COURT OF APPEAL FOR ONTARIO

CITATION: Fernandes v. Carleton University, 2016 ONCA 719

DATE: 20161003

DOCKET: C60632

Weiler, Blair and van Rensburg JJ.A.

BETWEEN

Myles Fernandes

Plaintiff

(Appellant)

and

Carleton University and BCE Inc.

Defendants

(Respondents)

Myles Fernandes, acting in person

Jamie Macdonald, for the respondents

Heard: September 19, 2016

On appeal from the order of Justice G. Patrick Smith of
    the Superior Court of Justice, dated June 10, 2015.

ENDORSEMENT

Background:

[1]

Mr. Fernandes was a student enrolled in Aerospace Engineering at
    Carleton University. In 2013 he received a failing grade in one of his courses,
    Electronics II. He attempted unsuccessfully to overturn this grade through
    Carletons internal appeal process. As a result, he claims that he was unable
    to continue and finish his degree. He holds Carleton responsible for his
    failure to become an aerospace engineer.

[2]

Mr. Fernandes was also employed by The Source as a retail employee,
    selling various Bell products such as telephone and internet plans. In March
    2014, his employment was terminated by The Source, a subsidiary of Bell Canada
    which is, in turn, a subsidiary of BCE Inc.

[3]

These proceedings are a by-product of the foregoing events. Mr.
    Fernandes sued both Carleton and BCE Inc. As against both, he claimed damages
    for conspiracy to terminate his employment in reaction to an email he sent to
    Carleton threatening legal action. He sued BCE Inc. for wrongful termination of
    his employment at The Source. He sued Carleton for damages for breach of duty
    of care, intentional infliction of emotional distress, the tort of inducement
    and defamation (based on certain remarks made by his professor and the
    Associate Dean during the grade appeal process).

[4]

The defendants moved for summary judgment dismissing the action,
    pursuant to r. 20 of the
Rules of Civil Procedure
, R.R.O. 1990, Reg.
    194.  Carleton also moved to have the statement of claim struck as against it
    as an abuse of process pursuant to rules 21.01(3)(d) and  25.11(c). The motion
    judge granted the relief claimed.

[5]

He dismissed the claim against BCE Inc. on the ground that Mr.
    Fernandes claim for wrongful termination lay against The Source and not
    against BCE Inc. because he was employed by The Source which is a different
    legal entity than BCE Inc. and because, on the record before him, there was no
    evidence tying BCE Inc. to The Sources employment decisions or to Mr.
    Fernandes employment. He did not consider it appropriate to pierce the
    corporate veil in the circumstances.

[6]

The motion judge dismissed the conspiracy claim because the evidence
    satisfied him that there had been no contact between the defendants concerning
    Mr. Fernandes or his circumstances. He struck the statement of claim against
    Carleton on the basis that it constituted an abuse of process because it was in
    substance an indirect attempt to re-litigate the unsuccessful internal
    grade-appeal process which is an essentially academic matter.

[7]

Mr. Fernandes appealed the decision of the motion judge.

[8]

In addition, however, he brought a motion within the appeal to have the
    affidavits of Suzanne Blanchard and Deborah Stanbridge struck from the record.
    Ms. Blanchard is the Vice-President (Students and Enrolment) and University
    Registrar at Carleton. It was through her affidavit that Carleton placed on the
    record the evidence relating to the internal appeal process regarding the
    appeal of Mr. Fernandes failing grade. Ms. Stanbridge is the Director  Employee
    Services with BCE Inc. She provided the evidence on behalf of BCE Inc.
    regarding the corporate separation of BCE Inc., Bell Canada, and The Source and
    the lack of connection between BCE Inc. and any employment decisions of The
    Source.

[9]

For reasons discussed below, LaForme J.A. dismissed that motion, which
    also sought to strike an additional affidavit filed by the respondents in reply
    to Mr. Fernandes motion to strike the Blanchard and Stanbridge affidavits. Mr.
    Fernandes seeks to have that order set aside by a panel. By order of Doherty
    J.A., that motion is before us to be heard at the same time as the main appeal.

[10]

Shortly
    after the dismissal of his motion by LaForme J.A., Mr. Fernandes brought a
    second motion to strike Ms. Blanchards affidavit. Justice Hourigan  dismissed
    that motion as an abuse of process. Mr. Fernandes seeks to have the order of
    Hourigan J.A. set aside by a panel. By order of Epstein J.A., that motion is
    before us to be heard at the same time as the main appeal.

Discussion

[11]

For
    the reasons that follow, the motions to set aside the orders of LaForme J.A.
    and Hourigan J.A. are dismissed and the main appeal is dismissed.

The
    Order of LaForme J.A.

[12]

Mr.
    Fernandes evidence in support of the motion to strike the Blanchard and
    Stanbridge affidavits is contained in an affidavit purportedly sworn by a
    lawyer in Regina, Saskatchewan, named Michael Scott Tochor. The problem is
    that, on the evidence before LaForme J.A., Michael Scott Tochor does not
    exist.

[13]

The
    respondents inquiries of the Law Society of Saskatchewan and a search of the
    online directory of lawyers practising in that province revealed that there is
    only one Michael Tochor practising in Saskatchewan: Michael Dennis Tochor Q.C. Michael
    Dennis Tochor Q.C. filed an affidavit on the motion deposing that he did not
    know and has never communicated with Mr. Fernandes, has never acted in any
    capacity as legal counsel for Mr. Fernandes, and did not swear the affidavit
    purportedly sworn by Michael Scott Tochor on the motion.  We note as well that,
    when asked to do so, Mr. Fernandes admitted during the proceedings before
    LaForme J.A. that he could not produce Michael Scott Tochor and had no
    knowledge of his whereabouts, nor could he provide any contact information for
    him.

[14]

Instead
    Mr. Fernandes focussed his attention on attacking the affiants of the
    affidavits filed by the respondents to answer his allegations about the faults
    in the Blanchard and Stanbridge affidavits and certain non-essential matters (a
    dispute about the return date of a motion and the service of certain
    materials).  Mr. Fernandes challenges to these affidavits rely primarily on
    unfounded allegations of bias arising from the connection of the affiants with
    the respondents lawyers.  There is no merit in them.

[15]

The
    allegations respecting the Blanchard affidavit were that Ms. Blanchards
    affidavit stated that it was sworn in Toronto when she was apparently in Ottawa
    and that her affidavit was not sworn on February 13, as stated, but on February
    3, or at some other time.

[16]

The
    allegation with respect to the Stanbridge affidavit  contained in the Tochor
    affidavit was that the affidavit had been commissioned by an unauthorized
    person in Quebec. The affidavit of the articling student who commissioned Ms.
    Blanchards affidavit clarifies that it was indeed sworn before him in Ottawa
    (he mistakenly stated Toronto on Ms. Blanchards affidavit) and that it had
    been sworn on February 13.  The affidavit of Joan LaRoche confirms, among other
    things, that the records of the Province of Quebec show that the commissioner
    of Ms. Stanbridges affidavit is an authorized commissioner for the taking of
    oaths in Quebec.

[17]

Justice
    LaForme was completely justified in dismissing the motion to strike the
    affidavits. To put it mildly, the filing of the affidavit of a purported
    Michael Scott Tochor is troubling and an abuse of process providing the basis
    for dismissal. LaForme J.A. did not err in principle by drawing an adverse inference
    from the fact that Mr. Fernandes was unable to produce his purported affiant,
    Michael Scott Tochor, or provide any information regarding his whereabouts.
    His inability to do so was telling in the circumstances.

[18]

In
    any event, the responding affidavits filed by the respondents provide ample
    explanation for any technical flaws that may have existed in the Blanchard and
    Stanbridge affidavits.

