COURT OF APPEAL FOR ONTARIO

CITATION: Consolidated Contractors Group S.A.L. (Offshore) v.
    Ambatovy Minerals S.A., 2017 ONCA 939

DATE: 20171204

DOCKET: C63134

Strathy C.J.O., van Rensburg and Trotter JJ.A.

BETWEEN

Consolidated Contractors Group S.A.L. (Offshore)

Applicant
(Appellant)

and

Ambatovy Minerals S.A.

Respondent
(Respondent)

John A. Keefe, Brad Halfin and Jesse-Ross Cohen, for the
    appellant

Duncan W. Glaholt and Michael A. Valo, for the
    respondent

Heard: September 6, 2017

On appeal from the judgment of Justice Michael A. Penny
    of the Superior Court of Justice, dated November 28, 2016, with reasons
    reported at 2016 ONSC 7171.

Strathy C.J.O.:

[1]

The appellant challenged an international
    commercial arbitral award, arguing that portions of the award were made without
    jurisdiction, were made in breach of procedural fairness and violated public
    policy. The application judge dismissed the claim.

[2]

For the reasons that follow, I would dismiss the appeal. My reasons
    are structured as follows:
first
, I will describe the arbitration process and will summarize the
    parties claims;
second
, I
    will explain the grounds for judicial intervention in international arbitral awards
    under the United Nations Commission on International Trade Law (UNCITRAL) Model
    Law (the Model Law); and
third
, I will examine the appellants grounds of appeal, including, in
    each case, the nature of the claim, the standard of review, the Tribunals
    reasons, the application judges reasons for dismissing the claim, and my
    analysis and disposition of the ground.

A.

THE ARBITRATION

[3]

The
    arbitration arose out of a US$258 million project for the construction of a
    slurry pipeline from a nickel mine in the mountains of Madagascar to the coast.
    The appellant, (CCG), was the contractor and the respondent, (AMSA),
    tendered the project.

[4]

The
contract for the project contained a three stage dispute
    resolution process.
The first stage required disputes to be
    determined by the respondents supervising engineer. If the dispute was not
    resolved, it would be referred to adjudication by a sole adjudicator. A party
    who did not accept the adjudication could refer the dispute to arbitration
pursuant
    to the
International Commercial Arbitration Act
, R.S.O. 1990, c. I.9,
    which incorporates the Model Law.
In that event, the
    arbitration was to take place in Ontario, in accordance with Ontario law.

[5]

The contract provided that the arbitration
    procedure was to be governed by the International Chamber of Commerce (ICC) Rules
    of Arbitration. Article 23(1) of those Rules provides that the arbitration
    tribunal is required to draw up terms of reference setting out, among other
    things, the parties respective claims, the relief sought, the issues to be
    determined and the applicable procedure. The terms of reference must be signed
    by the tribunal and by the parties.

[6]

Terms of reference were duly prepared and signed.
    They described the procedural history of the dispute, summarized the claims,
    counterclaims and defences of the parties, and set out the issues.

[7]

The terms of reference also delineated the issues
    to be determined by the Tribunal. Section 89 provided:

The issues to be determined by the Arbitral
    Tribunal shall be those arising from the submissions, statements, pleadings,
    and applications of the Parties, provided that these are made in accordance
    with the directions of the Arbitral Tribunal, and include any questions of fact
    or law that the Arbitral Tribunal may deem necessary to decide, in its own
    discretion, in order to determine such issues and rule on the Parties
    respective requests for relief.

[8]

The
appellant claimed
that the respondent
    had breached the contract, causing delays and additional costs. It claimed
an extension of the time for performance by at least 294 days,
    compensation for its costs arising from delay, and compensation for additional
    work it claimed to have performed.

[9]

In accordance with the arbitration clause in the
    contract, the appellant had submitted its claims to the respondents engineer
    for determination. It disputed the engineers decision and proposed to refer
    the dispute to adjudication. The respondent suggested that the dispute go
    directly to arbitration, by-passing adjudication, and the appellant agreed.

[10]

The
    respondent defended the appellants claims and asserted a counterclaim
for
    liquidated damages due to the appellants failure to complete the project on
    time. It also counterclaimed for additional costs caused by the appellants
    failure to properly complete its work. The appellant agreed that the
    respondents claim for liquidated damages could proceed directly to
    arbitration, because a determination of the appellants claim for an extension
    of time would necessarily determine the respondents liquidated damages claim.

[11]

Although at various
    times the appellant proposed that the respondents other counterclaims should
    proceed directly to arbitration, the respondent equivocated. Ultimately, the
    respondent proposed to do so, but at this point the appellant balked. As is
    discussed below, this required the Tribunal to decide whether it could properly
    hear these counterclaims.

[12]

There were three
    arbitrators. Each party nominated one and the chair was appointed by the
    Chairman of the International Court of Arbitration of the ICC. The arbitrators
    were a blue chip international panel, with expertise in both commercial
    arbitration and mega-project construction disputes.

[13]

The arbitrators held a case management conference and issued several
    procedural orders. Pleadings were filed and witness statements and expert
    reports were delivered. An evidentiary hearing was held in Toronto between June
    3 and 20, 2014. Post-hearing memoranda were filed by the parties.

[14]

The Tribunal issued its final award on September 30, 2015. Its
    reasons were over 200 pages long and contained a detailed analysis of the appellants
    claims and the respondents counterclaims. It rejected most of the appellants
    claim for an extension of time and its claim for costs relating to the delay.
    It heard and adjudicated the respondents counterclaims.
At the end of
    the day, the appellant lost more than it won. It was awarded only $7 million of
    its $91 million claim. In contrast, the respondent was awarded nearly $25
    million for its counterclaims.

[15]

In
    the court below, the appellant challenged the Tribunals award in four broad
    respects:

(a)

the Tribunal had no jurisdiction to deal with some of the
    respondents counterclaims;

(b)
    the Tribunal failed to exercise its jurisdiction in not compensating the
    appellant for costs due to delays caused by the respondent;

(c)
    the Tribunal denied the appellant procedural fairness in its disposition of two
    claims and its award of costs; and

(d) part
    of the Award was made in breach of Ontario public policy.

[16]

The application judge
    dismissed these attacks and upheld the award in its entirety.

[17]

I turn to the relevant
    provisions of the Model Law and the grounds on which an international arbitral award
    may be set aside.

B.

