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So You’ve Lost Your Arbitration: Now What?

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It has been commonplace to include arbitration clauses in commercial agreements. The benefits of arbitrating disputes rather than litigating over them are well known. Arbitrations are usually considered to be a cheaper and faster way to adjudicate disputes than litigation. Typically, arbitrations are seen to be the better approach particularly when the parties expect to continue to do business with each other after the dispute has been resolved. For example, where a dispute arises during a contract where the performance of obligations by each side is expected to continue on a long-term basis and the dispute is not serious enough for either party to actually terminate the agreement, arbitrations are thought to be a somewhat less acrimonious and certainly more efficient way of handling the issue at hand.

Often, one of the key features of arbitration has to do with the limits on appeal rights. It is not uncommon for an arbitration clause to provide that there simply is no appeal of any kind from the arbitrator’s decision.

A limit on appeals may seem like a good idea at the time the contract is signed. Presumably, neither party actually anticipates there is going to be a dispute during the course of the business relationship and it may provide some comfort to know that if there is a dispute, its resolution will not be dragged out by an appeal process.

However, this feature becomes a lot less appealing when one engages in an arbitration to resolve a dispute and loses. What then?

An arbitration provision that provides that the arbitration’s decision is final will be interpreted by the court in exactly that manner – as final. If it turns out that the arbitrator didn’t understand the evidence or simply got it wrong in the opinion of one of the parties (or perhaps both), that’s simply too bad. That is a risk that one takes when entering into such an agreement. Presumably, the risk cuts both ways.

Having said that, in Ontario, the Arbitration Act does provide for some recourse in certain circumstances. Section 46 of the Act allows an unhappy party to ask the court to set aside an arbitration award on the basis that the arbitrator failed to conduct the hearing in a procedurally fair manner. For example, an award can be set aside by a party who is not treated equally and fairly, was not given an opportunity to present its case or respond to the opponent’s case, or was not given proper notice of the arbitration or the appointment of an arbitrator.

There is often a temptation to bring such a motion on the basis of allegedly unequal or unfair treatment when all that has really happened is that one of the parties does not like the award. In the recent case of Aquanta Group Inc. et al. v. Lightbox Enterprises Ltd., 2023 ONSC 971, Aquanta applied to the court for an order to set aside the award because a few days before the commencement of the arbitration, the arbitrator dismissed its motion to amend its pleading. The arbitrator, a retired trial judge, had considered the arguments on both sides and exercised his discretion to dismiss the motion and require the arbitration to proceed as scheduled.

At the motion to set the award aside, Aquanta argued that the arbitrator’s refusal to allow it to amend its pleading amounted to unfair and unequal treatment. The court disagreed and dismissed the motion.

In doing so, the judge relied on a decision of the Ontario Court of Appeal released in December 2022 called Tall Ships Development Inc. v. Brockville (City), 2022 ONCA 861. In that case, the Court of Appeal made it abundantly clear that the basis for setting aside an award for procedural unfairness is extremely narrow. That provision of the Act “is not concerned with the substance of the parties’ dispute and is not to be treated as an alternate appeal route.”

Accordingly, it appears clear that at a motion to set aside an award, the court will not consider the substantive issues in the dispute. It will only concern itself with matters of a procedural nature. In the Lightbox decision, for example, the issue was not whether or not the arbitrator exercised his discretion correctly or even reasonably. The only issue was whether or not the arbitrator had the jurisdiction to make the decision that he made. As the arbitrator acted within the bounds of the authority granted to him by the arbitration agreement, that ended the matter. Arbitration clauses in commercial agreements have become popular because they offer the possibility of a speedy resolution to disputes. However, an arbitration provision with no appeal rights does present some element of risk which should be considered carefully before the agreement is signed.

When Can A Ski Resort Be Liable For A Skier’s Injuries?

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The recent decision of the Ontario Superior Court in Trimmeliti v. Blue Mountain Resorts Limited is a useful reminder of the difficulty that an injured skier will face in suing a ski resort for a personal injury incurred on the slopes.

In this case, Mr. Trimmeliti suffered a fractured clavicle when night skiing with two other friends at the Blue Mountain Ski Resort near Collingwood, Ontario and attempted to collect damages from Blue Mountain.

Mr. Trimmeliti, a self-described intermediate skier, had been skiing at Blue Mountain for years.  In fact, in the year of the accident (2006), he had a season pass at Blue Mountain and was generally familiar with its ski runs.

