In Vanhof & Blokker Ltd. v. Vanhof & Blokker Acquisition Corp, 2021 ONSC 7211, Justice Pollak of the Ontario Superior Court of Justice dealt with an appeal from an arbitral award where the arbitration proceeded in the absence of one of the parties.
The Appellants sold the assets of their horticultural and garden supply business to the Respondents pursuant to a 2014 Asset Purchase Agreement (the “Agreement”).
A dispute arose and the Respondents commenced a court action. On consent of all the parties the claims in the action were agreed to be subject to binding arbitration by court order.
The parties agreed to an arbitrator (the “Arbitrator”). A Notice of Arbitration was delivered on May 17, 2017, and a mediation was held on May 29, 2017. The parties agreed to be bound by the ADR Chambers Arbitration Rules when they selected the Arbitrator, but the Appellants refused to execute the Terms of Appointment of Arbitrator, as set out by ADR Chambers.
After submitting materials for the arbitration and being advised of the arbitration date, the Appellants sent correspondence to the Arbitrator on October 6, 2017, stating that they would not attend the arbitration and that they would not execute the Arbitration Agreement as a result of alleged concerns therewith. Counsel for the Respondents responded to these concerns that same day.
The Arbitrator proceeded with the arbitration as scheduled on October 16, 2017. The Appellants did not attend. The Arbitrator released his Award on November 27, 2017, which was under appeal in this case.
One of the issues to be decided on this Appeal was whether the Arbitrator erred in proceeding with the hearing in the absence of the Appellants.
The court’s decision
Justice Pollak was of the view that the Arbitrator correctly decided to proceed in the absence of the Appellants in accordance with s. 27(3) of the Arbitration Act, 1991. That subsection provides: “If a party fails to appear at a hearing or to produce documentary evidence, the arbitral tribunal may, unless the party offers a satisfactory explanation, continue the arbitration and make an award on the evidence before it.”
The Arbitrator had the jurisdiction to hear the dispute pursuant to the consent order of the parties and their agreement on the choice of Arbitrator. Most importantly, there was no objection to jurisdiction raised at the arbitration hearing. The Act requires that all objections to jurisdiction are to be made before the Arbitrator.
Justice Pollak also found that the Arbitrator made no errors as alleged by the Appellants. The Appellants were aware of the scheduled time for the hearing and had the obligation to attend and make their arguments with respect to jurisdiction at the beginning of the hearing before the Arbitrator, who had jurisdiction, to determine if he had jurisdiction to hear the Arbitration. The Appellants were not entitled to send correspondence to the Arbitrator advising that they chose not to participate in the hearing and expect that the Arbitration would not proceed in their absence.
While fact-specific, Vanhof & Blokker Ltd. offers helpful guidance to counsel and arbitrators dealing with a non-participating party to an arbitration. Notably, in certain circumstances, the parties need not agree to the Terms of Appointment in order for the arbitration to proceed. In all circumstances, however, parties and their counsel must be mindful of any requirements imposed by the applicable arbitration statute.