JUDICIAL INTERVENTION UNDER the model law

[18]

The Model Law provides a standard process for the conduct of
    international commercial arbitrations. It covers all stages of the arbitral
    process, including the arbitration agreement, the composition and jurisdiction
    of the arbitral tribunal, the conduct of arbitral proceedings, the extent of
    court intervention in arbitral awards and the recognition and enforcement of
    awards. It has received broad international acceptance. In Ontario, it has been
    given the force of law by the
International Commercial Arbitration
    Act, 2017
, S.O. 2017, c. 2. Sched. 5, and by predecessor
    legislation. Federally, it has been enacted by the
Commercial
    Arbitration Act
, R.S.C. 1985, c. 17 (2nd Supp.).

[19]

Article 5 of the Model Law limits the scope of judicial oversight of
    international arbitral awards. It states:

In matters governed by this Law, no court
    shall intervene except where so provided in this Law.

[20]

Article 34 identifies the circumstances under which an international
    commercial arbitral award can be set aside by a domestic court. These grounds
    are narrow. They are: (a) incapacity of a party or legal invalidity of the
    agreement; (b) absence of notice or an opportunity to present the partys case
    (i.e. procedural unfairness); (c) absence of jurisdiction; (d) non-compliance
    with the arbitration agreement concerning the tribunals composition or
    procedure; (e) non-arbitrability of the dispute; and (f) a conflict between the
    award and domestic public policy.

[21]

The relevant provisions of Article 34 are as follows:

(2) An arbitral
    award may be set aside by the court specified in article 6 only if:

(a) the party
    making the application furnishes 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
    this State, or

(ii) the
    party making the application 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 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,
    only that part of the award which contains decisions on matters not submitted
    to arbitration may be set aside, or

(iv) the
    composition of the arbitral tribunal or the arbitral procedure was not in
    accordance with the agreement of the parties, unless such agreement was in
    conflict with a provision of this Law from which the parties cannot derogate,
    or, failing such agreement, was not in accordance with this Law; or

(b) the court
    finds that:

(i) the
    subject-matter of the dispute is not capable of settlement by arbitration under
    the law of this State, or

(ii) the
    award is in conflict with the public policy of this State.

[22]

The main focus of this appeal is the application of the grounds for
    intervention under Article 34.

[23]

The appellant concedes that, as a matter of principle, a reviewing
    court cannot set aside an international arbitral award simply because it
    believes that the arbitral tribunal wrongly decided a point of fact or law: see
Quintette Coal Ltd. v. Nippon Steel Corp.
(1990), 47 B.C.L.R. (2d) 201 (S.C.), affd [1991] 1 W.W.R. 219 (B.C.C.A.),
    leave to appeal refused, [1990] S.C.C.A. No. 431;
Corporacion
    Transnacional de Inversiones S.A. de C.V. v. STET International S.p.A.

(1999)
,
45 O.R. (3d) 183 (S.C.), affd (2000),
    49 O.R. (3d) 414 (C.A.), leave to appeal to refused, [2000] S.C.C.A. No. 581.

[24]

Moreover, this court has repeatedly held that reviewing courts
    should accord a high degree of deference to the awards of international
    arbitral tribunals under the Model Law: see
United Mexican States v.
    Cargill Inc.
,
2011 ONCA 622, 107 O.R. (3d) 528, at para.
    33
;
United Mexican States v. Karpa
(2005), 74
    O.R. (3d) 180 (C.A.), at paras. 34-37.

[25]

The standard to be applied by a reviewing court depends on the
    specific Model Law grounds on which the appeal is based. In this case, the
    appellant alleges that the application judge applied the wrong legal test under
    Article 34(2)(a)(iii) (jurisdiction), Article 34(2)(a)(ii) (procedural
    fairness), and Article 34(2)(b)(ii) (public policy). The appellant also argues
    that the application judge erred in his interpretation of the discretion
    available to the court to refuse to set aside an award under Article 34.

[26]

Each
    of these three grounds is discussed below.

C.

ANALYSIS OF THE APPELLANTS CLAIMS

[27]

The appellants claims
    can be grouped according to the provisions of Article 34(2) that they invoke.

(1)

Claims under Article 34(2)(a)(iii): Jurisdiction

[28]

Under Article 34(2)(a)(iii), the court may set aside an arbitral
    award, or part thereof, where the tribunal acts without jurisdiction by dealing
    with a dispute
not contemplated by or not
    falling within the terms of the submission to arbitration.

[29]

The standard of review on questions related to a tribunals
    jurisdiction under Article 34(2)(a)(iii) is one of correctness:
Cargill
, at para. 42. However, while endorsing a correctness standard in
Cargill
, Feldman J.A. was careful to limit the application of this standard
    to what she described as a true question of jurisdiction, at para. 44:

It is important, however, to remember that the fact that the
    standard of review on jurisdictional questions is correctness does not give the
    courts a broad scope for intervention in the decisions of international
    arbitral tribunals. To the contrary, courts are expected to intervene only in
    rare circumstances where there is a true question of jurisdiction.

[30]

After noting that in
    the domestic context courts are required to take a narrow view of what
    constitutes a question of jurisdiction (see
Dunsmuir v. New Brunswick
,
    2008 SCC 9, [2008] 1 S.C.R. 190, at para. 59;
Quebec (Attorney General) v.
    Guerin
, 2017 SCC 42, 412 D.L.R. (4th) 103, at para. 32), she continued, at
    paras. 46-7:

This latter approach is magnified in the international
    arbitration context. Courts are warned to limit themselves in the strictest
    terms to intervene only rarely in decisions made by consensual, expert,
    international arbitration tribunals, including on issues of jurisdiction. In my
    view, the principle underlying the concept of a "powerful
    presumption" is that courts will intervene rarely because their
    intervention is limited to true jurisdictional errors

Therefore, courts are to be circumspect in their approach to
    determining whether an error alleged under Article 34(2)(a)(iii) properly falls
    within that provision and is a true question of jurisdiction. They are obliged
    to take a narrow view of the extent of any such question. And when they do
    identify such an issue, they are to carefully limit the issue they address to
    ensure that they do not, advertently or inadvertently, stray into the merits of
    the question that was decided by the tribunal.

[31]

Feldman J.A. then explained the proper approach for a reviewing
    court to take in hearing a case invoking Article 34(2)(a)(iii), at para. 53:

The role of the reviewing court is to identify and narrowly
    define any true question of jurisdiction. The onus is on the party that
    challenges the award. Where the court is satisfied that there is an identified
    true question of jurisdiction, the tribunal had to be correct in its assumption
    of jurisdiction to decide the particular question it accepted and it is up to
    the court to determine whether it was. In assessing whether the tribunal
    exceeded the scope of the terms of jurisdiction, the court is to avoid a review
    of the merits.

