Non-parties to an arbitration agreement were not bound by the agreement, but instead were bound by the Arbitration Act, 1991 S.O. 1991, c.17

Administrative law – Decisions reviewed – Arbitration Board – Judicial review – Jurisdiction – Appeals – Standard of review – Reasonableness – Arbitration and award – Right to award costs

Bergmanis v. Diamond, [2021] O.J. No. 1585, 2021 ONSC 2375, Ontario Superior Court of Justice, March 26, 2021, W.S. Chalmers J.

Pursuant to a Personal Services Agreement (“PSA”), the law firm Diamond & Diamond (“Diamond”) agreed to refer all personal injury matters to Bergmanis Preyra LLP (“BP”) in exchange for a 30% referral fee. BP claimed Diamond breached the PSA and was sending work to other firms. The matter proceeded to arbitration. At the request of BP, the arbitrator issued summonses to lawyers who were referred files from Diamond, requiring them to produce the names of all clients that were referred to them by Diamond and provide details of the referral and fees paid to Diamond with respect to these clients. Some lawyers voluntarily complied, but others including Grillo and Daya objected to the production of this information on the basis of solicitor-client privilege. Grillo et al brought a motion to quash the summonses before the arbitrator. The arbitrator granted the motion to quash and refused a request made by BP for reconsideration of the decision.

BP appealed the arbitrator’s decision to quash the summonses to the Ontario Superior Court of Ontario. Grillo et al cross-appealed the costs award made by the arbitrator.

The court noted that the Arbitration Agreement between BP and Diamond did not apply to the non-party lawyers. Despite BP’s argument to the contrary, the court held that the fact that Grillo et al brought a motion to quash to the arbitrator who issued the summonses did not result in an attornment to the Arbitration Agreement or acceptance of the appeal rights under it. Therefore, the rights of appeal were governed by the Arbitration Act, 1991, S.O. 1991 c.17 (the “Act”). Under the Act, an appeal of an arbitrator’s decision is only permitted on a question of law. In the circumstances, the court held that the issues on appeal were questions of fact or mixed fact and law. The court noted the arbitrator’s comment that the legal principles were agreed upon and that his decision was based on the application of those agreed-upon principles to the facts. In any event, the court noted that leave to appeal was required and was not sought by BP. The appeal was accordingly dismissed.

The court similarly dismissed the cross-appeal for costs, as the costs issue also did not involve a question of law and Grillo et al similarly did not seek leave in relation to the cross-appeal as was required.

This case was digested by JoAnne G. Barnum, and first published in the LexisNexis® Harper Grey Administrative Law Netletter and the Harper Grey Administrative Law Newsletter.  If you would like to discuss this case further, please contact JoAnne G. Barnum at [email protected].

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