Appellants have failed to show that the Arbitrator made an error in principle or that the Award is plainly wrong, the appeal is dismissed.
A. FACTUAL BACKGROUND
1. The parties
4The Appellant Charlotte Schickedanz is a shareholder and director of Wagema. The other shareholders of Wagema are Ms. Schickedanz’s four brothers. Each sibling holds an equal number of shares (directly or indirectly) in Wagema.
5The Appellant Holdco is Ms. Schickedanz’s holding company.
6Wagema’s corporate counsel is Gowling WLG (Canada) LLP (“Gowling”). In 2018, Wagema retained Gowling as legal counsel in relation to a corporate reorganization and unanimous shareholder agreement. Myron Dzulynsky was the responsible partner at Gowling.
2. The Arbitration and the Arbitration Agreement
7In the fall of 2020, Ms. Schickedanz and Holdco commenced proceedings against Ms. Schickedanz’s brothers and their holding companies (together, “Brothers”), Wagema, Gowling and Mr. Dzulynsky. Ultimately, all the claims were consolidated into a single arbitration before the Arbitrator (“Arbitration”).
8For this purpose, the parties to the Arbitration executed an arbitration agreement in April 2021 (“Arbitration Agreement”). Sections 11 and 12 of the Arbitration Agreement read as follows:
The Parties acknowledge and agree that this Arbitration Agreement and the arbitration thereunder (the “Arbitration”) are governed by the Arbitration Act, 1991, S.O. 1991, c. 17 (the “Act”). […]
The Parties further agree that all Parties shall have appeal rights from any final decision in this Arbitration as set out in ss. 45(2) and 45(3) of the Arbitration Act, 1991, S.O. 1991, c. 17, including, for the avoidance of doubt, an appeal on an issue of fact, law or mixed fact and law. With respect to the conduct of the Arbitration, the Parties agree:
f. Subject to the agreement of all Parties otherwise, the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (by analogy, as appropriate) and the rules of evidence applicable in the Ontario Superior Court of Justice will govern the Arbitration, provided that:
i. The Parties agree to consult and confer on the most expeditious and efficient form of documentary discovery, including Redfern document requests in lieu of affidavits of documents, with recourse to the Arbitrator if consensus cannot be reached;
g. Subject to the applicability of the Rules, the Arbitrator (defined below) may reasonably determine his own procedure.
3. Gowling’s Litigation Support Retainer
9In December 2020, i.e., after the litigation was commenced but before its consolidation into the Arbitration, Wagema retained Gowling for the following mandate (“Litigation Support Retainer”):
Wagema has received a Notice of Arbitration and Statement of Claim (collectively the “Litigation”) commenced by Charlotte Schickedanz against Wagema and others, including against Gowling WLG and Myron Dzulynsky.
Gowling WLG to provide corporate (and not litigation) advice to Wagema in connection with the Litigation, including governance matters and board of directors protocol, engaging with appropriate litigation counsel in respect of the Litigation, dealing with third party consultants with respect to the Litigation, providing information to Wagema and its litigation counsel, providing information to others as directed or permitted by Wagema, and otherwise assisting from a corporate law perspective with respect to the Litigation as requested.
10The mandate letter also stated that instructions were to be provided to Gowling by litigation counsel for Wagema, Tyr LLP, and Manfred Schickedanz (one of Ms. Schickedanz’s brothers).
11On March 23, 2021, counsel for the Appellants sent the following letter to counsel for Gowling and counsel for Wagema regarding the Litigation Support Retainer:
It has come to our attention that on December 31, 2020, Gowling WLG invoiced Wagema approximately $57,000 for professional services in respect of the “Charlotte Schickedanz Litigation Support File”. Myron Dzulynsky signed the account on behalf of Gowling. We have enclosed a photo of the invoice.
The nature of these professional services is not clear on the face of the invoice, and we do not have the supporting dockets. However, we cannot understand why Gowling would invoice Wagema for Charlotte’s litigation – let alone in such a high amount. Please explain the nature of these services, and why Gowling billed them to Wagema. Also please advise if there are additional invoices in relation to litigation support that Charlotte is not aware of.
If these services relate to the arbitration that Charlotte commenced in November 2020, Wagema has indicated that it will not be taking an active role in this matter and, to date, has not delivered a Response. Wagema is separately represented by Tyr LLP and is already paying Tyr for litigation support.
To the extent that Mr. Dzulynsky and Gowling are assisting [Ms. Schickedanz’s brothers] in defending Charlotte’s arbitral claims, Gowling should bill any fees charged directly to those co-defendants and not to Wagema.
We look forward to your prompt response and explanation.
12Counsel for Wagema responded as follows on April 7, 2021:
I am writing in response to your letter dated March 23, 2021.
The services provided by Gowlings referenced in the invoice were provided to assist Wagema Holdings in considering and, if necessary, responding to the arbitration and civil proceedings commenced by your client, including your client’s claim for a Mareva injunction or freezing order in respect of the funds to be paid to Wagema pursuant to the vendor take-back mortgage under the Muzzo/DG sale agreement. Your client chose not to seek a Mareva injunction and these funds were received on or about December 11, 2020.
In addition to the invoice referenced in your letter, Gowlings advises that a further account was rendered to Wagema in February 2021 for litigation support in the amount of $23,194.89.
As the litigation has subsequently developed and as matters now stand, Wagema does not intend to take an active role in the arbitration proceedings. Although it does not intend to play an active role, Wagema believes that it is in the company’s best interests that documents and information in Gowlings’ possession as Wagema’s corporate counsel be made available to, among other things, facilitate an expeditious determination of the matters in dispute. Accordingly, Wagema believes that these costs are expenses incurred on behalf of the company and should be paid by the company.
If you have any questions or wish to discuss, please let me know.
13On April 7, 2021, counsel for the Appellants asked counsel for Wagema to provide the dockets supporting the accounts referenced in his April 7, 2021 letter. No response was provided to this letter.
4. Discontinuance of the Arbitration
14On July 19, 2021, counsel for Ms. Schickedanz and Holdco wrote to counsel for the other parties in the Arbitration to advise them that he had instructions to consent to a without costs dismissal of the Arbitration. On July 26, 2021, Gowling and Mr. Dzulynsky consented to the dismissal of the claims against them without costs in exchange for a release. However, the Brothers were not prepared to settle the matter on a no costs basis.