[19]

The
    motion to set aside the order of LaForme J.A. is dismissed.

The
    Order of Hourigan J.A.

[20]

Within
    two weeks of the order of LaForme J.A. dismissing his application to strike
    amongst others  the Blanchard affidavit, Mr. Fernandes brought a second motion
    to strike the same affidavit. On that motion he did not rely on the Tochor
    affidavit but attacked the Blanchard affidavit on the technical grounds
    referred to above (the date and place of swearing). Justice Hourigan  dismissed
    this motion on the basis that it was a collateral attack on the order of
    LaForme J.A., which was already subject to a motion to the panel to have it set
    aside.

[21]

Mr.
    Fernandes contests this order on the basis that the motion did not constitute a
    collateral attack because LaForme J.A. had made no finding of fact in his
    reasons concerning the complaints about the Blanchard affidavit. In his view,
    that kept the matter alive and subject to a fresh attack. He submitted at
    length that he was not precluded by the doctrine of issue estoppel from
    bringing the second motion. Because of the absence of factual findings and the
    errors of Hourigan J.A., he argued that the Blanchard affidavit must be struck
    or the matter remitted to another Chambers judge for such findings to be made
    (and, inferentially, that the main appeal cannot be determined until that
    exercise has been completed).

[22]

Accepting
    that Mr. Fernandes is a layperson and not trained in the law, he nonetheless
    misunderstands the basis upon which Hourigan J.A. dismissed his motion. The
    doctrine of issue estoppel has no application. The motion was dismissed because
    it constituted a collateral attack on the order of LaForme J.A. (itself under
    review) and was therefore an abuse of process. Whatever Mr. Fernandes personal
    views about the use (or abuse) of the abuse of process principles by lawyers
    and judges against self-represented litigants may be, courts are obliged to
    apply the law, where applicable, in the circumstances before them.

[23]

Justice
    Hourigan did not err in dismissing the motion before him on the basis that he
    did. The motion to set aside his order is dismissed.

The
    Main Appeal

[24]

Mr.
    Fernandes submitted that the motion judge went too far in exercising his discretion
    to determine the issues by way of summary judgment under r.  20.  He argued
    that there were a number of serious issues of fact and credibility that had to
    be determined on the motion and that these constituted a genuine issue requiring
    a trial. Included in the serious issues of credibility that Mr. Fernandes
    raised were the following:

 Who was the appellant answerable to?

 Did the appellant work for Bell Canada and, if so, was he an
    employee of Bell Canada?

 Did an employer-employee relationship exist between the appellant
    and Bell Canada?

 If no employment contract was signed, would common law notice
    of 24 months prevail?

 If the appellant was identified as a Bell Canada employee,
    without ever having signed an employment contract with Bell Canada, could there
    exist an employer-employee relationship between the appellant and BCE Inc. as
    described in their Annual Reports?

 What did BCE mean by Our Employees at the Source?

 Was the tortfeasor accused of battery a BCE employee by the
    same standards?

 Did BCE Inc. owe the appellant a duty of care at the time of
    the incidents?

 Did BCE breach their duty of care toward the appellant?

[25]

Mr.
    Fernandes contends that because he did not file evidence directly relating to
    these questions  because he did not understand that he was required to file
    evidence  the motion judge was not in a position to resolve those issues of
    credibility and therefore was not able to reach a fair and just determination
    of the action on its merits, as required by the decision of the Supreme Court
    of Canada in
Hryniak v. Mauldin
, 2014 SCC 7, [2014] 1 S.C.R. 87.

[26]

There
    are two difficulties with these submissions.

[27]

First,
    in making his arguments about the motion judges inability to reach a fair and
    just determination, Mr. Fernandes ascribed a narrower role for the summary
    judgment motion judge than that now called for in
Hryniak
. Mr.
    Fernandes argued that the purpose of a summary judgment motion was to weed out
    claims that have no chance of success, relying in this respect on a statement
    at para. 38 of
Hryniak
which was simply a summary of what the pre-
Hryniak
jurisprudence had narrowed the purpose to, and on a similar statement in an
    earlier decision of the Nova Scotia Supreme Court in
Spring Garden Holdings
    Ltd. v. Ryan Duffys Restaurants Ltd.
, 2010 NSSC 71, 297 N.S.R. (2d) 201,
    at para. 31.

[28]

It
    is clear from
Hryniak
and the jurisprudence following it, however,
    that the Supreme Court of Canada has broadened and liberalized the availability
    of summary judgment and has encouraged the judiciary to resolve disputes in
    that fashion when judges can justly do so. There will be no genuine issue requiring
    a trial where the judge is able to reach a fair and just determination on the
    merits and where the material filed on the motion: (i) allows the judge to make
    the necessary findings of fact; (ii) allows the judge to apply the law to the
    facts; and (iii) is a proportionate, more expeditious and less expensive means
    to achieve a just result:
Hryniak
, at paras. 32, 49-51. Under r. 20.04(2.1),
    the summary judgment motion judge is provided with a number of powers enabling
    him or her to weigh evidence, evaluate credibility, and draw reasonable
    inferences.

[29]

Here,
    the motion judge properly followed that approach.

[30]

The
    second difficulty is that, while Mr. Fernandes may not have put forward
    evidence directly on the issues outlined above, the respondents did.  That
    evidence  in the form of the Blanchard and Stanbridge affidavits  clearly
    provided the motion judge with the evidence necessary to resolve the issues before
    him.

[31]

While
    it may be Mr. Fernandes was somewhat confused, as a lay person, about the need
    to file evidence  a confusion enhanced, perhaps, by the companion claim for
    relief on the motion to strike  he is nonetheless required to prepare himself
    and present his case, like any other litigant, and he has shown himself capable
    of navigating the rules of procedure in other ways.

The
    Claim Against BCE Inc.

[32]

There
    was ample evidence to support the motion judges finding that Mr. Fernandes was
    not an employee of BCE Inc. and had no contractual relationship with it. His
    findings are entitled to deference.

[33]

Mr.
    Fernandes was employed by The Source. The fact that Mr. Fernandes sold Bell
    products at the store is insufficient to establish the necessary employment or
    contractual nexus. The Source is a wholly-owned subsidiary of Bell Canada
    which, in turn, is a wholly-owned subsidiary of BCE Inc. The evidence was that
    BCE Inc. played no role in the implementation of The Sources internal policies
    and operating decisions.

[34]

The
    motion judge addressed Mr. Fernandes submission that he should pierce the
    corporate veil and find BCE Inc. liable for the actions of The Source.  He
    properly applied the law on piercing the corporate veil and concluded that, on
    the facts before him, it was not appropriate in the circumstances to do so.
    These findings were also open to him on the evidence and are entitled to
    deference.

The
    Conspiracy Claim

[35]

Although
    the motion judge did not say specifically in his reasons why he was dismissing
    the conspiracy claim, his reasons as a whole make it clear why he did so. On the
    basis of the evidence filed, there was no agreement between two or more
    persons. No one from Carleton had contacted, or directed anyone to contact, or
    had any knowledge of anyone contacting BCE Inc. or anyone else outside of
    Carleton regarding Mr. Fernandes; and that no one at BCE Inc. had any knowledge
    of Mr. Fernandes or the events referred to in the statement of claim prior to
    the commencement of the action, nor had anyone from BCE Inc. contacted or
    communicated with anyone at Carleton with respect to Mr. Fernandes or those
    events.

[36]

On
    the basis of that evidence, the conspiracy claim could not stand.

