



COURT OF APPEAL FOR ONTARIO

CITATION: PQ Licensing S.A. v. LPQ Central Canada Inc., 2018
    ONCA 331

DATE: 20180405

DOCKET: C63750

Sharpe, LaForme and van Rensburg JJ.A.

BETWEEN

PQ Licensing S.A., Vincent Herbert and Jean-Marie
    Josi

Applicants (Appellants)

and

LPQ Central Canada Inc
.

Respondent (Respondent)

Geoffrey B. Shaw and Eric
    Mayzel, for the appellants

David M. Golden and Marco
    P. Falco, for the respondent

Heard: January 30,
    2018

On appeal from the judgment of Justice Victoria R. Chiappetta
    of the Superior Court of Justice, dated January 17, 2017, dismissing an appeal
    from the preliminary award of Arbitrator Ronald G. Slaght, dated June 10, 2016.

van Rensburg J.A.:

A.

OVERVIEW

[1]

This is an appeal from a judgment of a judge of the Superior Court
    dismissing an appeal from an arbitrators decision on a preliminary issue. The
    parties are engaged in a dispute about a franchisees purported rescission of
    their franchise agreement. The agreement provided for the mediation, then
    arbitration, of disputes. On the franchisors preliminary motion, the
    arbitrator determined that the limitation period of two years under the
Limitations
    Act, 2002
, S.O. 2002, c. 24, Sched. B had not expired, and that the
    arbitration of the parties dispute could therefore proceed. The franchisors
    appeal to the Superior Court was dismissed. The further appeal to this court is
    by leave.

[2]

For the reasons that follow, I would dismiss the appeal. The standard of
    review from the decision of the arbitrator is reasonableness. The arbitrator
    was engaged in the determination of an issue that depended on the
    interpretation of the parties contract, and the application of relevant legal
    principles, to determine whether the time for commencement of the arbitration
    process had expired. There is nothing about the issue decided by the arbitrator
    that would displace the presumptive standard of reasonableness in appeals of
    arbitral decisions.

[3]

The arbitrators decision that the arbitration was not time-barred was
    reasonable. It was based on his reasonable conclusions that (i) the parties
    agreement provided for mediation as a precondition to arbitration; (ii) the
    requirement to mediate in Delaware could be severed from the parties
    agreement; and (iii) applying s. 5(1)(a)(iv) of the
Limitations Act
, the
    two year limitation period for arbitration commenced on the date that mediation
    was deemed completed.

B.

THE DISPUTE

[4]

The parties to the appeal are the appellants (together, the
    franchisor) and the respondent, a franchisee. In 2008 they entered into an
    Area Development Agreement (the franchise agreement) for the development by
    the franchisee of 13 Le Pain Quotidien locations in the provinces of Ontario
    and Québec. On August 11, 2009 the respondent delivered a notice of rescission,
    asserting that the franchisor had breached its disclosure obligations under s.
    5 of the
Arthur Wishart Act (Franchise Disclosure), 2000
, S.O. 2000,
    c. 3 (the 
AWA
). On October 8, 2009 the franchisor disputed the
    validity of the franchisees notice of rescission.

[5]

On October 6, 2011, almost two years later, the franchisee commenced an
    action in the Superior Court. The franchisor objected, relying on ss. 31.03 and
    31.04 of the franchise agreement, which required disputes between the parties
    to be arbitrated after mediation (the ADR Provisions). By letter dated
    January 16, 2012 the franchisee asserted that the mediation requirement was
    void because it required mediation in the State of Delaware and that, in any
    event, the entire franchise agreement was voided by the franchisors breaches.
    The franchisor responded by letter dated January 23, 2012 stating that the
    mediation clause was not void, proposing a mediation in Toronto, and indicating
    that it would bring a stay motion if the franchisee did not agree to first mediate
    and then submit to arbitration any claims not resolved by mediation.

