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In The 6th Line Mofos Limited v. Stewart, 2022 ONSC 520,[1] Justice Healey of the Ontario Superior Court of Justice addressed questions including whether issue estoppel should apply to prevent relitigation of issues previously decided by an arbitrator and whether the findings of the arbitrator allow the court to grant summary judgment on the claims.

Background

The Plaintiffs were formerly co-owners of a large, undeveloped parcel of land in Ontario (the “Property”). Their relationship was governed by a co-tenancy agreement (“CTA”), and their intention was to develop the Property into a residential subdivision.

The CTA included a mechanism by which one owner could purchase the other’s interest. The Plaintiffs’ relationship broke down and they could not agree on the value of the Property. The CTA provided that in such an event, each party would obtain an appraisal and if the two appraisers did not agree on the Property’s fair market value, its value would be determined by averaging the two appraisals.

As it turned out, the two appraisals were widely divergent and the Plaintiff Bayview did not accept the methodology used by the Plaintiff 6th Line’s appraiser (“Integris”). This triggered final and binding arbitration under the CTA.

The arbitrator rejected the report by Integris and found that it did not qualify as an appraisal under the CTA. The disqualification meant that the report by Bayview’s appraiser could be used to calculate the buyout price of the Property.

Each plaintiff separately sued Integris for negligence and breach of contract (among other causes of action), seeking to recover their costs of the arbitration. There were four motions for summary judgment before the court.

The court’s decision

The parties agreed that the three requirements for issue estoppel are those set out in Angle v. M.N.R.:[2] (i) the same question has been decided; (ii) the judicial decision which is said to create the estoppel was final; and (iii) the parties to the judicial decision or their privies participated in the earlier litigation.

Contrary to the Plaintiff’s assertions, the arbitrator did not decide whether the principal of Integris and author of the Integris report, Mr. Atlin, had been negligent in the preparation of that report. This issue was not before the arbitrator, and the rejection of Mr. Atlin’s report by the arbitrator cannot unequivocally establish that there has been a decision on this issue. There was no finding that Mr. Atlin failed to meet the standard of care of a reasonable appraiser.

In addition, while Mr. Atlin did testify in the arbitration as an expert witness for 6th Line, it would be manifestly unfair to conclude that simply because the Integris appraisal was the focus of the arbitration, and that Mr. Atlin testified for four of the 18 days, that he had a “meaningful voice” in the arbitration.[3] Mr. Atlin was not a privy in the arbitration, and this finding again prevents issue estoppel.

Integris’ motions for summary dismissal of the actions against it were granted, and the motions of the Plaintiffs were dismissed.

Conclusion

The application of issue estoppel to prevent relitigation of issues previously decided by an arbitrator will need to wait until another day.

On an unrelated note, however, it is interesting that Justice Healey respectfully disagreed with the arbitrator on a finding of fact and did not consider herself bound because the arbitrator’s reasons do not explain why he came to that conclusion.[4]