Splitting issues into separate arbitrations could lead to conflicting decisions, ruling says
The Superior Court of Justice of Ontario recently dismissed an application questioning the jurisdiction of an arbitrator in a case where the applicants waited 18 months before raising the jurisdictional issue.
The applicants in this matter were two brothers. In 2005, they agreed to donate $20 million to the Jewish Foundation of Greater Toronto through their charitable foundations. In return, the foundation agreed to name a campus in Vaughan, Ontario after them.
The donation agreement included an arbitration clause, which required the resolution of any disputes arising from the agreement through arbitration by a three-member panel. If either party failed to appoint an arbitrator, the arbitrator appointed by the other party would act as sole arbitrator, whose decision would be final and binding.
A disagreement arose over the proposed sale of a portion of the campus land and over missed payments under the donation agreement. This dispute prompted the respondents to initiate an arbitration in 2015.
Colin Campbell, now a retired judge of the Ontario Superior Court, presided over the arbitration. A consent order resolved the arbitration. It also allowed the referral of future disputes – specifically disputes regarding matters to which the consent order referred – back to Campbell.
In 2021, the respondents initiated another arbitration, which focused on refinancing the campus property and naming rights. The arbitration proceeded before Campbell as a single arbitrator.
Initially, the applicants participated in the arbitration by filing a counterclaim and a notice of demand for arbitration. Shortly before the arbitration hearing in October 2022, the applicants retained new counsel. Later, they challenged the arbitrator’s jurisdiction for the first time.
In March 2023, Campbell issued a decision determining that he had jurisdiction over the dispute. The consent order from the previous arbitration created a continuous process that included jurisdiction over the current issues, he reasoned. The applicants’ actions of participating in the arbitration and filing a counterclaim showed that they accepted the arbitrator’s jurisdiction, he said.
The issues in dispute had close ties to both the donation agreement and the consent order, Campbell noted. Trying to separate these issues into different arbitrations would lead to unnecessary delays, increased costs, and the risk of inconsistent findings, he added.
In The Joseph Lebovic Charitable Foundation et al. v. Jewish Foundation of Greater Toronto, 2024 ONSC 4400, the Ontario Superior Court rejected the applicants’ jurisdictional challenge, affirmed the jurisdiction of the arbitrator, and allowed the present arbitration to proceed.
The court held that parties to an arbitration could waive their right to challenge jurisdiction through their conduct. In this case, the applicants’ actions over the 18 months preceding their jurisdictional challenge indicated their consent to the arbitrator’s authority, the court found.
Splitting the issues into separate arbitrations would be inefficient and could lead to conflicting decisions, given that arbitration aimed to provide parties with a practical and streamlined dispute resolution process, the court determined.
The applicants’ late jurisdictional challenge was strategic rather than genuine and was intended to delay the arbitration process, the court said. It pointed out that allowing such a challenge at the last minute would undermine the efficiency and cost-effectiveness of arbitration and would go against the principles underlying Ontario’s Arbitration Act, 1991.
The court rejected the applicants’ argument that they had the right to object to the arbitrator’s jurisdiction until the beginning of the arbitration hearing. The court accepted that the Arbitration Act allowed parties to object to jurisdiction before the hearing but ruled that it was still entitled to find a waiver of the parties’ right to object earlier through their conduct.