15On August 16, 2021, Ms. Schickedanz and Holdco discontinued the Arbitration. The Brothers and Wagema brought motions for costs which were heard in writing by the Arbitrator. While Gowling did not seek costs, the Arbitrator invited its counsel to make submissions in response to the Appellants’ request for an order that Gowling refund all amounts received from Wagema pursuant to the Litigation Support Retainer.
5. Gowling’s Financing Retainer Agreement
16Before turning to the Award, it is necessary to discuss briefly a retainer between Gowling, the Appellants and others that was entered into prior to the litigation.
17By a Joint Engagement Letter dated January 1, 2020, Wagema, Ms. Schickedanz, Holdco and other corporate entities retained Gowling to act for them to facilitate the advance of a credit facility and related matters (“Financing Retainer Agreement”).
18The Financing Retainer Agreement contained the following provisions:
- NATURE OF THIS JOINT ENGAGEMENT
2.1 Our duties: We understand that at present there are no contentious issues between any of you, and we understand your respective interests are, in all material respects, the same with respect to this engagement. However, it is possible that those interests could conflict in the future. When we agree to represent clients jointly, we must raise certain issues with you and obtain your consent about what will happen should a conflict arise between any of you:
2.1.1 We owe each of you a duty of undivided loyalty. This means that we must not favour the interests of one of you over the interests of another, or allow anything to interfere with our duty of loyalty to each of you. If we believe we are unable to fulfil this duty for any reason, we will withdraw from this joint representation, subject to paragraph 2.1.3 below.
2.1.2 No information received from one of you on this engagement can be treated as confidential from the others. This means that we must share information received from one of you with the others.
2.1.3 If a conflict arises between any of you, and you all agree that we can help you try to resolve the conflict through negotiation, we will do so. However, if the conflict cannot be resolved, we will stop acting jointly for you. You have all agreed, however, that in that case we may nevertheless then continue to act for Wagema Holdings Limited alone in any future engagements.
2.1.4 We have advised all of you and all of you are all aware that we have a prior and continuing relationship with Wagema Holdings Limited[.] its shareholders and principals thereof in various capacities, and we have advised that each of you obtain independent legal advice before agreeing to this joint engagement. Each of you acknowledges that you have had the opportunity to seek independent legal advice before agreeing to the terms of this joint engagement, and that if you decided not to, that decision was entirely voluntary and was not influenced by us. [Emphasis added.]
19Two paragraphs included in Gowling’s template retainer agreement were manually crossed out and initialed. The two struck-out provisions read as follows:
4.2 Acting adverse in unrelated matters: You each agree that we may act in an unrelated matter (meaning it is not the same as or related to any matter in which we are then representing you, whether jointly or on your own) for another client whose interests are adverse, provided that (i) we protect your relevant confidential information, and (ii) we have concluded that acting in that other matter does not create a substantial risk that our representation of you would be materially and adversely affected. Moreover, you each acknowledge that another client’s interests will not be considered adverse merely because that client is a business competitor or is asserting, through us, legal positions that are inconsistent with legal positions any of you are asserting, or is adverse in interest to entities with which any of you has a relationship through ownership or otherwise.
4.3 If you are no longer our client: Each of you agrees that if you are no longer our client, we may represent clients whose interests are adverse in any matter other than one on which we have represented you, whether jointly or on your own. However we will continue to protect your relevant confidential information from all our engagements with you.
20It appears from the record before me that the Financing Retainer Agreement was entered into when the closing of the financing transaction to which it relates was imminent. There is no evidence before me as to when the Financing Retainer Agreement was concluded and whether the Appellants were current clients of Gowling when Gowling entered into the Litigation Support Agreement with Wagema in December 2020 (under the Financing Retainer Agreement or otherwise).
6. The Award
21On October 8, 2021, the Arbitrator released the Award. He awarded costs in the amount of $409,426.48 plus applicable HST to the Brothers. This part of the Award has not been appealed. The Arbitrator also awarded costs to Wagema as follows: (a) $48,380 plus HST for its counsel’s fees at Tyr LLP; and (b) $172,150.34 for the legal expenses paid to Gowling pursuant to the Litigation Support Retainer. The Arbitrator noted in the Award that this case was complex and required work done on a tight time frame.
22The Award has eleven pages and forty paragraphs. The Brothers’ claim for costs is discussed over approximately four pages. The balance of the Award deals with Wagema’s request for costs. However, some paragraphs of the Arbitrator’s reasons regarding the Brothers’ costs also apply to Wagema’s claim for costs, notably the paragraphs discussing the issue of the appropriate scale of costs.
23While the following excerpt of the Award is lengthy, it is important to set out the relevant parts of the Arbitrator’s reasons for the purpose of addressing the arguments raised by the Appellants. The Award states, in part:
[3] Wagema seeks an Order under section 54(2) of the Arbitration Act that: (i) the Claimant pay Wagema costs of $48,380 for the fees of Tyr LLP with applicable taxes of $6,289.40 for a total amount of $54,669.40; and (ii) the Claimant reimburse Wagema for legal expenses paid to Gowling in the amount of $152,295.50 for fees, disbursements of $49.93 and applicable taxes of $19,804.91 for a total amount of $172,150.34. […]
[6] Paragraph 12 of the Arbitration Agreement appears to provide procedural terms governing the arbitration. It begins “With respect to the conduct of the Arbitration…”. I read that to refer to how the arbitration will be conducted by the parties and the arbitrator. Moreover, subparagraph f. states that the Rules “(by analogy, as appropriate) and the rules of evidence shall govern the Arbitration”. The word “appropriate” indicates that not all of the Rules will apply.
[7] I do not read the Arbitration Agreement to provide that costs shall be governed by Rule 57 and the case law under that rule. I am to be guided by section 54 of the Arbitration Act, which provides:
Power to award costs
54 (1) An arbitral tribunal may award the costs of an arbitration.
What constitutes costs
(2) The costs of an arbitration consist of the parties’ legal expenses, the fees and expenses of the arbitral tribunal and any other expenses related to the arbitration.
[8] Costs in an arbitration under the Arbitration Act are not required to be set using the practice under the Rules of Practice in civil actions in Ontario. The practice under domestic arbitrations is to award reasonable legal fees without reference to any court scale. See J. Brian Casey, Arbitration Law of Canada: Practice and Procedure, 3rd ed. Juris $8.7.1. There is no notion of costs in the cause or of substantial or partial indemnity costs in an arbitration under the Arbitration Act. The costs are the parties’ legal expenses plus the fees and expenses of the arbitral tribunal and other related arbitration expenses.
