2015 QCCQ 1161, 2015 QCCQ 1161

Salomon c. 2700620 Canada inc. 2015 QCCQ 1161 COURT OF QUEBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division DATE: February 26, 2015 ______________________________________________________________________ BY THE HONOURABLE JEFFREY EDWARDS, J.C.Q. ______________________________________________________________________ 500-32-131706-121 KENNETH F. SALOMON Plaintiff v. 2700620 CANADA INC. Defendant ______________________________________________________________________ 500-32-131739-122 LIONEL GOLDMAN Plaintiff v. 2700620 CANADA INC.

Defendant ______________________________________________________________________ 500-32-125627-101 2700620 CANADA INC. Plaintiff v. LIONEL GOLDMAN Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Further to an aborted arbitration process (the " Arbitration "), Mr.

Kenneth Salomon, attorney and arbitrator sues (case no. 500- 32-131706-121) one of the parties involved in the arbitration, 2700620 Canada Inc. (“ 270 Canada ”) for payment of services rendered as an arbitrator. 270 Canada denies that any amount is owed and makes a cross-demand and sues Mr. Salomon for $ 7,000 in damages suffered as a result of an alleged fault in his conduct as an arbitrator. [ 2 ] Mr.

Lionel Goldman, a chartered accountant and arbitrator also involved in the Arbitration, sues (case no. 500-32-131739-122) 270 Canada for his services rendered as an arbitrator. 270 Canada denies owing any amount to Mr. Goldman. [ 3 ] In separate proceedings, 270 Canada sues (case no. 500-32-125627-101) Mr. Goldman for $ 7,000 in damages on the basis of an alleged fault in his conduct as an arbitrator. [ 4 ] The three proceedings have been joined for a common hearing on the merits given the disputes between the parties relate to the same arbitration. Questions in Issue

[ 5 ] The Court is called upon to decide, with respect to the separate proceedings involving Mr. Salomon and Mr. Goldman, the same questions of fact and law, namely: 1) Is there any valid ground to deny or reduce their respective claims for services rendered as arbitrators in the Arbitration? 2) Did either Mr. Salomon or Mr.

Goldman, in their function as arbitrators, commit any fault which would render either of them liable for the damages claimed by 270 Canada? 3) If any fault has been established in accordance with question 2) above, is there a causal link between such fault and the alleged damages suffered by 270 Canada? 4) Regarding the cases involving Mr.

Goldman, the Court must in particular decide whether, in the context of the Arbitration, his omission to disclose, prior to his appointment, to both arbitrating parties, that there existed a social connection which would ultimately lead to his recusation by judicial order, should either affect his claim for services rendered or constitute a fault rendering him liable for damages suffered by one of the parties to the arbitration. Context Arbitration Agreement [ 6 ] 270 Canada carried on business under the name of Pascal Hotel Supplies.

On June 16, 2006, by way of an “Asset Purchase Agreement” (“ Sale Agreement ”), 270 Canada sold most of its assets, including its inventory, to 6513557 Canada Inc. (“ 651 Canada ”) [1] . Under the terms of the Sale Agreement, the purchase price paid to 270 Canada upon execution was $ 2,701,177 [2] . [ 7 ] The Sale Agreement also provides for other amounts to be paid to 270 Canada, namely adjustments to the purchase price and remittances of amounts received from the sale by 651 Canada of 270 Canada’s inventory.

After the sale was concluded, a disagreement arose between 270 Canada and 651 Canada as to the specific amounts owed by 651 Canada regarding those adjustments and remittances. [ 8 ] In the Sale Agreement, the parties elected to resolve any dispute by way of arbitration. The binding terms governing the arbitration process are set out in the Sale Agreement [3] . Under those provisions, one party (referred to in the clause as the “Instituting Party”) appoints an arbitrator [4] .

The other party (referred to in the clause as the “Responding Party”) may accept that arbitrator, in which case, that arbitrator becomes the sole arbitrator. However, the other party may instead reject the proposed sole arbitrator and elect to appoint an additional arbitrator. In that case, the two designated arbitrators jointly appoint a third arbitrator who acts as chairperson of the arbitration panel [5] composed of these three arbitrators. Designation of Arbitrators [ 9 ] On May 9, 2007, further to inquiries made by Mr.