[6]

The court action remained dormant until it was administratively
    dismissed for delay in 2013. When the franchisee tried to revive the action,
    the franchisor relied on the franchisees failure to commence an arbitration,
    which it asserted was out of time. Penny J. stayed the court action in July
    2013 on the basis of the ADR Provisions. He directed that the limitation period
    issue be determined by the arbitrator. The franchisee then served a notice of
    arbitration on October 7, 2013.

[7]

The parties agreed to the appointment of Ronald G. Slaght as arbitrator.
    As a preliminary issue, he had to determine whether the arbitration was out of
    time because it was not commenced within two years of October 8, 2009, the date
    the franchisor disputed the franchisees notice of rescission. The arbitrator
    decided this issue against the appellant franchisor.

C.

RELEVANT CONTRACTUAL AND STATUTORY PROVISIONS

[8]

At the center of the dispute are ss. 31.03 and 31.04 of the franchise
    agreement, comprising the ADR Provisions, s. 10 of the
AWA
,

and the relevant provisions of
    the
Limitations Act.


[9]

Sections 31.03 and 31.04 of the franchise agreement provide in part:

31.03 Except for disputes [relating to intellectual
    property], the parties agree that before resorting to arbitration, litigation
    or any other dispute resolution procedure, if any dispute between them  cannot
    be settled through negotiation by diligent effort, they will first attempt in
    good faith to settle the dispute or claim by non-binding mediation conducted in
    the state of Delaware under the auspices and then-prevailing commercial
    mediation rules of the American Arbitration Association. The parties
    obligation to mediate will be deemed to be satisfied when six hours of
    mediation have been completed (whether or not the parties have resolved their
    differences) or sixty days after a mediation demand has been made if any party
    fails to appear or participate in good faith in the mediation.

31.04 Except for
    disputes [relating to intellectual property], all controversies, disputes or
    claims arising between us  and you  based on any theory or facts, and whether
    or not arising out of this Agreement and which have not been resolved through
    mediation as provided in Section 31.03 above will be submitted for arbitration
    as provided in this Section 31.04 including (without limitation) any claim for
    equitable or interlocutory relief and any dispute as to the arbitrability of
    the controversy, dispute or claim.

[10]

Section
    10 of the
AWA
provides:

Any provision in a
    franchise agreement purporting to restrict the application of the law of
    Ontario or to restrict jurisdiction or venue to a forum outside Ontario is void
    with respect to a claim otherwise enforceable under this Act in Ontario.

[11]

The
    parties agree that the
Limitations Act
applies, and that the applicable
    limitation period for arbitration in this case is two years from when the claim
    was discovered. Section 5 of the
Limitations Act
provides in part:

5.(1) A claim is discovered on the earlier of,

(a)
the day on which the person with the
    claim first knew,

(i) that the injury, loss
    or damage had occurred,

(ii) that the injury,
    loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or
    omission was that of the person against whom the claim is made, and

(iv) that, having regard
    to the nature of the injury, loss or damage, a proceeding would be an
    appropriate means to seek to remedy it; and

(b) the day on which a
    reasonable person with the abilities and in the    circumstances of the person
    with the claim first ought to have known of the matters referred to in clause (a).

(2) A person with a
    claim shall be presumed to have known of the matters referred to in clause (1)
    (a) on the day the act or omission on which the claim is based took place,
    unless the contrary is proved.

D.

THE ARBITRATORS DECISION

[12]

The
    arbitrator held that the arbitration of the parties dispute was not
    time-barred. He noted that the parties plainly agreed in their franchise
    agreement to a comprehensive scheme for the resolution of their disputes, which
    included both mediation and arbitration. He interpreted the ADR Provisions to
    require mediation of the parties dispute as a precondition to arbitration.