[32]

She suggested, by way of example, that an award would be subject to
    attack under Article 34(2)(a)(iii) as a true error of jurisdiction where the
    tribunal decides a matter outside of its geographic or temporal jurisdiction:
    see
Cargill
,
at para. 49.

[33]

I turn now to the two jurisdictional claims raised on appeal.

(a)

Jurisdiction over Counterclaims

[34]

The appellant initiated the arbitration with the respondents
    agreement that the appellants claims need not go through the pre-arbitration
    adjudication process. The respondent in turn advanced counterclaims. Ultimately,
    after twice suggesting that the respondents counterclaims should be addressed
    in the arbitration, the appellant objected to the counterclaims (other than the
    liquidated damages claim) proceeding to arbitration because they had not gone
    through the dispute resolution process outlined in the project contract.

[35]

The respondents counterclaims were fully pleaded and defended in
    the arbitration. Evidence was adduced by both parties on the substance of the
    claims. There was full argument on the counterclaims. It was left to the
    Tribunal to determine whether it had jurisdiction to address them.

[36]

The Tribunal ultimately concluded that it had jurisdiction to address
    the counterclaims.

[37]

As a prelude to its discussion, the Tribunal noted the respondent
    claimed an entitlement to set off the amounts of its counterclaims against any
    amounts found owing to the appellant. The Tribunal considered this proposition
    seemingly uncontroversial, although it was not accepted by the appellant.

[38]

The Tribunal found that the parties to a complex construction
    contract may be presumed, when making it, to agree that any disputes that may
    arise will be resolved in an efficient manner. This intention was reflected, it
    said, in the parties agreement that the appellants claims could go directly
    to arbitration, by-passing adjudication if they could not be determined by the
    respondents engineer or by negotiation.

[39]

It concluded that the parties agreement reflected a common
    intention that disputes would be dealt with at the same time by the same
    tribunal when there was sufficient connection between the disputes to enable
    them to be dealt with efficiently. The parties were in agreement, it found, that
    it would not be necessary for one party to submit to prior adjudication of a
    claim that was so connected to a claim of the other party that the two claims
    should be determined at the same time. This applied to the respondents counterclaims.

[40]

The application judge rejected the appellants submission that the
    Tribunal exceeded its jurisdiction in considering the counterclaims. In so
    doing, he noted that the appellant had full knowledge of the substance of those
    claims, had exercised a right to make a full and comprehensive defence to those
    claims and there was no evidence to suggest that the result would have been
    different had the claims gone through the pre-arbitration process.

[41]

He found, at para. 28, that the terms of reference signed by the
    parties and the arbitrators expressly gave the Tribunal jurisdiction to
    determine any questions of fact or law that [it] may deem necessary to decide,
in its own discretion
, in order to determine such
    issues and rule on the
Parties respective
    requests for relief
 (emphasis added).

[42]

He noted the Tribunals conclusion that two arbitrations, one on the
    appellants claims and some of the respondents counterclaims and the other on
    the respondents remaining counterclaims, would have made no sense and could
    not reasonably have been in the contemplation of the parties. The Tribunals
    mandate included everything closely connected to the matters subject to
    arbitration:
Desputeaux v. Éditions Chouette (1987) inc.
, 2003 SCC 17, [2003] 1 S.C.R. 178, at para. 35. There was ample
    evidence on which the Tribunal could reach the decision it did.

[43]

The application judge also found, at para. 33, that the
    pre-arbitration dispute resolution steps were not true conditions precedent to
    the Tribunals jurisdiction, noting that [i]t [was] accepted that the [counterclaims]
    were always going to be arbitrated under the Agreement; the only issue was
    when. He concluded, at para. 35, that [p]rocedural issues relating to the
    conduct of the arbitration are preeminently matters for the arbitrators to
    decide and the court must view the determination with deference (citations
    omitted).

[44]

On this appeal, the appellant submits that the Tribunals
    jurisdiction was purely consensual and that the parties never consented to the
    counterclaims being arbitrated. They had not gone through the contractual
    dispute resolution procedure that was a pre-condition to arbitration. The
    Tribunal recognized that its jurisdiction rested solely on consent, but erred
    in finding consent. There was never a meeting of minds on the issue.

[45]

The appellant says that it is irrelevant that the issues were fully
    pleaded before the Tribunal, that a complete evidentiary record was developed
    and full argument was made. There was simply no consent to jurisdiction, and
    that portion of the award should be set aside pursuant to Article 34(a)(iii) of
    the Model Law.

[46]

I would reject this submission. Article 34(2)(a)(iii) requires the
    court to consider whether the award deals with a dispute not contemplated by
    or not falling within the terms of the submission to arbitration, or contains
    decisions on matters beyond the scope of the submission to arbitration. To
    answer this question, I must have regard to the contractual provisions with
    respect to arbitration, the submission to arbitration, the agreed terms of
    reference of the arbitrators and the arbitral award.

[47]

I have summarized the relevant contractual terms. The terms of
    reference set out at length the claims, defences and positions of the parties.
    The respondent asserted its counterclaims and the appellant advanced its
    argument that the respondent had failed to comply with the mandatory
    pre-arbitration dispute resolutions steps specified in the Contract for each of
    its counterclaims and/or claims of set-off. It said that [s]uch compliance is
    a condition of admissibility. In addition to taking this position, the
    appellant set out its defences to the counterclaims and to the claims for set-off.

[48]

The terms of reference conferred jurisdiction on the Tribunal to
    decide questions of fact and law necessary to determine the issues and to rule
    on the parties requests for relief.

[49]

The Tribunal had intimate familiarity with the conduct and
    communications between the parties leading up to and after the commencement of
    the arbitration. It was also immersed in their claims and counterclaims. It found
    that a claim that was so connected to a claim of the other party that it
    should be decided at the same time could proceed to arbitration without
    passing through the contractual dispute resolution process.

[50]

It came to this conclusion based on a review of the contract, the
    communications between the parties and their conduct, both before and after the
    initiation of the arbitration. The parties conduct reflected a common
    intention that disputes would be resolved in an efficient manner.

[51]

As the application judge said, at para. 31:

CCG argues that failure to follow the pre-arbitration steps
    with respect to the counterclaims deprived it of the opportunity to settle
    those claims or, perhaps, to conduct a separate arbitration. That issue was
    addressed squarely by the Tribunal. It decided that two arbitrations, one on
    CCG's claims and some of AMSA's counterclaims, and another on AMSA's remaining
    counterclaims, would have made no sense and could not reasonably have been in
    the contemplation of the parties.