Paul Marcil, the attorney of 270 Canada, 270 Canada informally proposed the appointment of Kenneth Salomon as the sole arbitrator [6] . Mr. Marcil and Mr. Andrew Cohen, the attorney of 651 Canada, had previously met with Mr. Salomon to review his possible nomination as arbitrator. Mr. Salomon, a commercial attorney for the past 35 years at that time, had vast experience in commercial transactions and had also acted as an arbitrator in commercial disputes. It appears that Mr. Marcil was under the impression that the choice of Mr. Salomon as sole arbitrator was acceptable to 651 Canada.

But that was not to be. [ 10 ] Instead on May 10, 2007, Mr. Cohen rejected the choice of Mr. Salomon as sole arbitrator on the basis that he did not have sufficient accounting expertise [7] and 651 Canada felt that accounting issues were an important part of the matter in dispute.

[ 11 ] Nevertheless, on May 14, 2007, 270 Canada, through its attorney, formally and by "Notice of Complaint" confirmed both to Mr. Salomon and 651 Canada as well as its attorneys that, under the terms of arbitration stipulated in the Sale Agreement, it appointed Mr. Salomon as arbitrator [8] . Therefore, 270 Canada, in full knowledge that its choice for a sole arbitrator was not acceptable to 651 Canada, thereby triggered the mechanism for an arbitration panel of three arbitrators. The Notice of Complaint states in clear terms that: “Our client appoints Mr. Kenneth F. Salomon of the firm Sternthal, Katznelson, Montigny as Arbitrator in conformity with

Article 13.3 of the Agreement. Please be advised that failing receipt within 5 days of the date hereof from you of a notice concurring in the appointment of Me Salomon, as Arbitrator or the appointment of an additional arbitrator, Me Salomon shall act as the Sole Arbitrator as provided by

Article 13.3.” [ 12 ] On May 15, 2007, 651 Canada advised [9] 270 Canada of the appointment of its choice of an “additional arbitrator”, being Mr. Lionel Goldman, a chartered accountant. Mr. Salomon and Mr. Goldman then went about selecting a third arbitrator to act as chairperson of the arbitration panel. After a previous candidate was rejected by 270 Canada, on June 7, 2007, Mr. Salomon and Mr. Goldman advised the parties that they were in agreement to propose Mr.

John Nicholl as third arbitrator and chairperson, who they described as being a well known and respected attorney in the area of insurance and defence liability [10] . [ 13 ] Mr. Nicholl had carried out the standard conflict verification at his firm and confirmed that there was no conflict. Mr. Salomon and Mr. Goldman requested that the parties advise whether they had any objection to this proposed appointment, and in which case to advise them by June 12, 2007. As no objection was made, the three arbitrators under the leadership of Mr.

Nicholl, started the process on June 13, 2007, to organize the arbitration including the formal defining of the issues to be arbitrated, determining the place of the arbitration hearing, drafting an arbitration protocol to be signed by the parties, determining payment arrangements and proposing a timetable for the adjudication of the arbitration matter. [ 14 ] From the evidence, it appears that: (

i) all the arbitrators agreed to charge their time at a billable hourly rate of $ 400; (ii) each of the parties was made aware of that rate; (iii) the arbitrators agreed between themselves to standardize their hourly applicable rates at the lowest rate amongst them, which was $ 400. For Mr. Nicholl, this was a substantial reduction from his posted hourly rate of $ 575 at the time. [ 15 ] The parties also agreed that the arbitration costs, principally the arbitrators’ fees, would be shared equally at 50% each. The date for the hearing on the merits was tentatively scheduled for July 26 and July 27, 2007.