[9] In this case, there is no reason not to award the full legal expenses of the Brothers and the expenses of the arbitral tribunal. This is consistent with the normal practice in commercial arbitrations, absent language agreed by the parties otherwise, to award full indemnity against the costs incurred.
Costs of Wagema
[18] Charlotte [defined as including Ms. Schickedanz and Holdco] contends that Wagema should be denied any costs, or alternatively only nominal costs. She also contends that amounts paid by Wagema to Gowling for its work should be returned to Wagema.
[19] The costs claimed by Wagema for its own counsel are $48,380 plus HST. What Charlotte means by nominal in her cost submissions is not stated.
[20] Wagema was named as a respondent by Charlotte in her initial notice of arbitration dated October 28, 2020 and a Mareva injunction was sought against Wagema restraining it from dealing with funds received by Wagema on a sale transaction with the Muzzo Group. This claim for an injunction was continued in the Consolidated Notice of Arbitration dated March 11, 2021. The claim for an injunction was withdrawn by Charlotte in her Amended Consolidated Notice of Arbitration dated May 4, 2021 and replaced with a claim rescinding the Wagema USA [Unanimous Shareholder Agreement]. Sometime after my Award of June 2, 2021 in the Class A Priority arbitration [i.e., a parallel arbitration before the Arbitrator involving some of the same parties, including the Appellants], Charlotte dropped her claim to rescind the Wagema USA.
[21] Wagema was entitled to retain counsel to deal with this arbitration. The Tyr LLP dockets indicate that time docketed was worth $66,965. The bill of costs submitted by Wagema is less, at $48,380. I do not know the reason for the difference. I have gone through the dockets and bill of costs and I cannot discern any apparent overbilling or work that was not required of Wagema’s counsel. Wagema had a right to co-ordinate with other counsel in defence of the arbitration, and had it not, it could have been criticized for not being involved at all. I note that some time was spent on issues of privilege and conflict issues raised by Charlotte regarding work done by Gowling, an issue again raised in the cost submissions of Charlotte.
[22] I accept that it made sense to have Gowling collect documents and information for use in the arbitration and it was reasonable to have Wagema co-ordinate that work with Gowling. Otherwise, some other firm such as Tory or Tyr would have had to do the work. If the work that Gowling did, which I will deal with below, had not been done, the costs incurred by Wagema in having its counsel do that work would have been far higher than the amount paid to Gowling whose lawyers were familiar with the documentation and information. Also, the time for doing this work was very tight. What occurred was in accordance with the Arbitration Agreement that provided that the parties agreed to consult and confer as to the most expeditious and efficient form of documentary discovery.
[23] The amount claimed by Wagema in its bill of costs for fees of $48,380 plus HST is reasonable.
[24] Charlotte has raised arguments that the amount paid by Wagema to Gowling was improper. I do not agree.
[25] As part of Wagema’s reorganization, Charlotte agreed to assume a $22.5 million obligation to Arthur [i.e., one of Ms. Schickedanz’s brothers] under the USA (the “Class A Priority”). The Class A Priority was needed to equalize Charlotte and Arthur’s proportionate interests in Wagema’s assets. Gowling acted on behalf of Charlotte and several entities, including Wagema, to assist in the credit facility being established with Farm Credit Canada in favour of Wagema and Charlotte’s Holdco. Charlotte asserts that under the Retainer Agreement made in connection with this credit facility, Gowling assumed a duty of loyalty to Charlotte and her Holdco that precluded Gowling from providing assistance to Wagema in this arbitration.
[26] The Retainer Agreement contained the following:
- NATURE OF THIS JOINT ENGAGEMENT
2.1 Our duties: We understand that at present there are no contentious issues between any of you, and we understand your respective interests are, in all material respects, the same with respect to this engagement. However, it is possible that those interests could conflict in the future. When we agree to represent clients jointly, we must raise certain issues with you and obtain your consent about what will happen should a conflict arise between any of you:
2.1.1 We owe each of you a duty of undivided loyalty. This means that we must not favour the interests of one of you over the interests of another, or allow anything to interfere with our duty of loyalty to each of you. If we believe we are unable to fulfil this duty for any reason, we will withdraw from this joint representation, subject to paragraph 2.1.3 below.
2.1.2 No information received from one of you on this engagement can be treated as confidential from the others. This means that we must share information received from one of you with the others.
2.1.3 If a conflict arises between any of you, and you all agree that we can help you try to resolve the conflict through negotiation, we will do so. However, if the conflict cannot be resolved, we will stop acting jointly for you. You have all agreed, however, that in that case we may nevertheless then continue to act for Wagema Holdings Limited alone in any future engagements.
2.1.4 We have advised all of you and all of you are all aware that we have a prior and continuing relationship with Wagema Holdings Limited its shareholders and principals thereof in various capacities, and we have advised that each of you obtain independent legal advice before agreeing to this joint engagement. Each of you acknowledges that you have had the opportunity to seek independent legal advice before agreeing to the terms of this joint engagement, and that if you decided not to, that decision was entirely voluntary and was not influenced by us. (Underling [sic] added)
[27] It is clear from 2.1.1 of the Retainer Agreement that Gowling owed a duty of loyalty to all parties to the Retainer Agreement and could not favour the interests of one over another. However, I read the Retainer Agreement as intended to deal only with the Farm Credit financing. This is seen in the underlined provisions above.
[28] The provision in section 2.1.3 is instructive. It provided that if there was a conflict between any of the parties, Gowling would stop acting jointly but could act for Wagema in any future engagements. This provision indicates that the Retainer Agreement was intended to deal with the Farm Credit financing and, if Gowling could act for Wagema in the future if a conflict in that financing arose, it would make no sense for Gowling to be unable to act for Wagema in the future if there had been no conflict.
[29] The provision in 2.1.2 that information from one party could [not] be treated as confidential from another means that the information from one party had to be shared with the other parties. Gowling was a long-time corporate lawyer for Wagema and there was nothing to stop it from providing information and documentation that it had from its role in acting for Wagema. If any of the information it provided to Wagema had come from Charlotte or her Holdco during the engagement for the Farm Credit financing, Charlotte has no complaint as it is clear from 2.1.2 that such information was not privileged and had to be shared with Wagema.[Footnote 1: Charlotte refers to paragraphs struck from the Retainer Agreement and contends that they made clear that Gowling could not act in the future for Wagema. These paragraphs are inadmissible to construe the Retainer Agreement. Evidence of negotiations are inadmissible for that purpose. See Goodlife Fitness Centres Inc. v. Rock Developments Inc. 2019 ONCA 58 at paras. 15-17.]