[52]

The issue before the Tribunal was not a true question of
    jurisdiction in the sense used by Feldman J.A. in
Cargill
.
The respondents counterclaims were clearly the proper subject of
    arbitration under the contract. The only question, as noted by the application
    judge, was when they would be arbitrated. It was open to the Tribunal to find
    that the pre-arbitration dispute resolution process did not apply to claims of
    one party that were closely connected to the claims already submitted to
    arbitration by the other party.

[53]

This is not to say that every dispute submitted to arbitration will
    necessarily draw in counterclaims. It will depend, as in this case, on the
    contractual intention of the parties as determined by all the surrounding
    circumstances. Nor will it permit a party initiating an arbitration to
    completely ignore pre-arbitration dispute resolution requirements:
Emirates
    Trading Agency LLC v. Prime Mineral Exports Pte. Limited
,
    [2014] EWHC 2104 (Comm.), [2015] 1 W.L.R. 1145.

[54]

The Tribunals decision to determine this issue was not a true
    question of jurisdiction. Consequently, it is not reviewable under Article 34
    and I would decline to set aside the award on this basis.

[55]

I would also reject the appellants submission, advanced in the
    court below and in its factum, that it was denied procedural fairness under
    Article 34(2)(a)(ii) because the Tribunal developed its own novel theory of
    an implied agreement without notice to the parties. The Tribunal did not
    develop a novel theory. It simply made findings of fact concerning the
    parties intentions, having regard to all the surrounding circumstances, all of
    which were raised by the parties in their submissions.

(b)

Prolongation
    Costs

[56]

I turn to the appellants second claim under Article 34(2)(a)(iii).

[57]

The appellant sought a 36-day extension of time and US$482,480 for
    costs allegedly due to delays caused by the respondents failure to deliver
    materials and failure to complete work required to enable the appellant to complete
    its own work on the pipeline. The respondent argued that the appellant had not
    proven that it had incurred any additional costs as a result of the delay.

[58]

The Tribunal granted an 18-day extension, resulting in a
    corresponding reduction of the respondents claim for liquidated damages. But
    it did not specifically address the appellants claim for damages caused by the
    delay, other than in its summary of its award. There, the Tribunal awarded
    nil for the appellants claim for costs incurred as a result of this and
    other alleged delays. It gave no reasons for dismissing the appellants claim
    under this head.

[59]

The appellant submits that in so doing, the Tribunal committed a
    jurisdictional error and denied it procedural fairness by failing to address an
    issue put before it.

[60]

The application judge dismissed this claim. He found that, although
    the Tribunals reasoning was not explicit, it could reasonably be inferred that
    the Tribunal found that the appellant had not proven that it had incurred
    additional costs due to the delay. He noted, at para. 49, that in proceedings
    under the Model Law, the failure to give reasons, although less helpful to the
    parties, is not on its own a ground for refusing to enforce an award, citing
Schreter
    v. Gasmac Inc.
(1992), 7 O.R. (3d) 608, at p. 621 (Gen. Div.).

[61]

He also referred to cases in other jurisdictions where it has been
    held that the failure to give reasons, as opposed to a failure to deal with an
    issue, does not invalidate the award, specifically
Margulead Ltd. v.
    Exide Technologies
, [2004] EWHC 1019 (Comm.), and a
    decision of the Federal Supreme Court of Switzerland, Swiss Fed. Court, 26 May
    2010, 4A-433/2009. He found that in this case, there was evidence, and
    argument joined before the Tribunal to support its decision.

[62]

I
    need not address the question of whether the failure to deal with a claim
    justifies setting aside an award under Article 34(2)(a)(iii), because
I agree with the application judge that the Tribunal dealt with the
    prolongation costs claim. There is nothing in the Model Law that requires the
    Tribunal to give reasons, although it is unquestionably desirable that it do
    so. The
reasonable conclusion from the award, in the context
    of the submissions at the hearing, is that the Tribunal accepted the
    respondents argument that the appellant had failed to meet its burden of proof
    by identifying additional costs actually incurred as a result of the delay as
    opposed to per diem costs that would have been incurred in any event. I would
    therefore dismiss this ground of appeal.

(2)

Claims under Article 34(2)(a)(ii): Procedural Fairness

[63]

As noted above, Article 34(2)(a)(ii) permits a challenge to an arbitral
    award based on procedural unfairness  where a party has not received proper
    notice of the proceedings or was otherwise unable to present his case.

[64]

In responding to the appellants submissions under this provision,
    the respondent cites Michael J. Mustill & Stewart C. Boyd
,
The
    Law and Practice of Commercial Arbitration in England
, 2nd
    ed. (London: Butterworths, 1989), at p. 550, cited in J. Casey,
Arbitration
    Law of Canada: Practice and Procedure
, 2nd ed. (New York:
    Juris, 2011), at p. 420, for the proposition that before a court can set aside
    an award under Article 34(2)(a)(ii), there must be such a mishandling of the
    arbitration as to likely amount to some substantial miscarriage of justice.

[65]

There are few cases in Canada addressing the standard of review under
    Article 34(2)(a)(ii). However, in
Corporacion Transnacional de Inversiones
    S.A. de C.V. v. STET International S.p.A.
,
Lax J.
    interpreted Article 34(2)(a)(ii) as including procedural as well as substantive
    fairness. She held, at p. 194, that to justify setting aside an award for
    reasons of fairness or natural justice, the conduct of the Tribunal must be
    sufficiently serious to offend our most basic notions of morality and justice.
    Thus, she concluded, at p. 194, that 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
    the law of the enforcing State.

[66]

The appellant had proper notice of the proceedings and participated
    in the arbitration from the outset. It submits, however, that it was denied
    procedural fairness in relation to three claims, to which I now turn.

(a)

Retention
    Monies

[67]

Under the project
    contract, the respondent made regular progress payments to the appellant as
    construction proceeded. The respondent was contractually entitled to retain 5%
    of the amount of each of these interim progress payments (the money retained
    being referred to as retention monies). In total, the respondent retained
    $10,882,774.

[68]

The first half of the retention
    monies was to be paid out by the respondents engineer when a Taking-Over
    Certificate was issued for the works. The remaining half was to be released on
    the expiry of the Defects Notification Period.

[69]

The appellant argued
    that the respondent was required to release the retention monies on the dates
    in question. The respondent disagreed. It said that the contract permitted it
    to withhold certification of the estimated cost of correcting the appellants
    defective work until the defect had been cured, and that it was entitled to
    withhold the retention monies until that occurred.

[70]

With respect to the
    first half of the retention monies, the Tribunal found that the Engineer had acted
    reasonably in not releasing those monies, given the extent of the appellants
    defective work.