The
    Claim Against Carleton University

[37]

The
    claim against Carleton was struck on the basis of a different analysis.  Rule
    25.11(c) provides that a court may strike out a pleading where the pleading
    constitutes an abuse of process of the court. The motion judge relied on this
    provision in dismissing the claim against Carleton.

[38]

Mr.
    Fernandes resists the application of the doctrine, particularly in the case of
    a self-represented litigant. However, the jurisprudence establishes that courts
    may resort to abuse of process or other rules, in appropriate circumstances, to
    strike claims against universities where those claims are, at their heart,
    attempts to re-litigate the factual underpinnings of previously unsuccessful
    challenges to academic decisions that have already been subject to the
    universitys internal appeal processes:
Jaffer v. York University
,
    2010 ONCA 654, 326 D.L.R. (4th) 148, leave to appeal refused, [2010] S.C.C.A.
    No. 402;
Gauthier c. Saint-Germain
, 2010 ONCA 309, 325 D.L.R. (4th)
    558, leave to appeal refused, [2010] S.C.C.A. No. 257;
Dawson v. University
    of Toronto
, [2007] O.J. No. 591 (S.C.), affd in part 2007 ONCA 875. This
    is so even where, as here, the plaintiff attempts to dress up the previous
    academic dispute by adding claims for relief  such as a monetary claim for
    wrongful conduct  that are unavailable through the internal academic review
    process:
Aba-Alkhail v. University of Ottawa
, 2013 ONCA 633, 363
    D.L.R. (4th) 470, leave to appeal refused, [2013] S.C.C.A. No. 491. See also
Ontario
    v. Lipsitz
, 2011 ONCA 466, 334 D.L.R. (4th) 606, leave to appeal refused, [2011]
    S.C.C.A. No. 407 which, albeit in a different regulatory context, applies the
    same principle.

[39]

Mr.
    Fernandes correctly points out that there are decisions from other
    jurisdictions that have allowed some aspects of a complainant students action
    (that did not form part of the academic process) to proceed even though other
    aspects were struck as attempts to circumvent that process: see
Tapics v.
    Dalhousie University
, 2015 NSCA 72, 363 N.S.R. (2d) 202;
Mohl v. The
    University of British Columbia
, 2006 BCCA 70, 52 B.C.L.R. (4th) 89. Those
    decisions do not assist, however, because they do not conflict with the general
    application of the abuse of process doctrine in such circumstances. They simply
    reflect instances in which the courts were satisfied that the civil claim
    involved matters that had not been dealt with in the substance of the academic
    proceedings. It is noteworthy that in
Tapics
the majority of the
    plaintiffs claims were struck, following this Courts decisions in
Gauthier
,
Jaffer
, and
Aba-Alkhail
.

[40]

Here,
    the added dimensions to Mr. Fernandes civil claim are essentially the claims
    for damages for conspiracy, breach of confidence, invasion of privacy, and
    defamation. His claims in negligence, intimidation, and his other tort claims
    as against Carleton all arise out of the same factual nexus that formed the
    basis for his complaints in the academic process.

[41]

The
    breach of confidence and invasion of privacy claims are related to the
    conspiracy claim because they stem from the allegation that Carleton accessed
    Mr. Fernandes email after he threatened legal proceedings and then sent them
    to his employer. The conspiracy and these associated claims are properly
    dismissed on r. 20 principles, as explained above. Absent that claim, Mr.
    Fernandes relies on certain statements apparently made by one of his professors
    and by the Associate Dean during the course of the academic appeal proceedings.
    His professor is said to have stated that he (the professor) [knew] how easy
    it is for a student to get a medical note and that he was so tired of
    students using a medical note to get away with writing midterms.  The
    Associate Dean is said to have stated that Mr. Fernandes had a tendency to see
    that the world is against [him].  These comments were reviewed and addressed
    during the internal appeal process. No judicial review proceedings were taken.

[42]

In
    our view, the motion judge made no error in principle or in fact in determining
    that  on the case presented to him  Mr. Fernandes complaints in the civil
    action were in substance an attempt to challenge and re-visit the manner in
    which the university dealt with the complaints about his treatment in his
    Electronics II class and the unsuccessful outcome of the internal academic
    appeals process. It was open to him to conclude on this record that Mr.
    Fernandes claim against Carleton constituted an abuse of process, and we see
    no basis for interfering with that determination.

Disposition

[43]

For
    the foregoing reasons, the motions to set aside the orders of LaForme J.A. and
    Hourigan J.A. are dismissed, and the main appeal is dismissed.

[44]

The
    respondents are entitled to their costs of the appeal, fixed in the amount of
    $15,000.00 all inclusive.

Robert
    A. Blair J.A.

K.M.
    Weiler J.A.

K.
    van Rensburg J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Fontaine v. Canada (Attorney General), 2016 ONCA
    802

DATE: 20161028

DOCKET: C59310, C59311 and C59320

Strathy C.J.O., Sharpe and MacFarland JJ.A.

BETWEEN

Larry Philip Fontaine in
    his personal capacity and in his capacity as the Executor of the Estate of
    Agnes Mary Fontaine, deceased, Michelline Ammaq, Percy Archie, Charles Baxter
    Sr., Elijah Baxter, Evelyn Baxter, Donald Belcourt, Nora Bernard, John Bosum,
    Janet Brewster, Rhonda Buffalo, Ernestine Caibaiosai‑Gidmark, Michael
    Carpan, Brenda Cyr, Deanna Cyr, Malcolm Dawson, Ann Dene, Benny Doctor, Lucy
    Doctor, James Fontaine in his personal capacity and in his capacity as the
    Executor of the Estate of Agnes Mary Fontaine, Deceased, Vincent Bradley
    Fontaine, Dana Eva Marie Francey, Peggy Good, Fred Kelly, Rosemarie Kuptana,
    Elizabeth Kusiak, Theresa Larocque, Jane McCullum, Cornelius McComber, Veronica
    Marten, Stanley Thomas Nepetaypo, Flora Northwest, Norman Pauchey, Camble
    Quatell, Alvin Barney Saulteaux, Christine Semple, Dennis Smokeyday, Kenneth
    Sparvier, Edward Tapiatic, Helen Winderman and Adrian Yellowknee

Plaintiffs (Respondents)