[30] Charlotte sued Wagema and Gowling and the claims were eventually joined in one proceeding at the request of Charlotte made immediately after the claims were first made. Whatever information Gowling had that was relevant to the claim against it had to be produced in one form or another, and what was relevant to the other claims may well have had to be produced by Gowling as well. The fact that Wagema obtained the information it did from Gowling under the Mandate Letter makes no difference to its right to the information.
[31] I cannot find that Gowling breached any duty owed to Charlotte in providing information to Wagema. Neither Wagema nor Gowling did anything improper in this.
[32] Gowling contends as a preliminary matter that I have no jurisdiction to make an order for costs against it because the Arbitration Agreement covers only Disputes as defined in paragraph 5 of that agreement, and paragraph 6 provides that the Arbitration Agreement does not apply to any disputes, disagreements, controversies, questions or claims other than the Disputes. The claim by Charlotte that Gowling should repay what it was paid by Wagema is said by Gowling to arise from an alleged breach of the Retainer Agreement, which is not a Dispute under the Arbitration Agreement.
[33] Charlotte contends that I have jurisdiction because the Arbitration Act gives a broad discretion to make cost awards and no exception to this broad discretion is identified in the Arbitration Agreement. However, it is trite law that the Arbitration Act does not in itself give an arbitrator jurisdiction over a dispute to which the parties have not conferred jurisdiction by agreement. One of the basis for a court to intervene under section 6 of the Arbitration Act is to ensure that arbitrations are conducted in accordance with arbitration agreements. If such an agreement has been made, an arbitrator has the right under section 54 to make an award of costs. But if no such agreement has been made, an arbitrator has no jurisdiction over the dispute, in which case section 54 in itself does not confer jurisdiction.
[34] In this case I find that I do not have jurisdiction to decide the issue of whether the Retainer Agreement has been breached or whether any such breach would be a ground to order Gowling to return to Wagema the amounts paid to Gowling by Wagema that are in dispute. I must say, however, that if I did have such jurisdiction, I would not order Gowling to return such amounts to Wagema.
[35] It [sic] its argument, the solicitors for Charlotte say that she was unaware that Gowling was retained to do the work that it did until March 2021. I am not sure of the relevance of that assertion but there is no evidence to support it. The Master Engagement Letter was made on December 3, 2020. It stated that it was approved by the board of directors of Wagema on August 19, 2020. Charlotte was a board member and as such, would ordinarily have been given notice of the agreement prior to it being approved by the board of directors. If she was not given such notice, one would expect her to file evidence to that effect. She did not. There is no evidence that the Master Engagement Letter or the Mandate Letter was concealed in any way.
[36] Charlotte contends that Gowling’s litigation services went beyond the scope of its retainer as the Mandate Letter provided for “corporate (not litigation) advice”. I do not agree. Charlotte has taken a few words in the Mandate Letter out of context.
[37] The Mandate Letter provided:
Gowling WLG to provide corporate (and not litigation) advice to Wagema in connection with the Litigation, including governance matters and board of directors protocol, engaging with appropriate litigation counsel in respect of the Litigation, dealing with third party consultants with respect to the Litigation, providing information to Wagema and its litigation counsel, providing information to others as directed or permitted by Wagema, and otherwise assisting from a corporate law perspective with respect to the Litigation as requested.
[38] What Gowling did fell entirely within this provision. Gowling assisted Wagema and its litigation counsel by bringing litigation counsel up to speed concerning the complex and lengthy background to the matter, and provided a detailed chronological response with supporting documentation. Gowling also produced documents to be made available for the parties’ use in the arbitration. The time charged by litigators at Gowling was not for litigation advice to Wagema but for work done to produce Gowling records to all parties.
[39] I see no reason to deny Wagema its expenses of legal costs paid by it to Gowling.
[40] I order that Charlotte and her Holdco pay the following costs to Wagema:
(i) Wagema’s counsel’s fees of $48,380 plus HST.
(ii) The legal expenses paid to Gowling in the amount of $152,295.50 for fees, disbursements of $49.93 and applicable taxes of $19,804.91 for a total amount of $172,150.34.
7. The appeal and the motion to quash the appeal
24The Appellants commenced this appeal on November 8, 2021.
25In June 2022, Wagema brought a motion to quash the appeal on the ground that leave to appeal was not sought pursuant to section 133 (b) of the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”). The motion was heard in writing by Justice A.P. Ramsay: see Schickedanz v. Wagema Holdings Ltd., 2022 ONSC 5315 (“Quash Decision”).
26Justice Ramsay noted that the parties had negotiated and agreed upon a broad appeal process, without carving out a leave requirement for costs. She expressed the view (at para. 19) that imposing a leave requirement to appeal costs would amount to judicial interference with the parties’ right to contract. After discussing the relevant case law and statutory provisions, she stated (at para. 22) that she was “not persuaded that leave to appeal was required, on a plain reading of s. 133(b) of the Courts of Justice Act, and in the absence of any reference to that provision in the Arbitration Act in relation to an appeal (of costs).”
27Ultimately, Justice Ramsay dismissed Wagema’s motion to quash. She stated that she was not satisfied that the appeal was devoid of merit nor that there was no likelihood that, if leave was required, it would not be granted in this case. She concluded that if leave was required, the application for leave could be dealt with by the judge hearing the merits of the appeal.
B. DISCUSSION
28Before turning to the merits of the appeal, I have to address the preliminary issue of whether leave to appeal an arbitral costs award is required.
1. Leave to appeal
29Wagema’s position is that leave is required to appeal an arbitration decision on the issue of costs alone and that, as a result, this appeal is not properly before this Court. In my view, leave to appeal is not required in this case.
30Wagema relies on section 133(b) of the CJA which provides that “[n]o appeal lies without leave of the court to which the appeal is taken […] where the appeal is only as to costs that are in the discretion of the court that made the order for costs.”
31The expression “costs that are in the discretion of the court” is found in subsection 131(1) of the CJA, which states:
Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.
32As pointed out by Justice Ramsay in the Quash Decision, section 133(b) of the CJA refers to a court, and does not refer to a tribunal or arbitrator. The CJA draws a distinction between a tribunal and a court: see, e.g., subsections 90(4), 109(6) and 134(1)(a).