[71]

Additionally, the Tribunal
    found that the expiry of the Defects Notification Period (which triggered the
    payment of the second half of the retention monies) should be extended, because
    the appellant had failed to properly perform the contract. In fact, the period
    was continuing. Thus, the respondent was not yet liable to the appellant for
    the second half of the retention monies. However, once the appellant met its
    liability to the respondent for the costs of putting right its defective work,
    the respondent would be required to pay the retention monies to the appellant.

[72]

Before the application
    judge, the appellant argued that it had been denied procedural fairness and had
    been unable to present its case because the Tribunal had developed its own
    theory to deny the appellant payment of the retention monies. It argued that
    the Tribunal also relied on a new argument raised by the respondent for the
    first time in reply, contrary to the Tribunals own procedural order.

[73]

The application judge
    rejected this argument. He noted that the provisions requiring repayment of the
    retention monies were subject to a proviso that if anything remained to be done
    by the appellant under its obligation to repair or pay for the repair of
    defective work, the Engineer was entitled to withhold certification of payment
    of the retention monies until the remedial work was done.

[74]

The respondents
    counterclaims formed the basis of the Tribunals conclusion that the appellant
    had legal and financial responsibility for its defective work, and the contract
    permitted the withholding of the retention monies until the defects were
    remedied. The application judge found that the appellants arguments were in
    substance less concerned with procedural fairness and more about the fact that
    the appellant disagreed with the outcome.

[75]

On appeal, the
    appellant again asserts that the Tribunal breached its own procedural order and
    denied the appellant procedural fairness by disposing of its claims based
    solely on the respondents reply submissions, to which it had no opportunity to
    reply. It says that instead of considering the procedural fairness issue, the
    application judge became unduly absorbed in the merits.

[76]

I disagree. The
    application judge was fully attuned to the procedural fairness issue. But he
    made a perfectly valid observation, at para. 81, concerning, the difficulty of
    isolating a single alleged procedural defect in the treatment of one out of
    many issues in a complex and lengthy arbitration. He found that the retention
    monies issue was bound up in the appellants liability for the respondents
    counterclaims and the ability of the respondents engineer to refuse payment of
    the retention monies when there were unsatisfied defect claims. These issues
    were thoroughly aired in the course of argument before the Tribunal and, as the
    application judge noted, the Tribunal was not required to ignore its other
    findings, or the evidence on the other issues, in addressing the issue of
    retention monies. It was also entitled to consider all the terms of the parties
    contract, which were plainly put on the table by the parties.

[77]

I agree with the
    application judge that the appellants arguments on this issue are an attempt
    to re-argue the merits of the case. The Tribunal relied on a contractual term
    that permitted the respondent to withhold the retention monies until the
    appellant cured the defects in its work. The appellant was aware of this
    provision and addressed it in its submissions to the Tribunal. The appellant
    was therefore not prevented from presenting its case on this issue. Nor could
    the appellant have been surprised by the Tribunal relying on a contractual
    provision that it had addressed in its own submission.

(b)

Hydro Seeding

[78]

This was a claim by
    the respondent for US$7.64 million for the cost of re-doing defective
    restoration work (topsoil and seeding) over the completed pipeline. The
    contract required the respondent to give notice of its complaint to the appellant
    and give it an opportunity to remedy the defective work.

[79]

The appellant argued
    before the Tribunal that the respondent was not entitled to assert this claim
    because it had gone ahead and performed the work without giving the appellant
    proper notice and an opportunity to correct the problem.

[80]

The Tribunal found
    otherwise. In a passage referred to by the application judge, the Tribunal
    found that although the respondent had not observed the contractual niceties,
    the evidence established that the appellant had accepted and almost acquiesced
    in the respondents use of another contractor to redo the appellants work. The
    Tribunal went on to say that [a]lthough neither party followed contractual
    procedures to the letter, it was satisfied that the respondent was entitled to
    recover its costs. The documents established that the appellant had been warned
    about its work, had been requested to do better and had not done so.

[81]

Before the application
    judge and in this court, the appellant claimed that in resolving this issue
    against it, the Tribunal developed its own novel theory of constructive
    notice and denied procedural fairness by failing to give notice of that theory
    and an opportunity to respond to it.

[82]

I agree with the
    respondents submission that this argument is essentially a complaint about
    arbitral fact-finding, under the guise of a procedural fairness argument. The
    application judge said as much, at paras. 99 to 100 of his reasons:

CCG's argument seems to me to be an undiluted attempt to
    re-argue this issue on the merits. The parties filed extensive evidence on the
    relevant meetings and documents. CCG's selective quoting from the Award ignores
    the depth, detail and nuance of the analysis undertaken by the Tribunal

Once again, CCG's own submission emphasizes the fact that CCG's
    position throughout the arbitration was that AMSA retained Hydromulch to seed
    over CCG's work
without providing notice to CCG as required under the
    Agreement.
Issue was joined; CCG presented its evidence and arguments.
    There was no failure to afford CCG the opportunity to put its case before the
    Tribunal. Indeed, CCG admits that it did so. CCG's argument boils down to the
    assertion that the Tribunal got it wrong on the facts. That is not an argument
    falling within the purview of Article 34 of the Model Law. [Emphasis in
    original.]

[83]

In my view, the application judge was correct to reject the
    appellants submission, for the reasons he gave.

(c)

Costs

[84]

Although success was somewhat divided, the Tribunal concluded that
    the respondent should be regarded as the successful party and was entitled to
    recover the costs of the arbitration. It awarded the respondent costs of
    approximately $9.8 million plus $590,000 for its share of ICC administrative
    expenses and of the arbitrators fees and expenses.

[85]

Before the application judge, the appellant argued that the costs
    award was the result of a denial of natural justice, deprived the appellant of
    a fair opportunity to present its case, and also violated public policy contrary
    to Article 34(2)(b)(ii). It pointed out that before the Tribunal, both parties
    had argued that the costs of the arbitration should be in proportion to each
    partys degree of success. The resulting award, it said, was inconsistent with
    the parties submissions, failed to give it any credit for its success and
    failed to give it a fair opportunity to present its case.

[86]

The application judge rejected these arguments. He found that the
    Tribunals disposition of costs did not deprive the appellant of an opportunity
    to present its case. The Tribunal found that the overwhelming expenditure on
    both sides had been incurred in relation to the appellants main claims, in
    which it was largely unsuccessful, and the respondents counterclaims, in which
    the respondent was largely successful. The Tribunals finding that the
    respondent was to be regarded as the winning party did not result in the
    respondent getting more than it asked for.

