



COURT OF APPEAL FOR ONTARIO

CITATION: Maisonneuve v. Clark, 2022 ONCA 113

DATE: 20220208

DOCKET: C69277

Huscroft, Sossin and Favreau
    JJ.A.

BETWEEN

Jean Maisonneuve and 3721094
    Canada Inc.

Applicants (Respondents)

and

Christopher Clark and Lanciter
    Consulting Inc.

Respondents (Appellants)

Bryce Dillon, for the appellants

David Cutler, for the respondents

Heard: February 1, 2022 by
    videoconference

On appeal from the order of Justice Sally
    A. Gomery of the Superior Court of Justice, dated March 16, 2021, with reasons
    reported at 2021 ONSC 1960.

REASONS FOR DECISION

[1]

This appeal deals with the application of a
    limitation period to an arbitration agreement.

[2]

The personal appellant and respondent are
    cousins who were in business together as shareholders of various companies,
    including Eastern Ontario Real Estate Investors Inc. (EOREI).

[3]

Their relationship deteriorated over the years
    and, in early 2016, they referred their business disputes to arbitration. In
    September 2016, the parties reached an agreement on all issues in dispute
    except for one. As part of the agreement, the personal appellant agreed to
    transfer all his shares in EOREI to the personal respondent. However, the
    parties were not able to agree on the payment of various expenses associated
    with EOREI. The mutual release the parties signed in the context of their overall
    settlement provided that this outstanding issue was to be referred to
    arbitration. This term of the release was worded as follows:

The undersigned agree and understand that
    there is one issue that is not covered by the Mutual Release and it is as set
    out in this paragraph (the Excluded Issue). Maisonneuve takes the position
    that Clark is responsible for certain EOREI related costs and expenses incurred
    prior and subsequent to the Acceptance date. Conversely, Clark takes the position
    that he is not responsible for any EOREI related costs and expenses prior and
    subsequent to the Acceptance date and, if he is responsible for any EOREI
    related costs and expenses, then he disputes Maisonneuves accounting thereof.
If
    the parties are unable to resolve the Excluded Issue as between them, then the
    Excluded Issue shall be fully and finally referred to the Arbitrator for
    resolution.
The Arbitrators decision shall not be subject to any appeal,
    either of law, fact or mixed law and fact. [Emphasis added.]

[4]

The parties signed the release on September 26
    and 27, 2016. In 2017, the parties became involved in litigation over the
    validity of the settlement agreement as a whole. On January 31, 2018, in the
    context of settlement negotiations regarding the litigation, the appellants lawyer
    took the position that there would be no negotiations over the EOREI expenses.

[5]

In June 2019, the respondents lawyer wrote to
    the appellants lawyer seeking to initiate the arbitration over the EOREI expenses.
    The appellants refused the request to arbitrate on the basis that it was time-barred.

[6]

In September 2019, the respondents commenced an
    application to the Superior Court to appoint an arbitrator. On the application,
    the appellants took the position that the arbitration was time-barred because
    the parties had agreed that the referral for arbitration would take place
    within 90 days of the signing of the settlement agreement or, in the
    alternative, that the two-year limitation period in the
Limitations Act, 2002
,
    S.O. 2002, c. 24, Sched. B, applied and the respondents were required to
    commence the arbitration within two years of the date when the parties signed
    the settlement agreement.

[7]

The application judge held that there was no
    agreement that the parties would conduct the arbitration within 90 days of the
    agreement. She also held that the arbitration was not barred by the two-year
    limitation period in the
Limitations Act, 2002

because, based on s. 5(1)(a)(iv) of the Act, it was not evident that the arbitration
    was appropriate until it was clear that the dispute could not be resolved
    through negotiations. In reaching this conclusion, the application judge relied
    on the wording of the arbitration clause and the context of the negotiations
    leading up to the September 2016 settlement. Ultimately, she found that the
    respondents should have known by January 31, 2018 that a negotiated settlement
    of the EOREI expenses was not possible based on the communications between the
    parties counsel. On that basis, she found that the respondents commenced the
    application within the two-year limitation period.

[8]

On appeal, the appellants do not challenge the
    application judges finding that there was no agreement that the arbitration
    would take place within 90 days. However, they challenge her finding that the
    two-year limitation period started to run on January 31, 2018 rather than in
    September 2016, when the parties signed the agreement.