33Wagema relies on the decision in Flowers v. Eickmeier, 2017 ONSC 3376 (“Flowers”) in support of its position that leave is required. In that case, the arbitration agreement provided that a party had the right to appeal the final award on a question of law without leave. The appellant appealed the costs award made by the arbitrator. Di Luca J. expressed the view that leave to appeal was required. He stated the following at para. 16:
In my view, leave to appeal is required in this case. Neither the Agreement nor s. 45 of the Arbitration Act specifically address the issue of leave to appeal in relation to a costs award. It seems incongruous that a party needs leave to appeal a costs order made by a trial judge but where an arbitrator sits in the position of a trial judge, the parties can contract out of a leave requirement in relation to an appeal of a costs award. In my view, in the absence of express statutory language in the Arbitration Act, the parties are not free to contract out of s. 133(b) of the Courts of Justice Act and thereby confer jurisdiction on the Court to consider a costs appeal without leave of the Court.
34Di Luca J. found that the issue raised by the appellant in Flowers raised a question of law that could be appealed in accordance with the arbitration agreement, and he was prepared to grant leave to appeal on this issue because it was of sufficient importance to the parties and its determination would significantly affect their rights. See Flowers at para. 20. I note that the test applied by Di Luca J. to determine whether leave should be granted is the test set out in subsection 45(1) of the Arbitration Act instead of the test applicable on a motion for leave to appeal a costs award. Leave to appeal an order as to costs is granted sparingly and only where there are strong grounds on which the appellate court could find that the decision-maker at first instance erred in exercising their discretion because they made an error in principle or their decision is plainly wrong: see Smith v. Mackinnon, 2017 ONSC 4638 at para. 13 (Div. Ct.).
35The passage from Flowers reproduced above is inconsistent with a passage in Pagliaroli v. Rite-Pak Produce Co. Limited, 2010 ONSC 3729 (“Pagliaroli”). In that case, Grace J. dismissed the appeal from an arbitrator’s decision on the merits, but allowed the appeal on the issue of the costs of the arbitration. Grace J. held (at para. 65) that “[g]iven the breadth of the arbitration agreement and s. 45(3) of the Arbitration Act, leave to appeal the issue of costs is not required.”
36Contrary to Wagema’s submissions, if section 133(b) of the CJA applied, leave to appeal would have been required in Pagliaroli because Grace J. affirmed the substantive disposition of the award: see, e.g., Frances v. TTC Insurance Company, 2023 ONSC 780 at para. 69, Pollard Windows Inc. v 1736106 Ontario Inc., 2019 ONSC 4859 at para. 85 and 2019 ONSC 5361, St. Jean v. Cheung, 2009 ONCA 9 at para. 4, Mullin v. Lagace, 2015 ONCA 757 at para. 8, and Beaver v. Hill, 2018 ONCA 840 at paras. 1-2.
37The most recent decision discussing the issue of whether leave is required to appeal an arbitral costs award is the Quash Decision. While Justice Ramsay ultimately left the issue of whether leave was required to the judge hearing the appeal, she expressed the view that leave to appeal was not required. Her analysis of the issue is more detailed than the discussion of the issue in Flowers and Pagliaroli.
38I generally agree with Justice Ramsay’s reasoning. The following supports the conclusion that leave to appeal is not required in this case:
a. By its clear language, subsection 133(b) of the CJA only applies to costs awards made by a court.
b. Section 45 of the Arbitration Act deals with appeals from an arbitral award. It does not draw a distinction between an appeal regarding the substantive disposition of the award and an appeal as to costs only. Further, the Arbitration Act does not refer to subsection 133(b) of the CJA, even though it refers to other provisions of the CJA, when relevant: see sections 45(6) and 57 of the Arbitration Act.
c. As pointed out by Justice Ramsay, the parties have negotiated and agreed upon broad appeal rights, without carving out a leave requirement for costs. The appeal rights are set out in section 12 of the Arbitration Agreement. The parties agreed that they had appeal rights from any final decision in the Arbitration, including on a question of fact, law or mixed fact and law. Subsections 45(2) and (3) of the Arbitration Act allow a party to appeal an award to the court on such questions “[i]f the arbitration agreement so provides”.
39Given that subsection 133(b) of the CJA only applies to courts and the Arbitration Act does not impose a leave requirement with respect to costs appeals, I disagree that allowing parties to appeal from an arbitral costs award without leave amounts to allowing the parties to “contract out of a leave requirement in relation to an appeal of a costs award”, as stated in Flowers. There is no contracting out of anything if the legislature did not impose any leave requirement with respect to arbitral costs awards. I also note that the Arbitration Act expressly allows parties to an arbitration agreement to contract out of certain provisions. Of particular relevance to this appeal, section 45(1) of the Arbitration Act provides that a party may only appeal an arbitral award to the court on a question of law with leave if the arbitration agreement does not deal with appeals on questions of law. However, subsections 45(2) and (3) allow the parties to “contract out” of this provision and to agree that a party may appeal an award on a question of law (subsection 45(2)) and/or a question of fact or mixed fact and law (subsection 45(3)). This is what the parties did in this case.
40In light of the foregoing, I conclude that the Appellants were not required to seek leave to appeal the Award.
2. Applicable test and grounds raised by the Appellants
41A court should set aside a costs award on appeal only if the decision-maker made an error in principle or if the costs award is plainly wrong. See Hamilton v. Open Window Bakery Ltd., 2004 SCC 9 at para. 27. Costs awards are notoriously difficult to appeal because they represent the decision-maker’s exercise of judgment as to the overall justice of the situation that they saw unfolding before them: Strathmillan Financial Limited v. Teti, 2021 ONSC 7603 at para. 39. A reviewing court must be mindful that a costs award is a discretionary order and the decision-maker at first instance is in the best position to determine the entitlement, scale and quantum of any such award. See McNaughton Automotive Ltd. v. Co-operators General Insurance Co., 2008 ONCA 597 at para. 27.
42The Appellants argue that the Arbitrator made three reversible errors:
a. Allowing Wagema to recover Gowling’s “litigation support” fees. The Appellants argue that: (i) Gowling’s fees are excessive for an arbitration that did not progress past the production stage; and (ii) Gowling’s retainer was in breach of the duty of loyalty owed to the Appellants.
b. Allowing Gowling to recover its own arbitration costs indirectly through Wagema despite Gowling’s agreement to a without-costs withdrawal.
c. Holding that cost recovery on a full indemnity basis is “the normal practice in commercial arbitrations”.