[87]

I agree with the application judges conclusion on this issue. The
    ICC Rules of Arbitration give the Tribunal discretion with respect to costs. Article
    37(5) of those Rules (now Article 38(5)) states that [i]n making decisions as
    to costs, the arbitral tribunal may take into account such circumstances as it
    considers relevant, including the extent to which each party has conducted the
    arbitration in an expeditious and cost-effective manner. The Tribunal also referred
    to J. Fry, S. Greenberg & F. Mazza,
The Secretariats Guide to
    ICC Arbitration

(ICC Publication 729E) (Paris:
    International Chamber of Commerce, 2012). That publication suggests some
    factors that arbitral tribunals may wish to consider in allocating costs,
    including (a) the outcome of the case; (b) that some tribunals may adopt a
    proportional approach allocating the costs in accordance with the parties
    degree of success; (c) the extent to which each party has conducted the
    arbitration in an expeditious and cost-effective manner; and (d) conduct of a
    party which might abuse the procedure, cause delay or increase expense.

[88]

While it is true that the Tribunal initially noted the parties
    proposal that costs should be proportionate, it concluded that the appellant
    had succeeded on only four claims, only two of which required evidence. The
    respondent, on the other hand, had succeeded in defeating all the appellants
    main claims and also succeeded on its counterclaims.

[89]

The costs were within the discretion of the Tribunal. It was
    entitled to consider which party was substantially the winner and to award
    costs to that party alone.
The appellant has not demonstrated that it
    was prevented from presenting its case with respect to costs or that this
    decision was the result of any error in principle.

(3)

Claim under Article 34(2)(b)(ii): Public Policy

[90]

The appellant claimed that a portion of the Tribunals award
    offended public policy because it was a penalty. The following are the
    circumstances.

[91]

The contract was for a lump sum price of $258 million, divided into
    a base lump sum of $249 million and two tranche payments: (a) one for $5
    million, payable to the appellant on achieving construction completion by
    December 31, 2009; (b) the other for $4 million, payable to the appellant on achieving
    mechanical completion by March 31, 2010. The payment was to be forfeited if the
    relevant completion date was not met.

[92]

Neither of the tranche payment dates were met. The Tribunal found
    that the appellant forfeited both tranche payments.

[93]

The contract also provided that if mechanical completion was not
    achieved prior to March 31, 2010, the respondent was entitled to liquidated
    damages. The Tribunal found that the respondent was entitled to 276 days of
    liquidated damages (after subtracting the 18-day extension awarded to the appellant).
    It found that the tranche payments were unearned bonus or incentive payments
    and, therefore, had no bearing on the liquidated damages.

[94]

The Tribunal rejected the appellants arguments that the respondent
    was unjustly enriched by the forfeiture of the tranche payments and the
    recovery of liquidated damages. The forfeiture of the tranche payment bonuses
    was pursuant to a contractual right that the respondent was entitled to
    exercise and there was nothing unconscionable about the result.

[95]

The Tribunal also found that the tranche payments were not penalties
    for breach of contract; they were payments for compliance with the contract.
    The law of penalties was therefore inapplicable.

[96]

Before the application judge, the appellant argued that the award
    resulted in double recovery. The respondent was compensated twice for the delay
     once by the forfeiture of the tranche payments and again by the award of
    liquidated damages. This, it said, offended Ontario public policy.

[97]

The application judge rejected this submission. He noted the high
    threshold to set aside an arbitral award as contrary to public policy. He held,
    at para. 146, that to be set aside, an award must fundamentally offend the
    most basic and explicit principles of justice and fairness in Ontario or
    evidence intolerable ignorance or corruption on the part of the arbitral
    tribunal.

[98]

The application judge agreed with the Tribunals analysis. The
    liquidated damages and the forfeiture of the tranche payments performed
    different functions and achieved separate ends. The fact that both were
    triggered by the same or similar events did not mean there was double recovery.

[99]

The court may set aside an arbitral award under Article 34(2)(b)(ii)
    if it is in conflict with the public policy of the state. The leading statement
    of Ontario law under this provision is found in
Schreter v. Gasmac
    Inc.
, at p. 623:

The concept of imposing our public policy on foreign awards is
    to guard against enforcement of an award
which offends
    our local principles of justice and fairness in a fundamental way
, and
    in a way which the parties could attribute to the fact that the award was made
    in another jurisdiction where the procedural or substantive rules diverge
    markedly from our own, or where there was ignorance or corruption on the part
    of the tribunal which could not be seen to be tolerated or condoned by our
    courts. [Emphasis added.]

[100]

This statement was cited with approval by this court in
Corporacion
    Transnacional de Inversiones S.A. de C.V. v. STET International S.p.A.

(2000), 49 O.R. (3d) 414 (C.A.), at para. 2,
and in
United Mexican States v. Karpa
, at para. 66.

[101]

Suffice to say that I respectfully agree with the application judge
    for the reason he gave. The Tribunals award does not come close to meeting the
    test.

(4)

Discretion under Article 34

[102]

Although the application judge dismissed the application in all
    respects, he went on to consider whether, had he found grounds to set aside the
    award, he would have exercised the discretion, conferred by Article 34(2), not
    to do so. He correctly identified this courts decision in
Popack v.
    Lipszyc
, 2016 ONCA 135, 129 O.R. (3d) 321,

as the governing authority.

[103]

The application judges reasons on this issue are
obiter
and, in my view, it is unnecessary to address the issue.

D.

DISPOSITION

[104]

For the foregoing reasons, I would dismiss the appeal, with costs
    fixed at $100,000, inclusive of disbursements and all applicable taxes.

Released: GS  DEC 04 2017

George R. Strathy
    C.J.O.

I agree. K. van
    Rensburg J.A.

I agree. G.T. Trotter
    J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Dashti v. Moghimi, 2017 ONCA 1018

DATE: 20171222

DOCKET: C62150

Laskin, Miller and Paciocco JJ.A.

BETWEEN

Ebrahim Dashti

Appellant

and

Yalda Moghimi

Respondent

Veena Pohani, for the appellant

Joel Etienne and Naila Waheed, for the respondent

Heard and released orally: December 20, 2017

On appeal from judgment of Justice Backhouse of the Superior
    Court of Justice, dated April 19, 2016.

REASONS FOR DECISION

[1]

Over most of the course of their four year marriage the parties lived in
    a Toronto condominium. The respondent wife sought an equalization payment for
    her interest in this matrimonial home. The appellant husband took the position
    that the condominium was beneficially owned by his father under a declaration
    of trust, and that a $300,000 second mortgage the appellant gave to his parents
    was valid.

[2]

In lengthy and thorough reasons the trial judge rejected the appellants
    position. She found that both the declaration of trust and the second mortgage
    were shams. She also rejected an unequal division of property under s. 5(6) of
    the
Family Law Act
, and she awarded the respondent an equalization
    payment of $100,500.