and

The Attorney General
    of Canada
,
    The Presbyterian Church in Canada, The General Synod of the Anglican Church of
    Canada, The United Church of Canada, The Board of Home Missions of the United
    Church of Canada, The Womens Missionary Society of the Presbyterian Church,
    The Baptist Church in Canada, Board of Home Missions And Social Services of The
    Presbyterian Church in Bay, The Canada Impact North Ministries of the Company
    for the Propagation of the Gospel in New England (also known as the New England
    Company), The Diocese of Saskatchewan, The Diocese of the Synod of Cariboo, The
    Foreign Mission of the Presbyterian Church in Canada, The Incorporated Synod of
    the Diocese of Huron, The Methodist Church of Canada, The Missionary Society of
    the Anglican Church of Canada, The Missionary Society of the Methodist Church
    of Canada (also known as the Methodist Missionary Society of Canada), The Incorporated
    Synod of the Diocese of Algoma, The Synod of the Anglican Church of the Diocese
    of Quebec, The Synod of the Diocese of Athbasca, The Synod of the Diocese of
    Brandon, The Anglican Synod of the Diocese of British Columbia, The Synod of
    the Diocese of Calgary, The Synod of the Diocese of Keewatin, The Synod of the
    Diocese of Quappelle, The Synod of the Diocese of New Westminister, The Synod
    of the Diocese of Yukon, The Trustee Board of the Presbyterian Church in
    Canada, The Board of Home Missions and Social Service of The Presbyterian
    Church of Canada, The Womens Missionary Society of the United Church of
    Canada,
Sisters
    of Charity, A Body Corporate also known as Sisters of Charity of St. Vincent de
    Paul, Halifax, also known as Sisters of Charity Halifax
, Roman Catholic
    Episcopal Corporation of Halifax,
Les
Soeurs
de Notre Dame‑Auxiliatrice
,
Les
Soeurs
de St. Francois
    dAssise
,
    Insitut
des
Soeurs
du Bon Conseil
,
Les
Soeurs
de Saint-Joseph de
    Saint
Hyancinthe,
Les
Soeurs
de Jésus-Marie
,
Les
Soeurs
de lAssomption de
    la Sainte-Vierge
,
Les
Soeurs
de lAssomption de
    la Sainte-Vierge de lAlberta
,
Les
Soeurs
de
la Charite
de
St.-
Hyacinthe
,
Les Oeuvres Oblates
    de lOntario
,
Les
Residences
Oblates du
Quebec, La
    Corporation Episcopale Catholique Romaine de la Baie James (The Roman Catholic
    Episcopal Corporation of James Bay), The Catholic Diocese of Moosonee, Soeurs
Grises de
Montreal
/Grey Nuns of
    Montreal
,
Sisters
    of Charity (Grey Nuns) of
Alberta,
Les
Soeurs de la Charite des
T.N.O.
, Hotel
‑Dieu de
    Nicolet
,
The
    Grey Nuns of Manitoba Inc
.‑
Les
Soeurs
Grises du Manitoba Inc.
, La Corporation
    Episcopale Catholique Romaine de la Baie dHudson ‑ The Roman Catholic
    Episcopal Corporation of Hudsons Bay,
Missionary Oblates ‑ Grandin Province
,
Les Oblats de Marie
    Immaculée du Manitoba
,
    The Archiepiscopal Corporation of Regina,
The Sisters of the Presentation
,
The Sisters of St.
    Joseph of Sault St. Marie
, Sisters of Charity of Ottawa,
Oblates of Mary Immaculate

St.
    Peters Province
,
The
    Sisters of Saint Ann
,
Sisters
    of
Instruction
of the Child Jesus
, The Benedictine
    Sisters of Mt. Angel Oregon, Les Pères Montfortains,
The Roman Catholic
    Bishop of Kamloops Corporation Sole
, The Bishop of Victoria, Corporation Sole,
    The Roman Catholic Bishop of Nelson, Corporation Sole,
Order of The Oblates
    of Mary Immaculate in the
Province
of British Columbia
,
The Sisters of
    Charity of Providence of Western Canada
,
La Corporation Episcopale Catholique Romaine
de
Grouard
, Roman Catholic
    Episcopal Corporation of Keewatin, La Corporation Archiepiscopale Catholique
    Romaine de St. Boniface, Les Missionnaires Oblates Sisters de St. Boniface  The
    Missionary Oblates Sisters of St. Boniface,
Roman Catholic Archiepiscopal Corporation
    of Winnipeg
,
    La Corporation Episcopale Catholique Romaine de Prince Albert, The Roman
    Catholic Bishop of Thunder Bay,
Immaculate Heart Community of Los Angeles
,
Ca
.
, Archdiocese of
    Vancouver ‑ The Roman Catholic Archbishop of Vancouver, Roman Catholic
    Diocese of Whitehorse,
The Catholic Episcopale Corporation of Mackenzie‑Fort
    Smith
,
The
    Roman Catholic Episcopal Corporation of Prince Rupert
, Episcopal
    Corporation of Saskatoon, Omi Lacombe Canada Inc. and Mt. Angel Abbey Inc.

Defendants (
Appellants/Respondents
    by way of cross-appeal
;
Respondent/Appellant by way of cross-appeal
)

Charles Gibson and Ian Houle,
    for the Sisters of St. Joseph of Sault Ste. Marie

Janine Harding, for Twenty-Two
    Catholic Entities

Pierre Baribeau and Paul Lepsoe, for Nine Catholic
    Entities

Peter Grant, Diane Soroka and Sandra Staats, for
    Independent Counsel

Gary Penner and Diane Fernandes, for the Attorney
    General of Canada

Julian N. Falconer and Julian Roy, for the Truth and
    Reconciliation Commission of Canada

Joanna Birenbaum, for the National Centre for Truth and
    Reconciliation

Kate Wilson and Regan Morris, for the Privacy Commissioner
    of Canada

Stuart Wuttke, for the Assembly of First Nations

Joseph Arvay, Q.C., Catherine Boies Parker and Susan
    Ross, for the Chief Adjudicator of the Indian Residential Schools Adjudication
    Secretariat

Heard: By written submissions.

COSTS ENDORSEMENT

[1]

The
    costs of Independent Counsel are fixed at $60,000.00, inclusive of
    disbursements and all applicable taxes, payable by Canada.

G.R. Strathy C.J.O.

Robert J. Sharpe J.A.

J. MacFarland J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Haas v. Gunasekaram, 2016 ONCA 744

DATE: 20161013

DOCKET: C61014

MacPherson, Simmons and Lauwers JJ.A.

BETWEEN

Andreas Haas

Plaintiff

(Respondent)

and

Danushan Gunasekaram, also
    known as Dan Gunam
,

Luca

Viscardi and

Shenlu Feng, also known as Stephen Feng

Defendants

(Appellants)

Avrum D. Slodovnick and Raffaele Sparano, for the appellants

David Alderson and Andrew Ottaway, for the respondent

Heard:  June 30, 2016

On appeal from the Order of Justice Suhail A.Q. Akhtar of
    the Superior Court of Justice, dated August 14, 2015, with reasons reported at
    2015 ONSC 5083, 127 O.R. (3d) 128.

Lauwers J.A.:

[1]

Mr. Haas is an overseas resident. He entered into a shareholders
    agreement with Mr. Gunam, Mr. Feng and Mr. Viscardi respecting an Italian
    restaurant in Toronto known as Osteria Dei Ganzi and invested $200,000. The
    restaurant failed.

[2]

Mr. Haas launched this action against Mr. Gunam, Mr. Feng and Mr. Viscardi
    alleging he was induced to enter into the shareholders agreement by fraudulent
    misrepresentations about the restaurants business prospects and how it would
    be managed. He seeks to recover his investment.

[3]

Mr. Gunam, Mr. Feng and Mr. Viscardi moved to stay the action
    under s. 7 of the
Arbitration Act, 1991
, S.O. 1991, c. 17 in favour of
    the arbitration agreement contained in the shareholders agreement. Mr. Gunam
    and Mr. Feng appeal the motion judges refusal to stay the action. The
    co-defendant Mr. Viscardi did not appeal
[1]
.

[4]

For the reasons set out below, I
    would allow the appeal.

A.

The Context

[5]

Mr. Haas alleges he was induced to sign the shareholders agreement by a
    number of misrepresentations, which he groups into some general categories: the
    successful history of the restaurants location, the projected return on
    investment, the management team, the capitalization of the business and
    communications with him regarding changes in the business. Mr. Haas alleges
    these misrepresentations were made in various documents and communications
    provided to Haas
before
Haas signed the
    Shareholders Agreement (emphasis added).

[6]

An arbitration agreement is embedded in the shareholders agreement.

B.

The Issue

[7]

There is a single issue in this appeal: Did the motion judge err in
    refusing to stay the action under s. 7 of the
Arbitration Act
, thereby
    permitting Mr. Haas to avoid arbitrating the matters in dispute despite the
    arbitration agreement in the shareholders agreement?

[8]

I turn to this issue after setting out the laws approach to arbitration
    agreements.

C.