43I will first deal with the third point, i.e., the issue of the scale of costs. I will then address the issues related to Gowling’s Litigation Support Retainer.
3. Scale of costs
44Subsection 54(1) of the Arbitration Act states that an arbitral tribunal may award the costs of an arbitration. Subsection 54(2) deals with “what constitutes costs”. It states:
The costs of an arbitration consist of the parties’ legal expenses, the fees and expenses of the arbitral tribunal and any other expenses related to the arbitration.
45Section 54 does not refer to the Rules of Civil Procedure or to the concept of scale of costs.
46In granting costs to Wagema, the Arbitrator relied on the well-known textbook of J. Brian Casey, Arbitration Law of Canada: Practice and Procedure for the proposition that the practice under domestic arbitrations is to award reasonable legal fees without reference to any court scale. This textbook states the following, in part, at §8.7.1:
Most institutional rules provide for costs to include a party’s reasonable legal expenses. The practice in most domestic arbitrations is to award reasonable legal fees without reference to any court scale, absent the agreement of the parties or specific legislation.
There is older case law to the effect that where the word “costs” is used in a statute, it is to be given the same meaning as under the local rules for civil procedure in court proceedings. Under the Ontario Domestic Act however, the power to award costs is defined as including the parties’ legal expenses and any other expenses related to the arbitration.
The discretion in awarding costs is not unfettered and it must be exercised “judicially,” but “judicially” is not a precisely defined term. To act judicially does not mean to act as a judge must act under provincial court rules. It has a broader connotation. For example, it is improper to deny costs to the winning party as a form of “consolation” prize to the loser. […]
[…] Unlike a court action, the obligation to arbitrate effectively and fairly and in a timely manner is a contractual obligation of the parties. The obligation on an arbitrator to act judicially should not necessarily mean he or she must follow the procedural rules a particular jurisdiction has developed for determining costs of civil litigation. For example, there is no reason why an arbitrator may not make a distributive costs award in appropriate circumstances, notwithstanding that such awards are not permitted in most provincial courts. One must look to see if a particular Domestic Act has imported court rules of procedure dealing with costs as between the parties. The procedural law of the arbitration is the Domestic Act itself, not the rules of court for the province.
47These general principles are consistent with the language in section 54 of the Arbitration Act. In addition, there is support in the case law in other provinces that “full indemnity is the norm regarding commercial arbitration”: see, e.g., K-Rite Construction Ltd v. Enigma Ventures Inc, 2020 ABQB 566 at para. 38 and Allard v. The University of British Columbia, 2021 BCSC 60 at para. 78.
48The Appellants rely on Electek Power Services Inc. v. Greenfield Energy Centre Limited Partnership, 2022 ONSC 2437 (“Electek”) to argue that the Arbitrator erred in finding that full indemnity costs were the normal practice in commercial arbitrations.1 They also argue that the Arbitrator erred in granting costs on a full indemnity basis without finding any undue conduct on the part of the Appellants.
49In Electek, the applicant had brought an application based on subsection 17(8) of the Arbitration Act, which provides that if the arbitral tribunal rules on an objection as a preliminary question, a party may, within thirty days after receiving notice of the ruling, make an application to the court to decide the matter. The application, which proceeded as a hearing de novo, was granted. Perell J. found that the arbitrators had erred in assuming jurisdiction of the dispute. See Electek at para. 2. The applicant subsequently sought costs for the arbitration hearing and the court application on a full indemnity basis. I note that the arbitral tribunal itself had not made a costs award.
50Perell J. stated the following on the issue of the scale of costs at paras. 31-32:
[31] There is some vagueness in the authorities as to whether an arbitrator’s jurisdiction with respect to costs is different from a judge’s discretion with respect to costs because the discretion may be tempered or enhanced by the nature of the agreement to arbitrate or by statutory provisions mandating non-consensual arbitration such as may occur under the Condominium Act. My review of the cases, however, reveals that the distinctions are of the type that are without a difference. The authorities establish that the arbitrator’s discretion must be exercised judicially and not irrationally or whimsically. [Footnote 10] It is within an arbitrator's discretion to order substantial or full indemnity if it is justified after looking at the prior conduct of a party when making such an award. [Footnote 11]
[32] In my opinion, in the immediate case, exercising the arbitrator’s or the court’s discretion judicially, neither the arbitration nor the court application would justify or warrant a full indemnity award or even a substantial indemnity award. There is nothing in the conduct of the parties that calls out for a punitive award. It was as reasonable and appropriate for Greenfield to submit the parties’ dispute to arbitration as it was reasonable and appropriate for Electek to challenge the arbitrator’s jurisdiction. The adversaries in this $12 million litigation did not depart from the rules of engagement and there is nothing in the conduct of either that even justifies adjusting the costs scale beyond the partial indemnity scale that typically is awarded to the victor in litigation.
51Perell J. cited three cases in footnotes 10 and 11 referred to in the excerpt above. The first one is Italiano v. Toronto Standard Condominium Corp. No. 1507, 2008 CanLII 32322 (Ont. S.C.J.) (“Italiano”). This case repeats the principle that an arbitrator must exercise their discretion to decide who has to pay costs to whom judicially, and not irrationally or whimsically (at para. 41). While the case states that “[i]t is within an arbitrator’s discretion to order full indemnity if it is justified after looking at the prior conduct of a party when making such an award” (at para. 43), the court also refers to a case stating that the powers of an arbitrator under section 54 of the Arbitration Act are not limited by factors under Rule 57.01 of the Rules of Civil Procedure for a court’s exercise of discretion (at para. 42). The scale of costs was not in issue in this case because of section 134(5) of the Condominium Act, 1998, S.O. 1998, c. 19 (at paras. 44, 50).
52The second case is Azurix North America Engineering Corp. v. Deep River, 2006 CanLII 17927 (Ont. S.C.J.) (“Azurix”). In that case, the arbitrator awarded costs on a partial indemnity scale. The scale of costs was not in issue before the court. However, the court stated the following regarding an arbitrator’s authority to award costs (at paras. 10-11):
[10] Under the Arbitration Act, 1991 the arbitrator draws his authority to award costs from section 54, set out above. The word “may” denotes a discretionary power, and the section goes on in subsections (2)-(6) to prescribe a mini-costs-code. I am not at all sure that the arbitrator is necessarily required to be guided by the provisions of Rule 57.01. In Nfld. & Labrador Hydro v. Nfld. & Labrador Federation of Municipalities (1979), 24 Nfld. & P.E.I.R. 317 (Nfld. C.A.), it was argued that the costs award in the Public Utilities Board should have been fixed in accordance with the Courts’ rules. At page 320 Furlong, C.J.N. said:
I can find no support for bringing in the Rules as to costs in this court to proceedings before independent bodies.