[13]

The
    arbitrator rejected the franchisors argument that the entire mediation
    provision was void because, in requiring the parties to mediate in Delaware rather
    than Ontario, it infringed s. 10 of the
AWA.
He held that the
    reference to Delaware was severable from the rest of the mediation provision. He
    reasoned that this approach was consistent with the remedial purpose of the
AWA
,
    and it would be contrary to that purpose to void the entire provision and deny
    the franchisee its otherwise valid rights to mediate its claim. He rejected the
    franchisors argument that severance, as a matter of law, was not available.

[14]

In
    determining the limitations issue, the arbitrator concluded that arbitration was
    not appropriate within the meaning of s. 5(1)(a)(iv) of the
Limitations
    Act
until after the mediation regime in s. 31.03 had been complied with.

[15]

The
    arbitrator explained, at para. 164:

I find that a condition precedent to litigation has the effect
    of suspending the running of the limitation period under Section 5(1)(a)(iv) of
    the
Limitations Act
with the result in this case that because Section
    31.03 of the partys agreement creates such a condition precedent, the
    limitation period was suspended until the partys obligations under that clause
    were met. In this instance, the Franchisee refused to engage in Mediation at or
    about January 16, 2012. Thus, the Mediation requirement had been completed
    within the meaning of Section 31.03 60 days after that date. The result is that
    the limitation period commenced to run then and the Franchisees Notice to Arbitrate
    dated October 7, 2013, was within the two-year limitation period.

[16]

The
    arbitrator disagreed with the franchisors argument that such an interpretation
    would create an open-ended limitation period, permitting the franchisee to
    delay arbitration indefinitely. He described s. 31.03 as bilateral in the
    sense that either party could have started the limitations clock running by
    requesting mediation. This is what the franchisor eventually did when it
    insisted on mediation. The mediation requirement was satisfied 60 days after
    mediation was rejected by the franchisee.

[17]

The
    arbitrator addressed other arguments of the parties, including the question of
    waiver and the effect of their conduct on the limitations issue. It is
    unnecessary to refer to his reasons on these issues, which are not relevant to
    this appeal.

E.

THE APPEAL DECISION

[18]

The
    appeal judge rejected the franchisors submission that the arbitrators
    decision was subject to review on a correctness standard. Instead, she held
    that the applicable standard was reasonableness, consistent with
Sattva
    Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633.

[19]

The
    appeal judge concluded that the arbitrators finding that mediation was a
    precondition to arbitration was based on a reasonable interpretation of the franchise
    agreement that reflected the parties intentions about how to resolve their
    disputes.

[20]

The
    franchisor argued that the arbitrator erred by finding that a proceeding was
    not appropriate until after mediation had failed because the franchisee must
    have known a proceeding was appropriate when it started a legal action in
    October 2011.

[21]

The
    appeal judge disagreed. She referred to this courts decision in
407 ETR
    Concession Co. v. Day
, 2016 ONCA 709, 133 O.R. (3d) 762, leave to appeal refused,
    [2016] S.C.C.A. No. 509, at para. 40, where Laskin J.A. stated:

[U]nder s. 5(1)(a)(iv) of the
Limitations Act, 2002
,
    the date a proceeding would be an appropriate means to recover a loss must have
    regard to the nature of the ... loss. So, in fixing the appropriate date, it
    may not be enough that the loss exists and the claim is actionable.
If the claim is the kind of claim that can be remedied by
    another and more effective method provided for in the statute, then a civil
    action will not be appropriate until that other method has been used.
[Emphasis added.]

[22]

Applying
    this principle, the appeal judge held that the franchisees commencement of an
    action in 2011 was part of the narrative, but not relevant to the application
    of s. 5(1)(a)(iv) of the
Limitations Act
. Rather, the determination of
    when a proceeding was appropriate turned on the parties choice to have
    their disputes resolved by arbitration if mediation as a precondition [was]
    unsuccessful.

[23]

The
    appeal judge also upheld the arbitrators decision to sever the reference to
    Delaware in the ADR Provisions, rather than to declare the entire mediation
    provision void. She agreed with the arbitrator that doing so served the
    remedial purpose of the
AWA
while
    encouraging mediation in commercial disputes.