[9]

We do not agree that the application judge made
    any reversible errors.

[10]

The only issue on the appeal is the application
    judges interpretation of the arbitration agreement. This is not a standard
    form contract and, accordingly, the application judges decision is owed
    deference and the palpable and overriding error standard of review applies.

[11]

The appellants essentially raise four arguments
    on appeal.

[12]

First, the appellants argue that the application
    judge erred in failing to apply this courts decision in
Markel Insurance
    Company of Canada v. ING

Insurance Company of Canada
, 2012 ONCA 218,
    109 O.R. (3d) 652, to the interpretation of the arbitration clause. We reject
    this argument. In
Markel
, this court addressed the limitation period
    that applies to s. 275(4) of the
Insurance Act
, R.S.O. 1990, c. I.8, which
    provides that [i]f the insurers are unable to agree with respect to
    indemnification under this section, the dispute shall be resolved through arbitration
    under the
Arbitration Act, 1991
. In
Markel
, this court held
    that negotiation was not a precondition to arbitration and, therefore, the
    limitation period does not start to run at the conclusion of unsuccessful
    negotiations. The application judge here distinguished
Markel
on the
    basis that in that case this court was interpreting a statutory provision
    rather than a provision in an agreement. She explained that, in the context of
    an agreement, the factual matrix is also relevant to understanding the partys
    intentions. In addition, she found that the differences between the wording of s.
    275(4) of the
Insurance Act
and the arbitration clause here are
    significant. She found that the use of the word then in the arbitration
    clause adds a temporal component that makes the clause both temporal and
    conditional. An attempt at informal resolution is a prerequisite to
    arbitration. The application judge made no palpable and overriding error in
    reaching this conclusion. The distinctions she drew between
Markel
and
    the circumstances of this case were available on the law and on the record
    before her.

[13]

Second, the appellants also argue that the
    application judge made a palpable and overriding error in finding that it was
    not clear at the time the parties agreed to the arbitration clause in September
    2016 that they would not participate in any further negotiations over the EOREI
    expenses. In making this argument, the appellants ask this court to review and reweigh
    correspondence between the parties leading up to the agreement to arbitrate. It
    is evident from the decision that the application judge reviewed the correspondence
    at issue and concluded that it represented an evolution in the personal appellants
    position. While the appellant initially insisted that there would be no
    discussion of the EOREI expenses claim, the application judge found that by the
    time the agreement was concluded he had entered into Minutes that not only
    acknowledged Maisonneuves claim for the expenses but contemplated that the
    parties could resolve the issue as between them prior to resorting to
    arbitration. The application judge made this finding based on her review of
    the correspondence and the wording of the arbitration clause. Her finding is
    entitled to deference and we see no palpable and overriding error.

[14]

Third, the appellants argue that the application
    judge erred in relying on the decisions in
PQ Licensing S.A. v. LPQ Central
    Canada Inc.
, 2018 ONCA 331, and
L-3 Communication SPAR Aerospace
    Limited v. CAE Inc.
, 2010 ONSC 7133, as authority for the proposition that
    the limitation period that applies to an arbitration clause may not start to
    run until the parties have exhausted attempts at informal resolution. The
    appellants argue that the arbitration clauses in those cases were different and
    the preconditions for enforcement much clearer than in this case. While this
    may be true, it does not detract from our conclusion that the application judge
    made no palpable and overriding error in her interpretation of the arbitration
    clause as including a precondition in this case.

[15]

Finally, the appellants argue that the
    application judges decision will lead to uncertainty with respect to the
    application of limitation periods to arbitration clauses because it is
    necessarily difficult to ascertain when negotiations are at an end. We reject
    this argument. The application judges decision was based on the specific
    wording of this arbitration clause and the circumstances in which it was
    negotiated. Parties are free to agree to arbitration clauses that make no
    reference to the possibility of an informal agreement or that are more specific
    about the steps and timing leading to arbitration. In this case, as stated by
    the application judge, it was open to the appellants to let the respondents
    know at any time that no further negotiations would take place. Indeed, this is
    what occurred in January 2018, which the application judge found triggered the start
    of the limitation period.

[16]

For these reasons, we dismiss the appeal.

[17]

The respondents are entitled to costs in the
    agreed amount of $5,000.

Grant
    Huscroft J.A.

L.
    Sossin J.A.

L.
    Favreau J.A.