The Laws approach to arbitration agreements

[9]

Many cases have considered how the court should approach its task under
    s. 7(1) of the
Arbitration Act,
which provides:

7(1) If a party to an arbitration agreement commences a
    proceeding in respect of a matter to be submitted to arbitration under the
    agreement,
the court
in which the proceeding is
    commenced
shall,
on the motion of another party to
    the arbitration agreement
, stay the proceeding
. [Emphasis
    added.]

[10]

The law favours giving effect to arbitration agreements. This is evident
    in both legislation and in jurisprudence. Section 7 of the
Arbitration Act
contains mandatory language, stating the court in which the proceeding is
    commenced
shall
, on the motion of another party to
    the arbitration agreement, stay the proceeding (emphasis added).

[11]

The mandatory wording in s. 7 of the
Arbitration Act
is a
    change from s. 7 of the old
Arbitrations Act
, R.S.O. 1990,
    c. A.24, which gave the court discretion to stay the action:

[I]f satisfied that there is no sufficient reason why the
    matter should not be referred in accordance with the submission and that the
    applicant was at the time when the proceeding was commenced and still remains
    ready and willing to do all things necessary to the proper conduct of the
    arbitration, [the court]
may
make an order staying
    the proceeding. [Emphasis added.]

[12]

As can be seen, the statutory language in s.7 of the current
Arbitration
    Act
is directory, not equivocal. It strongly favours giving effect to an
    arbitration agreement. This policy direction is reinforced by s. 17 of the
Arbitration
    Act
:

17(1)  An
    arbitral tribunal may rule on its own jurisdiction to conduct the arbitration
    and may in that connection rule on objections with respect to the existence or
    validity of the arbitration agreement.

(2)  If
    the arbitration agreement forms part of another agreement, it shall, for the
    purposes of a ruling on jurisdiction, be treated as an independent agreement
    that may survive even if the main agreement is found to be invalid.

[13]

Subsection 17(1) did not exist in the 1980 or the 1990
Arbitrations
    Act
.  Subsection 17(2) codifies the common law, and establishes that an
    arbitration agreement can survive even where the contract in which it is found
    is determined to be invalid.
[2]

[14]

The same pro-arbitration orientation is found in the jurisprudence.  In
Dell
    Computer Corp. v. Union des consommateurs
,
2007 SCC 34, [2007] 2 S.C.R. 801, Deschamps J., speaking for the majority of the
    Supreme Court, articulated a general rule, at para. 84: I would lay down a
    general rule that in any case involving an arbitration clause, a challenge to
    the arbitrators jurisdiction must be resolved first by the arbitrator. This
    has become known as the competence-competence principle. The exception is where
    a challenge to the arbitrators jurisdiction is based solely on a question of
    law, or one of mixed fact and law that requires for its disposition only
    superficial consideration of the documentary evidence in the record (
Dell
    Computer
,
at para. 84).  See
    also
Seidel v. Telus Communications Inc
., 2011 SCC 15, [2011] 1 S.C.R.
    531, at para. 4.

[15]

This court most recently discussed the competence-competence principle
    in
Ciano Trading & Services C.T. & S.R.L. v. Skylink Aviation Inc.
,
    2015 ONCA 89, stating where it is unclear if the arbitrator has jurisdiction,
    it is preferable to leave the issue to the arbitrator pursuant to the
    competence-competence principle (at para. 7). In
Dancap Productions Inc.
    v. Key Brand Entertainment, Inc
., 2009 ONCA 135, 246 O.A.C. 226, at paras.
    32-33, Sharpe J.A. explained:

It is now well-established in Ontario that the court should
    grant a stay under art. 8(1) of the Model Law where it is arguable that the
    dispute falls within the terms of an arbitration agreement. In
Dalimpex
    Ltd. v. Janicki
(2003), 64 O.R. (3d) 737 (C.A.), at para. 21, Charron J.A.
    adopted the following passage by Hinkson J.A. in
Gulf Canada Resources Ltd.
    v. Arochem International Ltd.
(1992), 66 B.C.L.R. (2d) 113 (B.C.C.A.), at
    paras. 39-40, as the proper approach to art. 8(1):

it is not for the court on an application for a stay of
    proceedings to reach any final determination as to the scope of the arbitration
    agreement or whether a particular party to the legal proceedings is a party to
    the arbitration agreement because those are matters within the jurisdiction of
    the arbitral tribunal. Only where it is clear that the dispute is outside the
    terms of the arbitration agreement or that a party is not a party to the
    arbitration agreement or that the application is out of time should the court
    reach any final determination in respect of such matters on an application for
    a stay of proceedings.

Where it is arguable that the dispute falls within the terms
    of the arbitration agreement or where it is arguable that a party to the legal
    proceedings is a party to the arbitration agreement then, in my view, the stay
    should be granted and those matters left to be determined by the arbitral
    tribunal.

As Charron J.A. explained in
Dalimpex
, at para. 22, a
    deferential approach allowing the arbitrator to decide whether the dispute is
    arbitrable, absent a clear case to the contrary, is consistent both with the
    wording of the legislation and the intention of the parties to review their
    disputes to arbitration.

[16]

As I will explain, the motion judge did not appropriately consider the
    impact of the case law on the determinations he was required to make.

D.

The analytical framework

[17]

An analytical framework has emerged from the jurisprudence. It breaks
    the judges task of considering a stay under s. 7 down into a number of
    sub-issues:

(1)

Is there an arbitration
    agreement?

(2)

What is the subject matter
    of the dispute?

(3)

What is the scope of the
    arbitration agreement?

(4)

Does the dispute arguably
    fall within the scope of the arbitration agreement?

(5)

Are there grounds on which
    the court should refuse to stay the action?

[18]

I address each in turn.

(1)

Is there an arbitration agreement?

[19]

It is common ground that there is an arbitration agreement embedded in
    the language of the shareholders agreement.

(2)

What is the subject matter of the dispute?

[20]

Mr. Haas submits the action, as articulated in the Amended Statement of Claim,
    is focused entirely on the fraud and tort claims. He argues these claims fall
    outside the scope of the shareholders agreement, and are not captured by the
    arbitration agreement. Mr. Gunam and Mr. Feng submit, to the contrary, that the
    true subject matter of the dispute is whether they performed their obligations
    under the shareholders agreement and the other related documents.

The motion judges approach

[21]

The motion judge took what he called the pith and substance approach
    to characterizing the subject matter of the dispute. In doing so he relied
    heavily on this courts approach in
Precious Metal Capital Corp. v. Smith
,
    2008 ONCA 577, 92 O.R. (3d) 701 and in
Matrix Integrated Solutions Ltd. v.
    Naccarato
, 2009 ONCA 593, 97 O.R. (3d) 693. Although neither
Precious
    Metal
nor
Matrix
were cases involving the scope of arbitration
    agreements, the motion judge did not err in taking the pith and substance
    approach to characterize Mr. Haass claims for the purpose of determining the
    proper scope of the arbitration agreement. This is no more than an approach to
    construing the arbitration agreement, which, as noted in
Dalimpe
x, is
    the courts function.

The motion judges assessment

[22]

The motion judge considered Mr. Haass claims and found they were not in
    pith and substance contractual. The motion judges analysis is set out at
    paras. 19-21:

What then is the pith and substance of Haas claims? A review
    of his Amended Statement of Claim in this case indicates three types of
    wrongdoing alleged: misrepresentation, breach of fiduciary duty and oppressive
    behaviour.