F.

ISSUES AND ANALYSIS

[24]

The
    appellant asserts that both the arbitrator and the appeal judge erred in the
    interpretation of the franchise agreement and relevant statutory provisions in
    refusing to allow its preliminary motion to dismiss the arbitration as out of
    time.

(1)

Standard of Review

[25]

The
    appellant submits that the appropriate standard of review of the arbitrators
    decision was correctness, and that the appeal judge therefore erred when she
    dismissed the appeal after finding the decision to be reasonable.

[26]

The
    standard of review of a decision of an arbitrator is almost always
    reasonableness. This includes when the arbitrator is determining questions of
    law, except in rare circumstances, such as where a constitutional question, or
    a question of law of central importance to the legal system and outside the
    adjudicators expertise, is at issue:
Sattva
, at para. 106;
Teal
    Cedar Products Ltd. v. British Columbia
, 2017 SCC 32, [2017] 1 S.C.R. 688,
    at para. 74.

[27]

The
    appellant makes two arguments in favour of a correctness standard of review. I would
    not give effect to either argument.

[28]

First,
    the appellant relies on the Supreme Courts decision in
Ledcor Construction
    Ltd. v. Northbridge Indemnity Insurance Co.
, 2016 SCC 37, [2016] 2 S.C.R.
    23. In particular, the appellant refers to the statement of Wagner J. (as he
    then was), at para. 4, that where an appeal involves the interpretation of a
    standard form contract, where the interpretation issue is of precedential
    value, and there is no meaningful factual matrix, the interpretation of the
    contract is better characterized as a question of law subject to correctness
    review.

[29]

The
    appellant asserts that, while the franchise agreement is not technically a
    standard form contract, dispute resolution provisions that provide for
    arbitration after mediation are commonplace, and that a standard interpretive
    approach would be of precedential value to other parties with similar contractual
    dispute resolution provisions. The appellant also points to the arbitrators
    observation in this case (at paras. 66 and 67 of his reasons) that the
    interpretation of the franchise agreement did not depend on the factual matrix.

[30]

The
    appellants reliance on the analysis in
Ledcor
is misplaced.
Ledcor
involved an appeal in a court action, and not the review of the decision
    of an arbitrator. The characterization of the interpretation of a standard form
    contract of precedential value as a question of law (rather than as a question
    of mixed fact and law) drove the determination of the standard of review in the
    civil litigation context, where pure questions of law are reviewable on a
    correctness standard. As the Supreme Court noted in
Teal Cedar Products
,
    at para. 78, while the nature of the question (whether legal, factual or mixed)
    is dispositive of the standard of review in appeals from civil litigation
    judgments of the courts, it is not dispositive in the context of commercial
    arbitral awards by specialized arbitrators. The mere presence of a legal
    question does not, on its own, preclude the application of a reasonableness
    review in a commercial arbitration context:
Teal Cedar Products
, at
    para. 75.

[31]

The appellants second argument in favour of a correctness
    standard of review is that the arbitrator was called upon to interpret the
Limitations
    Act
and s. 10 of the
AWA
,
    which
engaged discrete questions of law of general application
    outside the arbitral context, and warrant a correctness standard of review.

[32]

Again,
Sattva
instructs otherwise. A correctness standard of review may apply
    where the issue before an arbitrator is a rare or exceptional question of law requiring
    a correctness standard to be applied, such as a constitutional question, or a
    general question of law that is both of central importance to the legal system
    as a whole and outside the adjudicators specialized area of expertise:
Sattva
,
    at para. 106;
Ottawa (City) v. Coliseum Inc
., 2016 ONCA 363, 352
    O.A.C. 199, at para. 31;
Intact Insurance Company v. Allstate Insurance
    Company of Canada
, 2016 ONCA 609, 131 O.R. (3d) 625, leave to appeal
    refused, [2016] S.C.C.A. No. 392, at paras. 41 and 42. No such exceptional
    legal question was determined by the arbitrator in this case.