The statute establishing and empowering the Board gave it complete discretion to order costs of and incidental to proceedings before it. Chief Justice Furlong went on to add:
The discretion of the Board is unlimited so long as that discretion is properly exercised in law and we are in no position to interfere with it.
[11] Clearly, a discretionary power conferred on a judicial or quasi-judicial body cannot be exercised arbitrarily, irrationally or whimsically. It must be exercised judicially. I think the arbitrator here did act judicially in determining how to award costs. He recognized that there may be other measures of who should pay, but selected the “who must pay who” measure as the way to best assess the result in the particular case he had before him. [Emphasis added.]
53The third case is Rosenfeld v. IAMGOLD International African Mining Gold Corp., [1997] O.J. No. 3770 (Gen. Div.). In that case, the applicant asked that an award of costs made by an arbitrator be set aside because complete indemnification had been ordered (see paras. 7, 9-10). The arbitrator found that the case “was not a legitimate commercial dispute in which the losers should pay only party-and-party cost” because it was a “business play” by the applicant (at para. 11). The court found that the arbitrator was entitled to make an award of costs on this basis (at para. 12.). The court also noted that the parties had agreed that the arbitrator would determine the issue of costs, including the amount of costs and which of the parties should bear these costs (at para. 13).
54In light of the foregoing, I find that, contrary to the Appellants’ submissions, Electek does not stand for the general proposition that the costs of a commercial arbitration must be granted on a partial indemnity scale except where the losing party’s conduct was reprehensible, scandalous or outrageous. I come to this conclusion for the following reasons:
a. Justice Perell awarded the costs of the arbitration as a judge of this Court. He was not ruling on a costs award made by the arbitral tribunal, and he did not have the benefit of the arbitral tribunal’s views and reasons with respect to costs. In this case, I have the views and reasons of the Arbitrator who was selected by the parties.
b. In addition to not having the views of the arbitral tribunal, it does not appear that Justice Perell was made aware of the relevant part of the arbitration textbook referred to above which is said to outline the general practice in domestic arbitrations.
c. While the three cases referred to in Electek are authorities for the principles that an arbitrator’s discretion regarding costs must be exercised judicially and that full indemnity costs can be awarded based on the conduct of a party, they do not support the broader principle that full indemnity costs cannot be awarded in other circumstances. They also do not support the principle that arbitrators must approach costs in the same manner as courts do under the Rules of Civil Procedure. In fact, two of the cases (Italiano and Azurix) contain statements to the contrary. I note that Justice Perell recognized in Electek that “[t]here is some vagueness in the authorities as to whether an arbitrator’s jurisdiction with respect to costs is different from a judge’s discretion with respect to costs”.
d. Justice Perell concluded based on the specific facts of the case before him that full indemnity or substantial indemnity costs were not warranted in that case. The present case is factually different; one significant factual difference between Electek and this case is the fact that the Appellants discontinued the Arbitration after significant expenses had been incurred.
e. I note that “partial indemnity costs” are defined in Rule 1.03 of the Rules of Civil Procedure as “costs awarded in accordance with Part I of Tariff A”. “Substantial indemnity costs” are defined as “costs awarded in an amount that is 1.5 times what would otherwise be awarded in accordance with Part I of Tariff A”. There are no references to the Rules of Civil Procedure or Tariff A in the Arbitration Act. Rather, the meaning of “costs” is specifically defined in subsection 54(2) of the Arbitration Act.
55In addition to Electek, the Appellants refer to three other cases. In my view, thse cases can be distinguished and none of them support the Appellants’ position:
a. Necrovore Inc. v. Andover Land Corporation, 2007 CanLII 34849 (Ont. S.C.J.): In that case, the arbitrator had determined that there would be no award as to costs of either party, and that each party was to pay 50% of the arbitrator’s fees and disbursements. The court stated that the provisions of the Rules of Civil Procedure with respect to costs were not binding upon the arbitrator, and had the parties intended that they be binding, the parties were free to stipulate to that effect in the arbitration agreement (at para. 21). However, the costs award was set aside because the arbitrator had not taken into account the general rule that costs should follow the event. The court found that the applicant should have been awarded its costs of the arbitration on a partial indemnity basis. There is no analysis by the court of the issue of the scale of costs. This is another case where the judge selected a scale of costs without having the benefit of the arbitrator’s view on the issue. Further, the parties’ submissions suggest that they agreed to have the costs of the arbitration fixed in accordance with the scales of costs set out in the Rules of Civil Procedure: see paras. 9-10.
b. Pagliaroli. In that case, the arbitrator concluded that the successful party was entitled to partial indemnity costs up to a certain date, and “substantial indemnity costs thereafter, approaching full indemnity”. The court granted the appeal on the issue of costs and found that the successful party was only entitled to costs of the arbitration on a partial indemnity basis. It is important to note that the issue of costs was specifically addressed in the parties’ arbitration agreement, which provided as follows: “The Arbitrator will have discretion to award costs of the arbitration including all pre-hearing motions and proceedings in the same manner and on the same scale as he deems appropriate as would a judge of the Superior Court of Justice.” [Emphasis added.] There is no similar clause in the Arbitration Agreement.
c. Wong v. Wires Jolley LLP, 2010 ONSC 4835. In paragraph 22 of that case, the court states that the arbitrator awarded costs on a partial indemnity basis. This is the only reference to the costs award in that case because it was not in issue before the court. This case does not disclose what the arbitration agreement between the parties provided with respect to the issue of costs, if anything.
56In light of the vagueness and uncertainty in the authorities and the absence of any clear rule, I conclude that the Arbitrator did not make an error in principle and was not plainly wrong when he decided to award Wagema its full legal expenses as costs of the arbitration. Among other things, the Arbitrator’s decision does not infringe subsection 54(2) of the Arbitration Act nor any established rule or principle regarding the costs of commercial arbitrations under the Arbitration Act. Further, it is clear from the Arbitrator’s reasons that he exercised his discretion judicially, and not irrationally or whimsically.
57The Appellants also argue that the Arbitrator erred in applying “some undefined arbitration practice” because the parties expressly agreed that the Arbitration was to proceed in accordance with the Rules of Civil Procedure.