The meat of this case is based on the allegations of representations
    made by the defendants with the purpose of inducing Haas into joining the
    business venture. The SHA [shareholders agreement] is pleaded as part of the
    instrumentality used by the defendants as part of the inducements. The subject
    matter of these allegations does not, in my view, rely on contractual
    obligations contained in the SHA. In other words, the claim is not for breach
    of contract but the fraudulent misrepresentation of facts which caused Haas to
    enter into the business agreement. Factually, this case bears a strong
    resemblance to
Leggat v. Direct Leverage Ltd.
, a decision of Spence
    J., (S.C.J.) unreported, affd 2015 ONSC 2639 (Div. Ct.) where the same
    conclusion was arrived at.

The breach of fiduciary duty allegations centre on the
    defendants working for rival companies at the same time that they were supposed
    to manage the jointly owned Osteria dei Ganzi. Haas also alleges that two of
    the defendants, Gunasekeram and Viscardi opened a competing Italian restaurant
    within one kilometre of Osteria dei Ganzi. Once again, these allegations do not
    rely upon or refer to the SHA as a basis for their validity and are not
    contractual in substance:
Precious Metals Corp. v. Smith,
2008 ONCA 577,
    92 O.R. (3d) 701.

The motion judge found, however, that Mr. Haass oppression
    claims did rely on contractual clauses in the shareholders agreement and were
    therefore within the scope of the arbitration agreement (at para. 22).

Discussion

[23]

I begin by dismissing the appellants argument that Mr. Haas should be
    bound by the original form of the Statement of Claim, even though he amended it
    so as to remove the contractual claims to minimize his reliance on the
    shareholders agreement. I agree with the motion judges reasons at
    paras. 13-16 for rejecting this argument. Mr. Haas had the right to amend
    the Statement of Claim to try to avoid the application of the arbitration
    agreement. But this does not assist Mr. Haas in resolving the substantive issue.

[24]

I now turn to the substantive issue. I accept as fair Mr. Haass summary
    of his allegations in the Amended Statement of Claim, which will help frame the
    analysis. He alleges he was induced to sign the shareholders agreement by a
    number of misrepresentations, which he groups into several categories in his
    factum, at para. 23:

(a)
History of the location
:
     e.g. that Ganzis location had a proven track record of successful restaurants
.
Haas later learned that the previous restaurants at that location had failed.

(b)
Return on investment
:
    e.g. that Haas investment would be returned within two years, and that his
    residual rate of return thereafter would be 55%.  Haas later learned that the
    defendants shut down the restaurant in early 2015, having failed to pay back any
    of his investment.

(c)
Management team
:
    e.g. that the management team, including the defendants Viscardi and Gunam,
    would be fully committed to Ganzi.  Viscardi was to be in charge of operations
    management.  Haas later learned that Viscardi refused to participate in the
    management of the restaurant as he had a non-competition clause in favour of
    another Toronto restaurant.  Haas also learned that both Viscardi and Gunam had
    been working on other, competing restaurants, and even opened a competing
    restaurant within one kilometre of Ganzi in 2015.

(d)
Capitalization
:
    e.g. that the other investors, including the defendants, would invest
    $635,000.00 in the project.  Haas later discovered that the other investors had
    only invested $445,000.00 in Ganzi, causing a $190,000.00 shortfall in Ganzis
    capital.

(e)
Communication with Haas
:
     e.g. that no material change in the business would be made without Haas
    consent.  Haas learned that the defendants shut down the restaurant in early
    2015 without his consent.  The defendants have refused to disclose the status
    of Ganzis remaining assets, if any, or provide Haas with any of Ganzis
    records.

[25]

Other contested matters in Haass Amended Statement of Claim include,
inter
    alia
, complaints about the opening hours of the restaurant and the
    adequacy of the provision for the payment of taxes.

[26]

The listed misrepresentations largely relate to the failures of Mr. Viscardi,
    Mr. Gunam and Mr. Feng to perform their obligations under the shareholders
    agreement. Achieving the promised rate of return on investment relates to the
    actual performance of the business, as does the constitution of the management
    of the restaurant. The breach of fiduciary duty claim, based on allegations
    that Mr. Gunam and Mr. Viscardi opened a competing Italian restaurant within
    one kilometre, depends on them being employees under the shareholders
    agreement. The purported shortfall in initial capitalization and the number of
    fully paid common shares also relate to the performance of Mr Viscardi, Mr.
    Gunam and Mr. Feng.  Complaints about the opening hours of the restaurant
    relate to its actual operation, as does the decision to close the business
    down, the adequacy of the provision for the payment of taxes, and so on. The
    only clearly prior misrepresentation was that the proposed location had a
    proven track record of successful restaurants, which Mr. Haas argues turned out
    to be untrue. The other alleged misrepresentations relate to the failure of Mr
    Viscardi, Mr. Gunam and Mr. Feng to perform under the shareholders
    agreement, and its various related documents and communications, as Mr. Haas
    expected they would. I observe that to establish the misrepresentations, Mr.
    Haas will be relying on the contractual documents.

[27]

With respect, I am unable to agree with the motion judges conclusion
    that the pith and substance of Mr. Haass claims relate to the fraudulent
    misrepresentation of facts which caused Haas to enter into the business
    agreement (at para. 20). The motion judge went too far in characterizing Mr. Haass
    claims, apart from the oppression claim, as relating only to fraudulent
    misrepresentation.

(3)

What is the scope of the arbitration agreement?

[28]

The arbitration agreement in the shareholders agreement provides:

If at any time during the currency of this Agreement, or after
    the termination hereof,
any dispute, difference or
    question shall arise
, or any failure to agree as specifically
    hereinabove referred to, shall occur among the parties hereto or certain of
    them,
respecting this Agreement or anything herein
    contained then every such dispute, difference or question or failure to agree
shall be referred to a single arbitrator to be appointed by the parties to the
    dispute within ten (10) days of such referral... [Emphasis added.]

[29]

The language of the arbitration agreement is broad in scope. It fits comfortably
    with Sharpe J.A.s description in
Dancap
, at para. 38:

I turn first to the scope of the arbitration clause. Section
    15(j) of the ARA [Additional Rights Agreement] is broad in scope: it applies
    not only to disputes arising out of the ARA but also to disputes related to
    the ARA. Contractual language calling for the arbitration of disputes relating
    to an agreement have been generously interpreted to enjoy a wide compass, an
    interpretation consistent with the legislative policy...which favours
    arbitration over litigation where the parties so provide by agreement:
Woolcock
    v. Bushert
(2004), 246 D.L.R. (4th) 139 (Ont. C.A.), at paras. 23, 25.

See also
Mantini v. Smith Lyons LLP
(2003), 64
    O.R. (3d) 505 (C.A.), at paras. 18-19.

(4)

Does the dispute arguably fall within the scope of the arbitration
    agreement?

[30]

After the motion judge determined the pith and substance of the dispute
    between the parties related only to fraudulent misrepresentation, apart from
    the oppression claim, he did not then consider whether the arbitration
    agreement applied nonetheless. The motion judge took the view that the scope of
    the arbitration agreement did not extend beyond contractual claims. He accepted
    Mr. Haass position that the scope of the arbitration agreement does not
    include arbitrating the issue of fraud in the formation of the original
    contract in which the arbitration agreement is found.

[31]

This approach was in error, for three reasons. First, the motion judge
    assumed tort claims fall outside of the scope of the arbitration agreement.
    Second, he assumed that a fraud claim vitiates an arbitration agreement. Third,
    he failed to advert to the laws policy of enforcing arbitration agreements and
    letting arbitrators decide the scope of their authority. He fell into error in
    equating forum selection clauses with arbitration agreements. These errors fall
    squarely into the list of extricable errors of law referred to in
Sattva
    Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, at
    para. 53. No deference is owed to his interpretation of the contractual documents.