[33]

Here, the arbitrator, a specialized decision-maker who was
    selected by the parties, decided a preliminary issue within his jurisdiction
    that involved the interpretation of the parties contract, the franchise
    agreement, and the application of the law to the particular facts of the case. To
    the extent that the arbitrator interpreted and applied the law to the questions
    he had to determine, the reasonableness standard would still apply.

[34]

The reasonableness standard of review therefore applies to the
    appeal of the arbitrators decision on the preliminary issue.

(2)

The Arbitrators Decision Was Reasonable

[35]

Applying
    a reasonableness standard of review requires the court to determine whether the
    arbitrators decision fell within a range of possible, acceptable outcomes
    which are defensible in respect of the facts and the law:
Dunsmuir v. New
    Brunswick
, 2008 SCC 9, [2008] 1 S.C.R. 190, at para. 47.

[36]

In
    considering whether the limitation period for arbitration of the dispute had
    expired, the arbitrator had to determine when the franchisees claim was
    discovered. This required his interpretation of the franchise agreement, in
    particular the ADR Provisions, and the application of the discoverability
    provisions of the
Limitations Act
to
    the franchisees claim
.
The
    arbitrator
characterized fulfillment of the mediation condition as
    a precondition to arbitration. He found that under s. 5(1)(a)(iv),
    arbitration was not an appropriate means to resolve the dispute until after
    the mediation condition was fulfilled. He gave effect to the mediation clause
    after severing the requirement that mediation take place in Delaware, as it was
    contrary to s. 10 of the
AWA.

[37]

In
    oral argument the appellant characterized the question on appeal as whether a
    limitation period can be tolled for almost four years from the accrual of a
    cause of action on the basis that the claimant did not notionally discover its
    claim until a mediation clause it had eschewed and denied had been pursued.

[38]

This
    characterization is inaccurate. What happened here was not a tolling of a
    limitation period, but the application of the criteria of discoverability under
    s. 5 of the
Limitations Act
, and in particular s. 5(1)(a)(iv), to the
    parties circumstances, including the franchise agreement which provided the
    mechanism for the resolution of their disputes. As Laskin J.A. stated in the
407
    ETR
case, at paras. 33 and 34, the appropriateness criterion in s.
    5(1)(a)(iv) can have the effect  of postponing the start date of the two-year
    limitation period beyond the date when a plaintiff knows it has incurred a loss
    because of the defendants actions, and when an action is appropriate
    [under s. 5(1)(a)(iv) of the
Limitations Act
]
,
depends on the specific
    factual or statutory setting of each individual case.

[39]

The
    appellant makes four arguments, none of which persuade me that the arbitrators
    decision was unreasonable.

[40]

First,
    the appellant says that the arbitrator erred when he found that the mediation
    provision tolled the applicable limitation period after specifically finding
    that s. 22 of the
Limitations Act,
which governs tolling agreements,

did not apply. That section requires an express and bilateral agreement
    between the parties that contains a clear and unambiguous request by one party
    to toll a limitation period and an equally clear and unambiguous affirmative
    response by the other: G. Mew, D. Rolph and D. Zacks,
The Law of
    Limitations
, 3rd ed. (Toronto: LexisNexis Canada, 2016), at p. 246. The
    appellant argues that, after observing that these requirements were not met,
    the arbitrator went on to find that the mediation provision in the ADR Provisions
    was a tolling agreement.

[41]

This
    submission has no merit. The arbitrator was clear that the franchisee did
not
rely on s. 22, and that there was no argument to be made based on this
    section (at paras. 172 and 180). Although the arbitrator used the term
    tolling on more than one occasion in his discussion of when the claim was
    discovered and the limitation period began to run, it is clear from his reasons
    that he was not applying s. 22 of the
Limitations Act
, nor was he
    invited to do so. Rather, his conclusion was that mediation was a condition
    precedent to litigation that had the effect of suspending (para. 164) or
    tolling (para. 140) the running of the limitation period under s.
    5(1)(a)(iv).

