


COURT OF APPEAL FOR ONTARIO

CITATION:
Shaw Satellite
    G.P. v. Pieckenhagen, 2012 ONCA 192

DATE: 20120323

DOCKET: C54202 and C54205

MacPherson, LaForme JJ.A., and Pattillo J. (
ad
    hoc
)

BETWEEN

Shaw Satellite G.P., c.o.b. as Shaw Direct

Plaintiff (Respondent)

and

Curt-Michael Pieckenhagen a.k.a. Curt Michael
    Pieckenhagen a.k.a. Curt Pieckenhagen a.ka. Curt-Michael Picckenhagen a.k.a.
    Kurt Micahel, a.k.a. Pat Turner, Kurt Pieckenhagen, Megan Anderson, Julita
    Pieakenhagen, Julite-Luise Pieckenhagen, a.k.a. Jules Luise a.k.a. Jules
    Michael, Vera Pieckenhagen, Christopher Brooks, a.k.a. Chris Brooks a.k.a.
    Andrew Brooks, Nicole Pieckenhagen, 1125749 Ontario Limited, Eccelerated
    Digital, Accelerated Digital Communications Inc., 121429 Ontario Inc., 373041
    Ontario Inc., Graydon Hall Property Management Ltd., GH Capital Corporation,
    Andrew Brooks, Theo Bulk, Jules Luise, Jules Michael, Kurt Michael and Pat
    Turner

Defendants (Appellants)

Michael A. Spears for the appellants Curt-Michael Pieckenhagen, 1125749 Ontario Limited, Eccelerated Digital, Accelerated Digital Communications Inc. and 121429 Ontario  Inc.

Melvyn Solmon, Nancy Tourgis, Jonathon Kappy, for the appellants
    373041 Ontario Inc., Kurt Pieckenhagen, Julita Pieakenhagen, Julite-Luise
    Pieckenhagen, a.k.a. Jules Luise a.k.a. Jules Michael, Vera Pieckenhagen,
    Christopher Brooks, a.k.a. Chris Brooks a.k.a. Andrew Brooks, Nicole
    Pieckenhagen, Graydon Hall Property Management Ltd., GH Capital Corporation

Christopher D. Bredt and Isabella Massimi, for the
    respondent

Heard and released orally: March 21, 2012

On appeal from the order of Justice Paul M. Perell of the
    Superior Court of Justice, dated July 14, 2011.

ENDORSEMENT

[1]

The defendants appeal from the
    order of the motion judge dated July 14, 2011 dismissing their motion under s.
    7(1) of the
Arbitration Act
,
    1991, S.O. 1991, C.17 (the Act) to dismiss or permanently stay the respondent
    Shaw Satellites (Shaw) action commenced in the Superior Court against them
    (the Action).

[2]

The defendants are the owners
    and/or operators of three apartment buildings in Toronto. Shaw alleges that the
    defendants fraudulently obtained its programming and illegally transmitted it
    to hundreds of tenants in their apartment buildings. Shaw alleges that the
    defendants obtained the programming by using mainly fictitious names and
    addresses to obtain a number of Shaw residential subscriber accounts. The
    accounts and receivers associated with them were then used as part of a
    satellite master antennae television system to then transmit the programming to
    the tenants.

[3]

In order to obtain the right to receive and review Shaw
    programming, a subscriber must enter into the Shaw Residential Agreement (the
    Agreement). The Agreement contains a number of terms and conditions including
    that the receivers be located at the residence listed on the customers
    account, that the right to receive programming is restricted to the customers
    residence and the programming cannot be rebroadcast, reproduced or transmitted
    except in accordance with the Agreement. The Agreement also contains an
    arbitration clause which is the subject matter of the dispute before us.

[4]

The motion judge dismissed the appellants motion on three mutually
    exclusive grounds.

[5]

First, he held that the defendants were not entitled to bring a
    motion for a stay pursuant to s. 7(1) of the Act given that they had not
    asserted that they were parties to the arbitration agreement. In so concluding,
    he held that the competence-competence principle did not apply in the
    circumstances of the case.

[6]

Second, and in the alternative, the motion judge held that if the
    competence-competence principle did apply, the case fell within an exception to
    the principle given that the pith and substance of the dispute between the
    parties was outside the jurisdiction of the arbitrator.

[7]

Finally, and in the further
    alternative, and if the exception to the competence-competence principle did
    not apply, the motion judge noted that s. 7(5) of the Act applied and refused
    to grant a partial stay pursuant to that section on the ground that it would
    create, among other things, a multiplicity of proceedings.

[8]

The appellants raise three grounds of appeal:

1.