[3]

On appeal the appellant makes two submissions: first, the trial judge
    erred in failing to find that the declaration of trust and mortgage were valid;
    second, in the alternative, the trial judge should have awarded the respondent
    an unequal division amounting to $50,000. We decline to give effect to either
    submission.

[4]

The appellants submissions run up against the trial judges credibility
    findings and her detailed reasons for finding that the two documents were shams,
    designed to defeat the respondents interest in the matrimonial home.

[5]

The trial judge assessed the credibility of each of the main
    participants. She found the respondent credible and the appellant, his father
    and the real estate agent not credible. We have no basis to interfere with the
    trial judges credibility findings. In addition to her credibility findings,
    the trial judge gave detailed reasons why she found both the declaration of trust
    and the second mortgage to be sham documents. Again, we have no basis to
    interfere with her findings, which are entitled to deference in this court.

[6]

Finally, the trial judge gave specific reasons for rejecting an unequal
    division of property under s. 5(6) of the
Family Law Act
. That finding,
    too, is entitled to appellate deference.

[7]

Accordingly the appeal is dismissed with costs to the respondent in the
    amount of $15,000 all inclusive.

John
    Laskin J.A.

B.W.
    Miller J.A.

David
    M. Paciocco J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: DHMK Properties Inc. v. 2296608 Ontario Inc., 2017
    ONCA 961 DATE: 20171207

DOCKET: C63805

Rouleau, Benotto and Roberts JJ.A.

BETWEEN

DHMK Properties Inc.

Respondent

and

2296608 Ontario Inc. and Mund Real Estate Group Inc.

Appellants

Michael A. Katzman and Jessica R. Hewlett, for the
    appellants

Geoffrey D.E. Adair, Q.C., and Gordon McGuire, for the
    respondent

Heard: November 28, 2017

On appeal from the judgment of Justice Paul Perell, dated
    April 20, 2017, with reasons reported at 2017 ONSC 2432.

REASONS FOR DECISION

[1]

The appellants appeal from the judgment granted in favour of the
    respondent, DHMK Properties Inc., following a motion for summary judgment on the
    issue of damages.

[2]

Effective January 30, 2013, the appellant, Mund Real Estate Group Inc.,
    entered into an agreement of purchase and sale with DHMK to purchase DHMKs
    commercial property for the amount of $5,300,000. The agreement provided for
    the following warranty in paragraph 2:  The Vendor warrants that the reports
    of revenue and operating expenses to be given to the purchaser are true and
    correct in all respects, and the property will have a net cash flow prior to
    debt service (the Net Income) of not less than $441,925.00. The agreement
    also permitted Mund to conduct due diligence inquiries and to terminate the
    agreement by the Notice Date, which the parties subsequently agreed was June
    13, 2013. The transaction was scheduled to close at the end of June 2013.

[3]

Mund did not terminate the agreement before the notice date. Instead,
    Mund took the position that it would only close the transaction with a substantial
    abatement of the purchase price, alleging that the net income from the property
    was materially less than the amount warranted in the agreement. DHMK did not
    agree to close the transaction on this basis.

[4]

Mund brought an application for specific performance of the agreement
    with an abatement of the purchase price. In response, DHMK instigated an
    application for damages incurred as a result of the failed transaction.

[5]

The applications were heard by Justice Brian OMarra who found that Mund
    had breached the agreement of purchase and sale by failing to close without the
    abatement of the purchase price, stating that Mund had the option of either
    terminating the agreement by the notice date or closing and suing on the
    warranty. He ordered the forfeiture to DHMK of Munds $100,000 deposit, costs,
    and an assessment of the issue of DHMKs damages from the failed transaction.

[6]

The appellants abandoned their appeal from OMarra J.s judgment in
    August 2014.

[7]

The assessment of damages was heard by the motion judge. He found that
    the damages were the difference between the agreed upon price of the contract
    ($5.3 million) and market value of the land in August 2014 ($4.27 million). He
    did not discount the $5.3 million for the vendors potential liability under
    the warranty. Nor did he explain why he chose August 2014  the date the appeal
    from OMarra J. was abandoned  as opposed to the date of closing.

[8]

With respect to the damages assessment, the appellants raise several
    grounds of appeal.
[1]
However, to dispose of this appeal, it is necessary to address only the
    following:

i. The failure to take into
    account the effect of DHMKs warranty of the net income from the property when
    calculating DHMKs loss of bargain from the failed transaction;

ii. The choice of August
    2014, without reasons or analysis, as the date for the valuation of the
    property for the purpose of calculating DHMKs loss of bargain.

[9]

It is common ground that in assessing DHMKs damages arising from Munds
    breach of the agreement of purchase and sale, DHMK is entitled to be put, as
    far as damages permit, into the same economic position that it would have
    occupied had the transaction closed, subject to DHMKs duty to mitigate its
    damages:
Bank of America Canada v. Mutual Trust Co.
, 2002 SCC 43, [2002]
    2 SCR 601, at para. 26;
Dasham Carriers Inc. v. Gerlach
, 2013 ONCA
    707, at para. 29, 38 R.P.R. (5th) 183;
Asamera Oil Corporation Ltd. v. Sea
    Oil & General Corporation et al.
, [1979] 1 S.C.R. 633;
100 Main
    Street Ltd. v. W.B. Sullivan Construction
(1978), 20 O.R. (2d) 401 (C.A.),
    at p. 415. Although correctly referencing this principle at para. 47 of his
    reasons, the motion judge erred in failing to apply it.

[10]

Specifically,
    the motion judge erred by finding that because Mund breached the agreement, Munds
    potential claim for damages for DHMKs breach of warranty need not be
    considered. Notwithstanding Munds repudiation of the agreement, DHMKs
    prospective warranty obligations as embodied in the agreement are relevant, and
    are to be taken into account in the assessment of damages:
Keneric Tractor
    Sales Ltd. v. Langille
, [1987] 2 S.C.R. 440,  at p. 455.

[11]

As
    OMarra J. stated, Mund had the option of closing the transaction and suing for
    breach of DHMKs warranty concerning the net income from the property. It is
    not seriously contested that had the transaction closed, Mund would have sued
    for breach of the warranty. The motion judge should have taken this factor into
    account in his assessment of DHMKs damages.

[12]

However,
    DHMK submits that it would have made no difference to the outcome because
    Munds potential action for breach of warranty had no chance of success.