[42]

Second,
    the appellant asserts that mediation could not reasonably be a precondition to
    the arbitration for disputes under the franchise agreement because it would
    result in the franchisee being able to indefinitely extend the period for the
    commencement of arbitration. The argument here is about a lack of certainty for
    the running of any limitation period.

[43]

The
    arbitrator reasonably rejected this argument. As he fairly observed, either
    party could have put in motion the ADR process under their agreement, to start
    the running of the limitation period. As for the franchisors argument to this
    court that it would have no incentive to initiate the mediation of a dispute
    that might simply go away, the mediation process to which the parties have
    agreed is no less certain or available simply because a party for one reason or
    another might choose not to invoke it. Indeed, it was the franchisors demand
    for mediation, in response to the franchisees commencement of a legal proceeding,
    that started the running of the limitation period.

[44]

The
    appellant contends that the mediation before arbitration precondition would
    make the limitation period uncertain because a franchisee could unilaterally
    postpone the discovery of a claim it chooses not to reveal and then pursue
    mediation years later. Where this happens, the franchisor will have no way of
    knowing about the claim, or initiating mediation to start the running of the
    limitation period. Again, the appellants argument is without merit. Section
    23.01 of the franchise agreement requires the franchisee to provide immediate
    notice of any alleged breach or violation of the agreement and contains its own
    time limit of one year for notice, failing which any action is permanently
    barred. And, as for claims based on non-disclosure, s. 6 of the
AWA
contains
    its own time limits in which the franchisee must give notice of rescission. Accordingly,
    once notice is given, the franchisor will be aware of the dispute and in a
    position to invoke the mediation precondition to start the running of the
    limitation period.

[45]

The
    appellants third argument is that the arbitrators discoverability analysis
    was wrong, or unreasonable, because he ignored s. 5(2) of the
Limitations
    Act.
Section 5(2) is a presumption that a claim is discovered where the
    facts giving rise to the claim occur and places the onus on a plaintiff to
    rebut the presumption. The appellant says that the franchisee could not have
    rebutted the presumption because, it must have known that a proceeding would
    be appropriate when it started its court action. The appellant relies on this
    courts decision in
Hamilton (City) v. Metcalfe & Mansfield Capital
    Corporation
, 2012 ONCA 156, 290 O.A.C. 42, upholding a motion judges
    rejection of an argument based on s. 5(1)(a)(iv) of the
Limitations
    Act
, where a plaintiffs commencement of an earlier court proceeding
    demonstrated its awareness of the possible expiry of a limitation period.

[46]

Here,
    the presumption in s. 5(2) had no role to play in the analysis the arbitrator
    was required to perform. No one disputed that, apart from the question of
    mediation as a first step, the claim would otherwise have been discovered when
    the notice disputing the rescission was delivered on October 8, 2009. The
    arbitrator recognized that it was up to the franchisee to establish that the limitation
    period for commencing arbitration was suspended by the mediation requirement in
    the ADR Provisions. Ultimately, he was satisfied that this was the case.

[47]

The
    question was not when the appellant knew it had a claim, or even that legal
    action was appropriate (the issue in
Hamilton
), but when the
    franchisee knew or ought reasonably to have known that arbitration, which was the
    dispute resolution proceeding the parties had bargained for, was the appropriate
    means to resolve the dispute. The arbitrator reasonably concluded that the answer
    to this question depended on the ADR Provisions and the parties agreement to a
    dispute resolution mechanism which required an attempt at mediation before
    arbitration could be commenced. As the appeal judge noted, the determination of
    when a proceeding was appropriate turned on the parties choice to have
    their disputes resolved by arbitration if mediation as a precondition [was]
    unsuccessful. Under this interpretation, the parties would only know that arbitration
    was appropriate when the mediation requirement had been exhausted. As such, the
    date of commencement of the franchisees misguided legal action was not
    determinative of the s. 5(1)(a)(iv) appropriateness inquiry.