Tort claims do not automatically fall outside arbitration agreements

[32]

Although
Matrix
was a case
    about a forum selection clause, not an arbitration agreement, in the course of
    his reasoning Sharpe J.A.
pointed to several cases where the courts
    have required the parties to proceed to arbitration even though tort claims
    were involved, at paras. 16-17:

In
Dalimpex Ltd. v. Janicki
,
(2003), 64 O.R.
    (3d) 737 (
Dalimpex
), at paras. 41-43, this court adopted and applied
    the test for applying a contractual provision which employs the words disputes
    arising out of or in connection with the parties contract used by the Alberta
    Court of Appeal in
Kaverit Steel and Crane Ltd. v. Kone Corp.
(1992),
    87 D.L.R. (4th) 129 (
Kaverit Steel
), at p. 135, leave to appeal to
    S.C.C. refused, [1992] S.C.C.A. No. 117, [1992] 2 S.C.R. vii. According to that
    test, a dispute is caught by the provision if either claimant or defendant
    relies on the existence of a contractual obligation as a necessary element to
    create the claim, or to defeat it. See also
Woolcock
at para. 23,
    holding that a claim is one relating to a contract [s]o long as the matter
    in dispute is referable to
the interpretation or implementation of some
    provision
of the Agreement (emphasis added by Sharpe J.A.).

In
Kaverit Steel
, the plaintiff advanced a conspiracy
    claim that relied upon a breach of the contract as the source of the
    unlawfulness to ground the conspiracy, and that was held to fall within the
    scope of the arbitration clause. Likewise, in
Dalimpex
, the claims for
    conspiracy and breach of fiduciary duty were mingled with claims for breach of
    contract and, in any event, in that case, this court declined to express any
    definitive view on the reach of the arbitration clause holding that
    determination should be left for the arbitrator.

[33]

In
Matrix
Sharpe J.A. concluded that the tort claims being advanced
    did not rely on a breach of the contract prescribing the forum, leaving the
    plaintiff free to sue in Ontario. He stated, at para. 18:

The present case is not one where either claimant or defendant
    relies on the existence of a contractual obligation as a necessary element to
    create the claim, or to defeat it or where the matter in dispute is referable
    to the interpretation or implementation of some provision in the agreement.

[34]

This case is readily distinguishable from
Matrix
, since, a
s I noted earlier, the motion judges
    statement, at para. 24, that the bulk of Haass claims fall outside the
    arbitration clause simply does not bear up under scrutiny. The bulk of the
    claims fall within the arbitration agreement and are clearly referable to the
    shareholders agreement.

[35]

Further, I would be reluctant to agree that the presence of tort claims
    nullifies an arbitration agreement. Justice Laskin cautioned the court to be
    wary of cases in which a party to an arbitration agreement seeks to avoid it by
    pleading a common law tort:
Piko v. Hudsons Bay Company
(1998), 41
    O.R. (3d) 729 (C.A.), at para. 9. Although that case involved possible
    arbitration under a collective agreement, in my view the principle holds more
    broadly.

Fraud does not necessarily vitiate an arbitration agreement

[36]

In
Ash v. Corp. of Lloyds
(1992), 9 O.R. (3d) 755 (C.A.), at para.
    9, Carthy J.A. observed that an allegation that a contract is void
ab initio
does not make it so until a
    final judgment of the court. The court upheld the motion judges stay of an
    action against Lloyds alleging Lloyds fraud. Justice Carthy agreed that the
    strategy of alleging fraud, while depriving the defendant of the contracted
    choice in respect of arbitration, would impair such arbitration clauses, which
    he considered to be too important in international commerce to permit that
    anomalous result to flow (at para. 9). The court should lean against a result
    that undermines arbitration agreements.

[37]

This is not a new proposition. Lord Wright said in the seminal case of
Heyman
    v. Darwins, Ltd.
, [1942] A.C. 356 (H.L. (Eng.)), at p. 384:

Hence, if the question of whether the alleged contract was void
    for illegality, or, being voidable, was avoided because induced by fraud or
    misrepresentation, or on the ground of mistake, it depends on the terms of the
    submission whether the dispute falls within the arbitrators jurisdiction.

[38]

In
James v. Thow
,
2005 BCSC 809, 5 B.L.R. (4th) 315, the application judge considered whether an
    action fell within the scope of an arbitration clause in an agreement between
    the plaintiff and the defendant. The plaintiff alleged fraudulent
    misrepresentation, breach of trust, breach of fiduciary duty and fraud. The application
    judge stayed the action and counterclaim, concluding, at para. 76: I am
    satisfied that the issues raised by the pleadings concern disputes that
    arguably fall within the scope of the arbitration agreement.

[39]

Put simply, in cases involving arbitration agreements, fraud does not
    necessarily vitiate everything. It is a matter of interpretation. The
    arbitration agreement in this case contains broad language, referring to
any dispute, difference or question
or
any failure to agree
respecting this Agreement or
anything
herein contained then
every
    such dispute, difference or question or failure to agree
shall be
    referred to a single arbitrator (emphasis added). There is no exclusion for
    tort claims, misrepresentation or fraud.

The law favours the enforcement of arbitration agreements

[40]

As noted above, the law, both statutory and judicial, favours the
    enforcement of arbitration agreements. This is not true for forum selection
    clauses. The motion judge cited
Matrix
and
Precious Metal
, but
    these are cases about forum selection clauses, not arbitration agreements, and
    do not support the motion judges decision to refuse to stay the action under
    s. 7 of the
Arbitration Act.

[41]

I reject the motion judges finding that the scope of the arbitration
    agreement is limited to contractual issues. To the contrary, the scope is broad
    and, in the normal course, s. 17 of the
Arbitration Act
and the
    jurisprudence plainly expect that the determination of jurisdiction will be
    made by the arbitrator, not the court. The motion judge erred in failing to
    take the relevant principles into account.

(5)

Are there grounds on which the court should refuse to stay the action?

[42]

Section 7(5) of the
Arbitration Act
provides:

(5) The court may stay the proceeding with respect to the
    matters dealt with in the arbitration agreement and allow it to continue with
    respect to other matters if it finds that,

(a) the agreement deals with only some
    of the matters in respect of which the proceeding was commenced; and

(b) it is reasonable to separate the
    matters dealt with in the agreement from the other matters.

[43]

The motion judge considered whether a partial stay should be ordered
    under s. 7(5) of the
Arbitration Act
. On the basis that the bulk of
    Haass claims fall outside the arbitration clause, he concluded that
    separating out the matters would be unreasonable: It makes little sense to
    order a partial stay referring the minority of the allegations to arbitration but
    permitting the rest to continue as an action particularly when each case would
    be founded on the same factual matrix (at para. 24).

[44]

The motion judges reliance on s. 7(5) of the
Arbitration Act
was based on a faulty premise, as noted above. Until the arbitrator decides his
    or her jurisdiction, a motion under s. 7(5) is premature.

[45]

I have concluded that the motion judge erred in refusing to stay Mr. Haass
    action on the ground that the subject matter is beyond the scope of the
    shareholders agreement. However, Mr. Haas submits that, even if the motion
    judge erred on this point, the action should be allowed to proceed for two
    other reasons: the arbitration agreement is invalid, and, alternatively, allowing
    the action to continue will prevent a multiplicity of proceedings. I address
    each in turn.

The arbitration agreement is not invalid

[46]

Mr. Haas invokes s. 7(2)2 of the
Arbitration Act
, which gives
    the court discretion to refuse a stay on the basis that the arbitration
    agreement is invalid. Mr. Haas argues that the arbitration agreement in this
    case is inoperable, hence invalid.