On the evening of February 9, 2006, he and two friends skied a number of runs over several hours until about 9:00 pm.  They then decided to ski down an intermediate hill called Waterfall.

About a third of the way down Waterfall, where the run levels out for a distance, there is a trail breaking off to the left known as Crooked Oak.  Crooked Oak is a black diamond run, meaning that it is somewhat more difficult than Waterfall.

The plaintiff testified that he was familiar with these runs.

As it happens, Crooked Oak was closed that night.  In this case, as is typical of these situations, the fact that a run was closed was signified by an orange ribbon closing it off at the top of the run.

The plaintiff testified that he was leading his group down the hill and bore left to take the turn-off onto Crooked Oak.  He claimed to have been unaware that it was closed.  The next thing he knew was that something hit his collar bone and he was down on the hill.  In fact, it appears that he was “clotheslined” by the ribbon itself and suffered the injury when he fell.

In other words, the very mechanism used by the hill to signify that a run was closed, presumably because it was not safely skiable, caused the injury.

In the lawsuit, Mr. Trimmeliti alleged that Blue Mountain had been negligent in the way in which it had closed off the Crooked Oak run by using the tape in a location where it was not illuminated by the night lighting used for night skiing.  As a result, he alleged that the tape represented an obstacle that he could not see and therefore not avoid.

He also alleged that Blue Mountain had been operating snow making equipment in the area, further obscuring the ribbon.

The judge did not find any evidence to support these allegations. The judge found that even if the snow gun had been operating in the area, a skier would have been able to see the ribbon from at least 120 feet away, which is plenty of time to be able to stop.  The judge went on to conclude that the site was lit by a high intensity light which was quite adequate for night skiing and which rendered the ribbon visible from a reasonable distance away to any skier skiing in control and at a safe rate of speed.

A more technical obstacle faced by the plaintiff had to do with his contract with Blue Mountain as represented by his season pass.  The judge found that the terms of that contract warranted a dismissal of the claim all by itself.

The season pass included a release in favour of Blue Mountain. The release language included a title in capital letters in an enclosed box at the top of a page signed by the plaintiff when he obtained his pass, in large bold type and highlighted in yellow.

According to the judge, “it would have been impossible for any literate person to have signed this document – even if they did no more than scan the heading – and remain ignorant of its general purpose and intent.”  Although the plaintiff claimed not to have read the document before signing it, the judge found that he could not have failed to understand what it was about in a general way.

In the past, the plaintiff had skied at the resort using a day pass.  Each person purchasing a day pass in at least the previous five years had been given a lift ticket to attach to their jacket with similar language.  Furthermore, the judge noted that the same language was also boldly displayed in public areas of the hill including the ticket area.

In conclusion, the judge indicated that he was “hard pressed to imagine what more the defendant could have done to bring the defendant’s required conditions of access to the ski hill in terms of waiver and release of liability to the plaintiff’s attention.”

There are very limited circumstances in which a waiver on a season pass or day lift ticket may not be enforced.  For example, where the ski resort personnel know that the skier does not intend to be bound by the waiver, there is a positive duty on those personnel to bring its terms to the attention of the plaintiff.  In this case, there was no such knowledge and in any event, Blue Mountain was found to have taken all reasonable precautions necessary to make it abundantly clear to this and all other skiers that they were skiing at their own risk.

The waiver, in this case, included a release of any claim based on negligence on the part of Blue Mountain. That part of the release was not tested because the judge found that Blue Mountain had not been negligent in the way it operated the ski hill. The question of whether or not a plaintiff would suffer the same consequences if it could prove negligence is not answered by this case.  Accordingly, this discussion is, as they say, “to be continued…”

The New World of Summary Judgments: Are the Courts Going Too Far?

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The recent case of King Lofts Toronto I Ltd. vs. Emmons involves the granting of a summary judgment where the remedy would never have been possible in the past.

This was a solicitor’s negligence case in which the law firm moved for summary judgment dismissing the claim and, without formally bringing a cross-motion for summary judgment, the former client requested a partial summary judgment against the law firm.

In 2005, a developer retained the Defendant law firm to act on a purchase of four commercial properties in downtown Toronto. The price was $22.5 million. The title indicated that the City of Toronto owned a strip of land and a laneway under the rear of one of the buildings.