[48]

Finally,
    the appellant asserts that the arbitrator erred in excising only that part of
    the mediation clause that referred to the requirement to mediate in Delaware,
    when he ought to have concluded that the entire mediation provision was void. If
    the entire mediation provision was void, then there would be no precondition to
    arbitration that would suspend the running of the limitation period.

[49]

Section
    10 of the
AWA
provides that a
provision
in a franchise agreement is void when it purports to, among other things,
    restrict a venue to a forum outside Ontario. The only part of the mediation
    clause that offends s. 10 is the requirement that the mediation, which the
    parties agreed would precede any arbitration, will take place in Delaware.

[50]

The
    arbitrator adopted a blue pencil approach, drawing a line through the
    reference to the State of Delaware. This approach, which severs or removes any
    illegal features of a contract, is available where it would further the
    parties contractual intentions:
Shafron v. KRG Insurance Brokers (Western)
    Inc.
, 2009 SCC 6, [2009] 1 S.C.R. 157, at paras. 29 and 32;
2176693
    Ontario Ltd. v. Cora Franchise Group Inc
., 2015 ONCA 152, 124 O.R. (3d)
    776, (
Cora Franchise
), at paras. 35 to 37.

[51]

Contrary
    to the appellants submission, the arbitrators severance of the Delaware
    location for mediation was not precluded by anything stated by this court in
Cora
    Franchise
. There the court refused to read down an unenforceable provision
    in a franchise agreement that required the delivery of a release that would have
    been void under s. 11 of the
AWA
because
    to do so would have d
efeated the purpose of s. 11. The case
    discusses both void provisions and those that are unenforceable because
    they require something to be done that would be void, but does not, as the
    appellant contends, preclude severance of provisions that are void. The issue
    here was what part of the mediation provision was void.  The arbitrator reasonably
    rejected the appellants argument that the entire mediation provision was void,
    and severed only the provision for mediation in Delaware, that s. 10 of the
AWA
rendered void
.


[52]

The
    parties franchise agreement expressly contemplated what the arbitrator did
    here. Section 30.02 provides that, in the event of any conflict between any
    provision of the agreement and any law, any affected provision will be
    curtailed and limited only to the extent necessary to bring it within the
    requirement of the law. Removal of the requirement to mediate in Delaware served
    to uphold the ADR process the parties agreed to, that anticipated mediation
    before arbitration. It would cure the illegality while remaining as close as
    possible to the intentions of the parties:
Cora Franchise
, at para. 36.

[53]

Accordingly,
    the arbitrators severance of the Delaware requirement to meet s. 10 of the
AWA
was reasonable. Indeed, it would have been unreasonable for him to have
    accepted the franchisors argument to exclude the entire mediation clause,
    which was an integral component of the ADR Provisions, especially in
    circumstances where the franchisor had expressly relied on the obligation to
    mediate, and had proposed that a mediation take place in Toronto.

[54]

For
    all of these reasons, I agree with the appeal judge that the arbitrators
    decision on the preliminary issue of whether the limitation period had expired
    for the arbitration of the parties dispute, was reasonable.

G.

DISPOSITION

[55]

Having
    concluded that the standard of review of the arbitrators decision was
    reasonableness and that the decision was reasonable, I would dismiss the
    appeal. I would award costs of the appeal, including the costs of the motion
    for leave to appeal, to the respondent in the sum of $28,000, which amount is
    inclusive of disbursements and HST.

K. van Rensburg J.A.

I agree Robert J.
    Sharpe J.A.

I agree H.S. LaForme
    J.A.

Released: April 5, 2018