[47]

I would not give effect to this argument.

[48]

In the arbitration agreement set out below, in full, the appointment
    process is highlighted:

16.     Arbitration

If at any  time  during the currency of  this Agreement,  or after
    the termination hereof,  any dispute, difference  or question  shall arise,  or
    any  failure to agree as specifically hereinabove referred  to, shall occur among
    the parties hereto or certain of them,  respecting  this Agreement or anything
    herein contained
then every such dispute, difference or
    question or failure to agree shall be referred to a single arbitrator to be
    appointed by the parties to the dispute within ten (10) days of such referral
    or, if the parties to the dispute neglect or refuse or are unable to agree upon
    a single  arbitrator, then, each party shall appoint an arbitrator and the
    representatives so appointed shall jointly select a third arbitrator  or, if
    such representatives  neglect, refuse or are unable to agree upon such a third
    arbitrator within a further ten (10)days from the expiration of such first
    mentioned ten (10) day period, then either party to the dispute may apply to a
    Senior Judge of the Ontario Superior Court of Justice at Toronto, as a persona
    designata to appoint such single arbitrator.
The parties hereto acknowledge
    that any such arbitrator shall have some appropriate knowledge or expertise (as
    investor, executive, advisor or otherwise) in the industry. The award or determination
    (including the disposition of costs of the arbitration) shall be final and binding
    upon the parties hereto. Subject as aforesaid,  the arbitration shall be regarded
    as a reference  under,  and  shall  be  proceeded  with  pursuant  to  the
Arbitration
    Act,  1991
,  S.O.  1991,  C.17.

[49]

I agree with Mr. Haas that the arbitration agreement was designed for a
    bilateral agreement, not for an agreement with multiple partners, as this case
    presents, but that is not fatal. Mr. Haas argues:
If the clause is effective, Haas would immediately be outnumbered by
    arbitrators appointed by Gunam and Feng, stacking the arbitral panel against
    him. There is a simple answer: if the parties cannot agree on a single
    arbitrator, then each side to the dispute will appoint an arbitrator to select
    a third arbitrator. If these arbitrators do not appoint a third arbitrator, then
    under the agreement a Superior Court judge will appoint one. There is nothing
    inoperable about the arbitration agreement.

A multiplicity of proceedings is not dispositive

[50]

Mr. Haas argues that Mr. Viscardis ambivalent position in this case
    must lead inevitably to a stay. Mr. Viscardi joined with Mr. Gunam and Mr. Feng
    in bringing the motion for a stay although he was represented by other counsel.
    He did not appeal the motion judges refusal of a stay, so the action would
    remain alive against him whatever the outcome of this appeal. Therefore, Mr.
    Haas argues the referral of the dispute with Mr. Gunam and Mr. Feng to
    arbitration would cause multiple proceedings, contrary to s. 138 of the
Courts
    of Justice Act
, R.S.O. 1990, c. C.43
.
    Mr. Haas submits the motion judge erred in not ruling on this basis given Mr.
    Viscardis status.

[51]

I would not give effect to this argument.

[52]

Some context is necessary. In the order signed by the motion judge the
    following emphasized text was struck out of the preamble:

[O]n hearing the submissions of the lawyer(s) for the parties,
and the admission by counsel for the Defendant, Luca Viscardi,
    that Luca Viscardi did not sign the Shareholders Agreement dated August 16,
    2013, but takes the position that despite the absence of his signature, the Defendant,
    Luca Viscardi, became a party to the Shareholders Agreement
[Emphasis
    added.]

It appears that the absence of Mr. Viscardis signature
    on the shareholders agreement only came to light in the course of these
    proceedings.

[53]

Mr. Haas points out Mr. Viscardi denied being bound by the shareholders
    agreement because he did not sign it. On this basis Mr. Haas says the
    arbitrator would not have jurisdiction over Mr. Viscardi. Mr. Haas adds Mr. Viscardi
    attorned to the jurisdiction of the court after the motion by serving notice
    of a demand for particulars and has therefore waived the arbitration clause.

[54]

Mr. Gunam and Mr. Feng submit this is not a real issue. The motion judge
    accepted, at para. 2, Mr. Viscardi was a party to the arbitration agreement:
    His position on this motion is that despite the absence of his signature, he
    became a party through oral discussions with the others. Mr. Haas concedes
    the accuracy of this observation in his factum.

[55]

In support of their submission that Mr. Viscardi is bound by the
    arbitration agreement, Mr. Gunam and Mr. Feng also point to Mr. Viscardis
    cross-examination:

183    Q: Mr. Viscardi, when you consider the arbitration
    agreement, which is contained in the Shareholders Agreement, and then the
    documents that Mr. Ottaway took you to, the Shareholder Loan Agreement and the Subscription
    Agreement, how are those documents supposed to work together the way you
    understand it?

A: I understand that the Shareholders Agreement is,
    we say, give the rules to the other documents because this is why the
    shareholders agree that there is an arbitration and the arbitration is going to
    be used  is going to reflect all the documents. This is what I think.

184    Q: In your understanding, how did you think that disputes
    between Mr. Haas, Mr. Gunam, Mr. Feng, yourself, and the other shareholders
    would get determined?

A: In arbitration. Because, if not, we never even
    enter in this business. This is the only way.

[56]

Mr. Viscardi had earlier testified that he likes to have arbitration
    clauses in shareholder agreements but could not specifically recall instructing
    counsel to ensure that there was one in the shareholders agreement in this
    case.

[57]

I note that, had the motion been correctly decided, the stay would have
    been refused and the arbitration would have been under way. Does the fact that Mr.
    Viscardi did not appeal force this court to dismiss the appeal to avoid a
    multiplicity of proceedings? In my view it does not, for several reasons.

[58]

First, the court should not lightly depart from the strong policy
    support for enforcing arbitration agreements. Second, it is not clear that
    there will be a multiplicity of proceedings. Mr. Viscardi will have some
    difficulty if he takes the position that he is not bound by the arbitration
    agreement in light of his conduct at the motion. Third, Mr. Haas controls the
    litigation process in the action against Mr. Viscardi. If Mr. Viscardi now
    agrees to participate in the arbitration, then perhaps a stay of the action
    against him might be the subject of a consent order.

E.

Disposition

[59]

For the reasons set out above, I would allow the appeal, set aside the
    motion judges order and issue a stay of the action against the defendants Mr. Gunam
    and Mr. Feng.

F.

Costs

[60]

Mr. Gunam and Mr. Feng have been successful and are entitled to the
    costs of the appeal, which I would fix at $7,500 inclusive of disbursements and
    taxes. They also seek $14,000 in costs, inclusive of disbursements and taxes in
    respect of the proceedings before the motion judge.  I would award costs in
    that amount; this is a reasonable request well within Mr. Haass expectations, since
    the motion judge had awarded costs in the amount of $25,500 inclusive of
    interests and costs to him.

Released: J.C.M. October 13, 2016

P. Lauwers J.A.

I agree J.C.
    MacPherson J.A.

I agree Janet Simmons
    J.A.

[1]
Section 7(6) of the
Arbitration Act
provides that there is no appeal from a courts decision whether to stay an
    action in favour of arbitration. However, this subsection does not preclude an
    appeal from an order refusing to grant a stay on the ground that the matter is
    not a proper subject for arbitration:
Griffin
    v. Dell
, 2010 ONCA 29, 98 O.R. (3d) 481 at para. 25.

[2]
Similar provisions are found in the UNCITRAL Model Law on International
    Commercial Arbitration, adopted in Ontario by the
International Commercial Arbitration Act
,
    R.S.O. 1990, c. I.9, referred to in some of the cases.