58The Arbitrator expressly dealt with this argument in paragraphs 6-7 of the Award. He found that section 12(f) of the Arbitration Agreement referred to how the Arbitration would be conducted by the parties and the Arbitrator, and did not mean that costs would be governed by Rule 57 of the Rules of Civil Procedure and the case law under that rule. He concluded that he was to be guided by section 54 of the Arbitration Act. I note that section 11 of the Arbitration Agreement states that the Arbitration is governed by the Arbitration Act.
59Based on the language of the Arbitration Agreement, it was open to the Arbitrator to interpret the Arbitration Agreement in the way that he did. The Appellants have not raised any error in principle or shown that the Arbitrator was plainly wrong on this point.
60Finally, even though it is not identified as a separate issue, the Appellants generally complain about the quantum of costs awarded to Wagema. They state that since Wagema did not have any exposure in the Arbitration and was a passive respondent who did not deliver a pleading, its costs are unreasonable.
61As pointed out by the Court of Appeal in Apotex Inc. v. Eli Lilly Canada Inc., 2022 ONCA 587 at para. 64, appellate intervention based solely on quantum is problematic because there is no meaningful way to determine when a number is too high. Thus, the amount of a costs award by itself does not mean that the award is unreasonable or reflect an error in principle.
62It is recognized in the case law that the decision-maker at first instance is in the best position to determine the quantum of any costs award. This is the case here. The Appellants’ arguments related to the limited role of Wagema in the Arbitration were addressed by the Arbitrator at paragraphs 18-23 of the Award. In these paragraphs, the Arbitrator discusses the claims made in the Arbitration that concerned Wagema, and he states that he has gone through Wagema’s bill of costs and dockets. His conclusion that the amount claimed by Wagema for fees in the amount of $48,380 plus HST was reasonable does not disclose any error in principle.
63I now turn to the portion of Wagema’s costs award that relates to the legal expenses paid to Gowling.
4. Costs for work done by Gowling pursuant to the Litigation Support Retainer
64At the hearing, the Appellants did not pursue their argument that Gowling’s Litigation Support Retainer was in breach of the duty of loyalty owed to them, but it is unclear whether the argument was formally withdrawn.
65In my view, the Arbitrator was correct in finding that he did not have jurisdiction to determine the issue of whether the Financing Retainer Agreement had been breached. As a result, the Arbitrator could not be asked to find a breach of the duty of loyalty in the context of his decision on the issue of the costs of the Arbitration. Further, and in any event, section 2.1.3 of the Financing Retainer Agreement specifically authorizes Gowling to continue to act for Wagema in any future engagements in the event of a conflict,2 and there is no evidence before me as to whether the Financing Retainer Agreement was ongoing (i.e., not concluded) at the time the Litigation Support Retainer started.
66I also note that the Appellants did not allege any breach of the duty of loyalty when they were advised of the nature of the work done by Gowling pursuant to the Litigation Support Retainer in April 2021.
67As for the Appellants’ complaints regarding the quantum of Gowling’s fees under the Litigation Support Retainer, the same comments made above regarding the Appellants’ complaint with respect to the quantum of costs of Wagema’s litigation counsel apply here. The Arbitrator was in the best position to determine the reasonableness of the fees charged by Gowling. The Arbitrator discusses the services provided by Gowling at paragraphs 22 and 36-39 of the Award. He concluded that the services were appropriate and the fees were reasonable. Again, his conclusion on this point does not disclose any error in principle.
68Finally, the Appellants complain that the Arbitrator did not address their argument that: (i) the costs paid pursuant to Gowling’s Litigation Support Retainer should have been Gowling’s costs as a litigant and were improperly diverted to Wagema, and (ii) such costs were not recoverable given the settlement between Gowling and the Appellants. These arguments were set out in the Appellants’ written costs submissions sent to the Arbitrator.
69In relation to this argument, the parties disagree regarding the scope of the claims and allegations made specifically against Gowling and the consequent scope of Gowling’s production obligations. The parties’ respective submissions on this point were also before the Arbitrator. I note that the parties agreed in the Arbitration Agreement to use Redfern document requests in lieu of affidavits of documents.
70I also note the following:
a. The amounts charged by Gowling pursuant to the Litigation Support Retainer did not include the fees paid by Gowling for its own counsel in the litigation (Lerners LLP).
b. When the Appellants and Gowling agreed to a without costs dismissal at the end of July 2021, the Appellants had known for more than four months that Gowling was doing litigation support work for Wagema and invoicing Wagema for that work.
c. Gowling was the repository of virtually all of Wagema’s relevant corporate records. Since Wagema was Gowling’s client with respect to these documents, the documents were within Wagema’s power or control for the purposes of production.
71In my view, the Arbitrator adequately addressed the Appellants’ argument with respect to Gowling’s status as a party/respondent. It is clear from the Award that the Arbitrator did not think that the work done by Gowling pursuant to the Litigation Support Retainer was work that Gowling would necessarily have had to do as a litigant because he found that if the work had not been done by Gowling, it would have had to be done by the law firms representing the Brothers or Wagema: see paragraph 22 of the Award. The Arbitrator also found in the same paragraph that the costs that Wagema would have had to incur had its counsel done that work under the applicable tight timeframe would have been far higher than the amount paid to Gowling. The Arbitrator concluded that in the circumstances of the Arbitration, the assistance provided by Gowling to Wagema and its litigation counsel to bring litigation counsel up to speed and to produce documents was an appropriate expense: see paragraphs 38 and 39 of the Award. Again, the Arbitrator was in the best position to make this factual determination. I cannot find any error in principle in this respect. The Arbitrator was not plainly wrong.
C. CONCLUSION
72The appeal is dismissed.
73If costs cannot be agreed upon, Wagema shall deliver submissions of not more than three pages (double-spaced), excluding the bill of costs, by January 10, 2024.3 The Appellants shall deliver their responding submissions (with the same page limit) by January 24, 2024. The submissions of all parties shall also be sent to my assistant by e-mail and uploaded onto CaseLines.
Vermette J.
Released: December 21, 2023
Footnotes
- I note that Electek was released four months after the Award.
- Section 2.1.3 of the Financing Retainer Agreement is specific to Wagema. In contrast, the sections of the Financing Retainer Agreement that were manually crossed out were general and did not identify any specific client. Based on interpretation principles, the specific provision would normally supersede the more general one.
- Gowling has agreed not to seek costs.