Canada – Anti-Suit Injunction Restrains Party Bound by Ontario Arbitration Award

This article was first published on Urbas Arbitral, here.

In Borschel v. Borschel, 2020 ONSC 4395, Mr. Justice Lorne Sossin issued an anti-suit injunction restraining a party to arbitration awards subject to Ontario law from pursuing parallel proceedings in a U.S. jurisdiction.  Sossin J. also dismissed arguments challenging enforcement of the awards based on legislative provisions requiring parties to sign any agreement reached as part of the court process. Sossin J. held that the provisions did not serve to invalidate awards which had issued on consent and where consent of the parties had been communicated by counsel.

Spouses involved in family litigation, Applicant and Respondent entered into an April 7, 2016 agreement to arbitrate (“Arbitration Agreement”).  The parties’ Arbitration Agreement covered a broad variety of issues (see para. 18 of Sossin J.’s reason) which they signed after having received advance, independent legal advice.   On December 21, 2017, the arbitrator issued two (2) arbitration awards in Ontario (“Final Arbitration Awards”).  Further disputes involving spousal support and child support remained but attempts in 2018 and 2019 to schedule a further arbitration proved unsuccessful.

Both parties were U.S. citizens who had moved to Ontario to practice their professions, living in Toronto until 2017 at which time Respondent moved back to Memphis, Tennessee with their children.

Applicant launched what Sossin J. described as “parallel” divorce proceedings in Tennessee, obtaining injunctive orders against Respondent from dissipating martial property and from removing the children from Tennessee.

Respondent applied for:

(i) an order restraining Applicant from proceeding with the action in Tennessee and requiring him to withdraw the action;

(ii) on order declaring void any orders issued by the court in Tennessee; and,

(iii) on order enforcing the Final Arbitration Awards.

Applicant applied for:

(iv) an order dismissing the issues in the Ontario case as they will be determined in the Tennessee courts; and,

(v) an order that the Final Arbitration Awards are not enforceable under section 59.6(1) of Family Law Act, RSO 1990, c F.3 and section 37 of the Arbitration Act, 1991, SO 1991, c 17.

Validity and Enforceability of Final Arbitration Awards – At paras 18-23, Sossin J. set out the facts leading to the arbitrator’s signature of the Final Arbitration Awards.  The arbitrator had issued both on the basis of consent of the parties following negotiations between the parties.  The Final Arbitration Award were said to be consistent with the accepted offers to settle and the terms agreed upon by the parties.

By e-mail exchange between counsel in November 2017, counsel for each party confirmed that the draft awards could be forwarded to the arbitrator to execute as arbitral awards.

Before Sossin J., Applicant alleged that he never consented to the Final Arbitration Awards and that he first became aware of them in September 2018.  Applicant also alleged a disagreement with former counsel but provided no evidence of it for Sossin J. to review.

Sossin J. held that the Final Arbitration Awards were valid and enforceable.

[49] Whether or not the Applicant has a separate dispute with his former counsel, or may wish to attempt to set aside the Arbitration Awards on that basis, the Final Arbitration Awards remain valid and enforceable until a contrary finding is made”.

He noted the lack of any explanation as to why Applicant took no steps to set aside the Final Arbitration Awards once he did have knowledge of them.  Sossin J. added that, following that initial period, Applicant had several instances in 2020 at which he could, but did not, raise an objection to their validity despite Applicant’s own express reference to them.

Sossin J. dismissed Applicant’s arguments challenging enforcement of the Final Arbitration Awards.  Applicant raised specific provisions of the Family Law Rules, O Reg 114/99.  While Rule 17(19) requires parties to sign any agreement reached as part of the court process, Sossin J. held that the provision did not apply to arbitration awards.

[51] This Rule addresses settlements and agreements that arise out of case conferences, but does not serve to invalidate an arbitration award where the consent of the parties has been communicated by counsel, and where the arbitration agreement governing the awards has been executed by the parties”.

He held that there was no need to determine the intent of the parties to form a binding agreement.  “The Final Arbitration Awards by their own terms bind the parties, and there is no language to suggest their enforcement depends on some other action or agreement taking place as in [Cole v. Cole, 2011 ONSC 4794] and [Ward v. Ward, 2011 ONCA 178]”.

Sossin J. also noted that the parties, in the conduct, had adhered to the Final Arbitration Awards.

Following his review of the applicable legislative provisions at paras 71-79, Sossin J. further determined that the conditions in the Family Law Act, RSO 1990, c F.3 and the Arbitration Act had been met for recognition and enforcement.  The parties had been represented by experienced senior legal counsel at the time the entered into the Arbitration Agreement and when negotiating the terms on which the Final Arbitration Awards issued on consent.  The Final Arbitration Awards were in writing and delivered to the parties’ respective counsel and no application to set them aside had been made.

Anti-Suit Injunction – Sossin J. then considered whether to grant Respondent’s application restraining further activity in the Tennessee litigation. Sossin J. agreed that the threshold for granting such an injunction, established in Amchem Products Incorporated v. British Columbia (Workers’ Compensation Board), 1993 CanLII 124 (SCC), [1993] 1 SCR 897, had been met:

(a)  A foreign proceeding is pending;

(b) The applicant has failed to obtain a stay from the foreign court;

(c) The domestic court is a potentially appropriate forum;

(d) The domestic forum has the closest connection to the action and the parties and no other forum is clearly more appropriate; and

(e) There is no injustice to the parties if the forum proceeding does or does not go forward and an injunction will not deprive the forum plaintiff of advantages in the foreign jurisdiction which would be an unjust deprivation.

Regarding (d), the “closest connection”, Sossin J. held that Ontario remained the jurisdiction with the closest connection to the divorce application and had oversight of the existing Final Arbitration Awards. As part of other key determinations supporting his conclusion, Sossin J. also noted the role of Ontario law in regard to the Final Arbitration Awards.

[102] In addition to the fact that the Final Arbitration Awards are governed by Ontario law, much of the evidence with respect to the remaining issues of support will involve the Applicant’s evidence of employment and income in Ontario”.

Though he did issue an order against Applicant to “take all reasonable steps to undo the orders that have been obtained pursuant to the Tennessee litigation”, Sossin J. refused to issue any order declaring void orders issued by the Tennessee court. Referring to Shaw v. Shaw, 2007 CanLII 27337 (ON SC), Sossin J. reiterated that anti-suit injunctions apply to restrain the person and not the foreign court. He stated that “this remedy does not restrain a court from hearing or deciding a matter, but rather restrains a person from pursuing a court proceeding”.

urbitral note – First, for more on anti-suit injunctions, see the Arbitration Note “Anti-suit injunction based on contract enjoins party from pursuing arbitration administered outside Canada”.  In Li v. Rao, 2019 BCCA 264, the Court of Appeal upheld an anti-suit injunction preventing a party from taking further steps in a pending arbitration administered beyond the court’s jurisdiction.  Exercising its in personam jurisdiction over the party, the Court enforced that party’s agreement not to take further steps in its arbitration.  The Court held that an injunction based on contract did not engage the jurisdiction of the foreign tribunal or raise issues of comity but did involve an assessment of the conduct of a party and whether to enforce a promise it made.

 

                        author

Daniel Urbas

Daniel Urbas is an experienced litigator, arbitrator and mediator with over 25 years of dispute resolution experience. He has earned a variety of repeat, annual peer recognitions including “Leading Lawyer” in “Commercial Arbitration” in the 2019 edition of the Lexpert ® / American Lawyer Guide to the Leading 500 Lawyers… MORE >

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