In the draft arbitration protocol, the deadline to render the arbitration decision was set at 20 days from the termination of the hearing [11] . This meant that the matter would have been adjudicated and resolved by August 15, 2007 at the latest. That was unfortunately not to be. Issue of Mr. Goldman’s independence, Standstill and Court Judgment [ 16 ] On or around July 6, 2007, 270 Canada questioned the independence of Mr. Goldman. 270 Canada raised this issue with the chair of the arbitration panel, Mr. Nicholl. Mr. Nicholl raised this issue with Mr. Goldman to obtain clarification.

In an e-mail on the same day to the parties’ attorneys, Mr. Nicholl wrote: “Gentlemen: in light of the question raised by Paul’s client, we want to make sure that any issue relating to the potential conflict of interest is dealt with before the arbitration, and that there has been full disclosure of the relevant facts. Lionel has consulted with his partners, and they know of no professional conflict relating to his mandate. However, Lionel’s name was suggested to Andrew Cohen by Stan Mazoff, a consultant who has been working with the purchaser for several months. Mr.

Mazoff recommended Lionel as someone capable and trustworthy. Mr. Mazoff is a neighbour and a friend of Lionel’s, and from time to time he suggests his name for possible mandates. He is not a client, and Lionel’s understanding is that he has no financial interest in these matters.

Furthermore, when Lionel’s name was put forward, he spoke to Mr. Mazoff to inform him that he felt no obligation to him, and that his (Lionel’

s) input into this process will be governed solely by what he considers to be fair and correct, not by who he knows or doesn’t know. Mr. Mazoff understood completely. We would ask that both your clients confirm they are satisfied with Lionel’s independence in light of this additional information before we proceed further. Please advise once you have had an opportunity to consult with your clients.” [12] [ 17 ] After further verification, the principal of 270 Canada, Mr. Larry Shaffer objected to the presence of Mr. Goldman and asked him to step down [13] . Furthermore, on behalf of 270 Canada, Mr.

Shaffer also now requested that Mr. Salomon be replaced. Although 270 Canada acknowledged that Mr. Salomon had “acted honourably throughout” [14] , Mr. Shaffer explained that he had decided that it was preferable to also select an accountant as 270 Canada’s designated arbitrator. 651 Canada saw no reason for Mr. Goldman to step down and urged him to remain. 651 Canada also contested the request to replace Mr. Salomon. At that point, Mr. Nicholl wrote to the parties that his own role was in question as he had been selected by Mr. Salomon and Mr.

Goldman and that new arbitrators might select a new chairperson arbitrator. Mr. Nicholl wrote to the parties’ attorneys as follows: “If therefore you want to replace Ken and Lionel, please get on with it and make the necessary Motions. If not, please confirm to me in writing that your respective clients agree to the present composition of the panel, and will sign the arbitration agreement.” [15] [ 18 ] However, despite Mr.

Nicholl’s urgings to resolve the impasse by way of motion to the Court, and despite 270 Canada’s position as initiator of the arbitration matter, 270 Canada did not take the initiative to present a motion to the Court and the arbitration proceedings came to a standstill. Finally, on September 20, 2007, attorneys for 651 Canada made a motion to the Court to clarify the issues raised and confirm the appointments of the arbitrators to the arbitration panel.

In its motion, 651 Canada requested that the Court confirm the appointments of Lionel Goldman and Kenneth Salomon as arbitrators and John Nicholl as chairperson of the arbitration panel. [ 19 ] Unfortunately, the Court proceedings appear to have not been pursued expeditiously. In December 2007, more than six (6) months after Mr. Nicholl’s July 6 e-mail, 270 Canada filed a written contestation of the motion and requested the removal of Mr. Goldman as well as the replacement of Mr.

Salomon by another arbitrator of its choosing with an accounting background. [ 20 ] On March 6, 2008, judgment on the motion was rendered by Mr. Justice Jacques Gauthier, J.C.S. The recording of the judgment was deposited by Mr. Goldman [16] . The relevant passage of the judgment is as follows: “Il est vrai que Monsieur Mazoff n’a pas lui-même d’intérêt économique direct. Il ne possède pas d’actions, il n’est pas administrateur de la compagnie demanderesse. Mais il demeure qu’en tant que dirigeant, il peut être raisonnablement perçu comme ayant des obligations de loyauté envers la compagnie.