The motion judge
    erred in finding that the appellants were not entitled to bring a stay motion
    under s. 7(1) of the Act because they did not assert that they were parties to
    the arbitration agreement. In so finding, the appellants submit the motion
    judge misapplied the competence-competence principle;

2.

The motion judge
    erred in holding, in the alternative, that if the competence-competence
    principle did apply, the case at bar was an exception to the principle given
    that the pith and substance of the Action was outside the jurisdiction of the
    arbitrator; and

3.

The motion judge
    further erred in refusing to grant the stay under s. 7(5) of the Act on the
    basis that it would result in a multiplicity of proceedings and certain
    defendants were not party to the arbitration agreement.

[9]

In our view, the motion judge was correct in concluding, as he
    did, that the appellants did not meet the onus of establishing that they are
    entitled to invoke s. 7(1) of the Act. While that conclusion is sufficient to
    deal with the appeal, we also agree with the motion judges alternate finding
    that s. 7(5) applies and his decision to refuse to grant a partial stay of the
    Action under s. 7(5). Accordingly, the appeal must be dismissed.

[10]

The motion judge concluded, correctly in our view that, on the
    facts of this case, the appellants refusal to agree that they are parties to
    the arbitration agreement disentitled them to invoke the arbitration agreement
    under s. 7(1) of the Act. Shaws statement of claim alleges significant issues
    of fraud and illegal activity on the part of the appellants facilitated by the
    Agreement. The claim alleges that while all appellants were part of the
    impugned conduct, only a few entered into the Agreement. The appellants have
    filed no defence to the claim. In the circumstances, we agree with the motion
    judge that the appellants cannot just rely on the statement of claim. It is
    incumbent on them to indicate to the court that they are parties to and bound
    by the Agreement to invoke s. 7(1). To hold otherwise would enable them to take
    the position before an arbitrator that they are not parties to the Agreement
    which in our view would be entirely inappropriate.

[11]

We are mindful that on the hearing
    of the motion, the defendant Curt-Michael Pieckenhagen acknowledged to the
    court that he was attorning to the jurisdiction of the arbitrator.  We agree
    with the motion judge in his supplementary reasons that this attornment comes
    too late to affect the decision.

[12]

In his reasons for decision, the motion judge went on to state
    that in the event his analysis that s. 7(1) did not apply was incorrect then s.
    7(5) of the Act applied. We agree that where a dispute falls within s.7(1), s.
    7(5) of the Act is applicable.

[13]

In the Action, there are 23 defendants, including six
    corporations. The statement of claim alleges that eight individual defendants
    maintained Shaw accounts for the purpose of facilitating their scheme. The
    evidence before the motion judge more specifically established that there are
    nine Shaw residential subscriber accounts associated with the activity alleged
    to be carried on by the defendants. One is in the name of the defendant
    Curt-Michael Pieckenhagen; one in the name of the defendant Chris Brooks,
    Curt-Michaels brother-in-law; and one in the name of the defendant Kurt
    Pieckenhagen, Curt-Michaels father. The remaining six are under false names or
    aliases.

[14]

Accordingly, it is clear that while three of the defendants may
    be subject to the arbitration clause, the remaining 20 would not be. It is also
    clear that the alleged fraudulent and illegal activity involved all of the
    defendants.

[15]

Section 7(5) of the Act gives the court discretion to grant a
    partial stay in circumstances where it is reasonable to separate the matters in
    an action which fall within the scope of the arbitration agreement from those
    that are clearly outside it. See:
Brown v. Murphy
(2002), 59 O.R. (3d)
    404 (C.A.);
Radewych v. Brookfield Homes (Ontario) Ltd.
, [2007] O.J.
    No. 4012 (C.A.).

[16]

In exercising his discretion, the
    motion judge refused to grant a partial stay under s. 7(5) of the Act on the
    basis that it was not reasonable in the circumstances of the case. He noted
    that a partial stay would result in a multiplicity of proceedings, duplication
    of resources, inefficiency, increased costs and delay contrary to s. 138 of the
Courts of Justice Act
. We agree
    with this finding.

[17]

Given the issues in the Action and the numerous parties involved,
    it was within the motion judges discretion to conclude it did not make sense
    to permit the dispute to proceed to arbitration in respect of three defendants
    and allow the Action to continue against the other 20. He was entitled to
    conclude that the issues should be determined for all parties in one forum and
    that the proper forum in this case is the court.

[18]

Accordingly, the appeal is dismissed.

[19]

Costs to the respondent fixed in the amount of $30,000 inclusive
    of disbursements and HST.

J.C. MacPherson J.A.

H.S. LaForme J.A.

L.A.
    Pattillo J. (
ad hoc
)