The purchaser assigned its interest in the purchase agreement to the Plaintiff in this case, whose principal was described by the Court as an experienced businessman and investor in real estate. The Plaintiff retained the law firm to continue and to complete the transaction.

Before closing, the lawyer handling the file told the Plaintiff about the laneway. He also said that this was a minor issue that was covered by title insurance that was being obtained. He indicated that the problem would be solved by converting the property from the Registry System to the Land Title System, that this could be completed after closing, and that the cost of doing so would be relatively nominal. Subsequently, the law firm indicated that after closing they could approach the City and ask for a by-law to be passed to convey the lane to the Plaintiff. Alternatively, they could attempt to obtain a court order based on the length of time that the building had been located on the laneway itself.

In any event, it was clearly conveyed to the Plaintiff that the problem was a minor one and likely covered by title insurance.

What the Plaintiff was not told is that the City would request payment for a conveyance of the laneway even though it had been located under a building for about eighty-six years. He was also not told that the title insurance policy excluded coverage for City-owned laneways.

The deal closed with no holdback in respect of the laneway. After the closing, the Plaintiff did nothing about the laneway and several years passed.

In 2008, the Plaintiff received an unsolicited offer from a Real Estate Investment Trust to purchase the properties. An agreement was signed for the sale to the REIT for a purchase price of $31.5 million.

Before the closing of that transaction, the lawyer for the REIT demanded that the title be rectified so that the Plaintiff could convey the laneway. When the Plaintiff looked into it further, it discovered that it would cost $106,000 to get the City to convey the laneway. An application was made to the title insurance company for coverage but that was denied.

The Plaintiff had no choice but to pay the $106,000 for the laneway. It then closed the deal to sell the properties to the REIT for $31.5 million – $9 million more than it had paid four years earlier.

The Plaintiff then sued the law firm for negligence.

At this point, one might well take a step back and suggest that having achieved a profit of almost 50%, the Plaintiff might have better things to do than to chase its former law firm over $106,000. It may be the fact that the law firm had billed the Plaintiff more than $270,000.00 in fees for the purchase transaction, which the Plaintiff had apparently found excessive, played a role in the Plaintiff’s decision to pursue the matter.

In any event, the law firm brought a motion for judgment to dismiss the claim on a variety of grounds. The most interesting one, in my view, related to the issue of causation.

As the Court pointed out, for a lawyer to be liable for professional negligence, the client must prove that the misconduct caused the client’s loss and that the client has suffered damages as a result. Generally, the “but for” test is used, on a balance of probabilities. In other words, the client must show that the injury would have not occurred “but for” the negligence of the lawyer.

In this case, the Plaintiff argued that had he been made aware of the extent of the problem, and the cost of resolving it, he would have insisted on a reduction in the purchase price.

By way of contrary evidence, the original purchaser of the property (who had assigned the purchase agreement to the Plaintiff) provided evidence that the vendor was notoriously hard to deal with and would never have agreed to such a reduction.

If that is true, of course, it could be argued that the law firm actually did the Plaintiff a tremendous favour. If the Plaintiff had been told of the extent of the problem and asked for the reduction, and the vendor had refused, it is very possible that the Plaintiff would have lost the deal (and therefore, the handsome profit achieved upon resale four years later).

As a reflection of the current state of the law on summary judgments, however, what is particularly interesting is what the Judge did with this evidence.

The Judge simply accepted the Plaintiff’s evidence and disregarded the evidence of the original purchaser. He decided that it was “at least doubtful that the vendor…could have simply relied on the recession clause to withdraw from the transaction” and concluded on a balance of probabilities that likely, there would have been agreement between the parties on a holdback or an abatement of the purchase price.

The Judge went on to dismiss the law firm’s motion for summary judgment and to grant summary judgment in favour of the Plaintiff on liability, with a trial to follow on damages.

In my view, this is a surprising decision that may move the yardsticks for summary judgment a long way. The current jurisprudence does allow the judges to make some credibility findings in certain circumstances. Here there was a contest between written evidence from the Plaintiff as to what he would have done (with the benefit of hindsight) on the one hand, and written evidence from another individual with nothing to gain or lose in the transaction suggesting that what the Plaintiff would have done would not have worked. I would have thought that this would have required a trial in order to resolve. However, that was not this motion court Judge’s opinion.

Subject to review by the Court of Appeal, this case might well constitute a significant development in the law of summary judgment in Ontario.