[13]

In
    our view, the effect, if any, that Munds potential lawsuit for DHMKs breach
    of warranty could have had on the assessment of DHMKs damages is best
    determined at first instance after full argument. In light of our disposition,
    we express no view on the merits of the potential claim.

[14]

We
    also conclude that the motion judge erred by selecting August 2014 as the date
    for assessing the value of the property for the purpose of calculating DHMKs
    loss of bargain without providing any analysis or reasons on this issue.  The
    absence of reasons precludes meaningful appellate review.

[15]

The
    choice of the August 2014 date departs from the general principle noted by the
    motion judge at para. 50 of his reasons that the proper date for taking the
    market value should be the time fixed for closing:
100 Main Street Ltd.
,
    at p. 415. Although there is judicial discretion to select another date than
    the closing date, the difficulty here is that the basis for the motion judges
    exercise of that discretion is not explained and the difference in the market
    valuation dates materially affects the assessment of DHMKs damages.

[16]

The
    difference in dates amounts to a substantial variance in damages of some
    $230,000:  the June 2013 appraised value of the property as at the date of
    closing is $4,500,000; whereas the appraised value of the property, over a year
    later, in August 2014 is $4,270,000.

[17]

There
    are other issues relating to the assessment of damages that we have not discussed
    in these reasons because it is not necessary to do so for the purposes of
    disposing of the appeal. However, by referring to only two of the arguments
    raised by the appellants, we do not wish to be taken as confirming any of the
    motion judges conclusions on the issue of damages, including the question of
    mitigation. These issues remain open for determination.

Disposition

[18]

As
    a result, the motion judges judgment shall be set aside, including the costs
    order. We remit the assessment of DHMKs damages to the Superior Court. The
    disposition of the costs of the motion are reserved to the judge hearing the
    matter.

[19]

With
    respect to the issue of the costs of the appeal, as agreed, the appellants as
    the successful party are entitled to payment of their costs in the amount of $30,000,
    inclusive of disbursements and applicable taxes.

Paul Rouleau
    J.A.

M.L. Benotto
    J.A.

L.B. Roberts
    J.A.

[1]

The parties are agreed that it was an error for the motion
    judge to award judgment against
2296608 Ontario Inc.


COURT OF APPEAL FOR ONTARIO

CITATION: Drakoulakos v. Stirpe, 2017 ONCA 957

DATE: 20171206

DOCKET: C63905

Strathy C.J.O., Juriansz and Huscroft JJ.A.

BETWEEN

Michael Drakoulakos

Plaintiffs (Appellant)

and

Martha Stirpe a.k.a. Martha Drakoulakos and Mark
    Stirpe and 1166054 Ontario Limited

Defendants (Respondents)

Daniel Zacks and Robert Drake, for the appellants

Ronald Bohm, for the respondents

Heard: December 4, 2017

On appeal from the judgment of Justice Paul M. Perell of
    the Superior Court of Justice, dated May 16, 2017.

REASONS FOR
    DECISION

[1]

This is an appeal from the summary judgment dismissing the appellants
    action for a declaration that his daughter holds assets in a numbered company
    in trust for him. The other respondents are the daughters husband and the
    company.

[2]

In 1996, the appellant incorporated the company making his daughter the
    sole shareholder and conveying a taxi license to the company. In 2003 he conveyed
    a second taxi license to the company. The appellant alleges the company was
    intended to hold the taxi licenses for tax purposes and the assets were meant
    to pass to his daughter only upon his death. The respondent daughter alleges
    the first license was a gift upon her graduation from university, and the
    second license was a gift upon the birth of her first child.

[3]

On the motion below, both parties proceeded on the basis that the claim
    related to a bare trust and that the limitation period was governed by the
Limitations
    Act, 2002,
S.O. 2002, c. 24, Sched. B
.
    The respondents took the position the appellant discovered his claim by 2004
    and no later than December 9, 2010. The appellants position on the motion was
    that his claim was discovered on December 9, 2010, and that a mental or
    psychological condition rendered him incapable of commencing an action within
    two years of that date.

[4]

The motion judge decided the case on a different basis than the parties
    had argued. First, he decided that the claim related to a resulting trust.
    Second, he decided that the appellants claim was known or ought to have been
    known in 2002. He observed this was more than 15 years before the action was
    commenced and thereupon dismissed the action as statute barred. He did not
    consider the application of the transition provisions of the
Limitations
    Act, 2002
.

[5]

The appellant argues, and counsel for the respondents properly concedes,
    that on the facts found by the motion judge there is no limitation period for a
    claim against the trustee of a resulting trust for property still in the
    possession of the trustee. The two prerequisites for the application of the
    transitional provision in s. 24 (6) of the present Act are satisfied: there was
    no limitation period for such a claim under the former Act and the claim was
    discovered before January 1, 2004.

[6]

The respondents submit that the appeal should be dismissed for two
    reasons. First, they submit the appellant should be held to his concession
    before the motion judge that his claim would be statute barred but for the
    application of s. 7 of the
Limitations Act, 2002
, which provides the
    limitation period does not run during any time during which the person with the
    claim is incapable of proceeding because of a physical, mental or psychological
    condition. Second, they submit that the appellant should not be permitted to
    advance a new argument on appeal.

[7]

In our view, the appellants concession must be understood in the
    context in which it was made. The concession was made in the context that he was
    claiming a bare trust and that the discoverability date was after the coming
    into force of the
Limitations Act, 2002
.

[8]

Further, it is our view that it is appropriate and in the interests of
    justice that we entertain the appellants argument. The appellant did not have
    the opportunity to advance the argument in the court below, his underlying
    claim is equitable in nature, the argument raises a pure question of law, the
    record provides a complete evidentiary basis for the determination of the
    argument, and there is no prejudice to the respondents.

[9]

Once the motion judge decided to proceed on a framework different from
    the one on which the parties had presented argument, he was obligated to apply
    the correct law to it. As noted, the parties agree that the correct law
    applicable to the facts found by the motion judge is that no limitation period
    applies to the appellants claim for property still in the possession of a
    trustee of a resulting trust.

[10]

We
    do not agree with the respondents argument that they are prejudiced because
    they were unable to raise the equitable defence of laches before the motion
    judge. The only basis on which the respondents brought a motion seeking summary
    judgment was their limitations defence. They may raise the defence of laches at
    trial or on another motion if they so wish. It would not be appropriate for
    this court to deal with the matter on appeal.

[11]

The
    appeal is allowed, the order of the motion judge is set aside, and replaced
    with an order dismissing the respondents motion. In the circumstances, the
    costs of the motion and of the appeal will be in the cause.

G.R. Strathy C.J.O.

R.G. Juriansz J.A.

Grant Huscroft J.A.