Maintenant, quel est son lien avec Monsieur Goldman? Le courriel P-12 [Mr. Nicholl’s e-mail of July 6, 2007, Exhibit P-5 (K. Salomon’s Exhibits)] le décrit comme « a friend of Lionel ». Alors, on est en présence de quelqu’un qu’une preuve extrinsèque décrit comme l’ami d’un dirigeant de l’entreprise, le dirigeant qui peut être raisonnablement perçu comme ayant des obligations de loyauté envers celle-ci.

Le Tribunal conclut donc qu’une personne bien informée et non tatillonne, qui aurait fait une analyse sérieuse, serait fondée d’entretenir une crainte raisonnable de partialité à l’égard de l’impartialité de Monsieur Goldman. Cela étant dit, ça ne signifie d’aucune façon et ne met d’aucune manière en cause son intégrité personnelle, on l’aura bien compris. Il s’agit d’un test qui est lié à l’analyse que pourrait faire une personne tiers raisonnable et non quant à des faits qui donneraient lieu à douter de l’intégrité de Monsieur Goldman, que personne d’ailleurs n’a ici mis en cause.

Quant à Monsieur Kenneth Salomon, aucune cause de crainte de partialité n’a été soulevée ou avancée.

Il reste la question des honoraires. Les deux parties ont débattu de bonne foi la question de la qualification des arbitres. Ceux-ci ont, pendant le débat ou avant, entrepris de faire leur travail. Le Tribunal ne voit aucune espèce de raison de déroger à l’engagement qui avait été pris initialement quant au paiement des honoraires des arbitres sur une base de 50/50. Le Tribunal par ailleurs constate que dans les procédures il n’y a pas de conclusions qui lui permettent de prononcer des ordonnances qui s’appliqueraient au paiement des honoraires des deux arbitres.

Il n’y a des conclusions que concernant le paiement des honoraires de l’arbitre Salomon dans la mesure où on demandait sa récusation, ce que le Tribunal n’accorde pas ici. Le Tribunal compte donc sur la bonne foi des parties, ne rendra pas d’ordonnance, mais compte sur la bonne foi des parties pour exécuter les engagements tel que prévus initialement, et, si cela s’avérait impossible à être accompli dans le cadre normal des opérations de l’arbitrage, les parties auront à ce moment-là à revenir à la Cour quant à cet aspect. POUR CES MOTIFS, LE TRIBUNAL : ACCUEILLE en

partie la demande de nomination du Tribunal d’arbitrage; CONFIRME la nomination de Me Kenneth Salomon à

titre de membre et de Me John Nicholl à

titre de président du Tribunal d’arbitrage; ORDONNE la récusation de Monsieur Lionel Goldman à

titre de membre du Tribunal d’arbitrage; ORDONNE aux demandeurs de nommer un arbitre en remplacement de Monsieur Lionel Goldman dans un délai de dix (10) jours du présent jugement; LE TOUT SANS FRAIS.” [ 21 ] Therefore, as a result of Justice Gauthier’s judgment, Mr. Salomon and Mr. Nicholl had received the judicial confirmation of their appointments to the arbitration panel. [ 22 ] With regard to Mr. Goldman, Justice Gauthier of Superior Court concluded that an objective and well informed third party could conclude as to the existence of a serious apprehension of bias on his

part in favour of 651 Canada in light of his friendship with Mr. Mazoff. [ 23 ] Justice Gauthier goes on to confirm expressly that the finding of an apprehension was simply an application by the Court of a legal test of a theoretical third party and should not and did not indicate or raise any issue with regard to the probity or integrity of Mr. Goldman in accepting and continuing to act as an arbitrator in the matter. Aftermath of Judgment and Continued Standstill [ 24 ] On March 14, 2008, counsel for 651 Canada confirmed the appointment of Mr. Philippe Boulanger, C.A., to replace Mr.

Goldman. [ 25 ] One would have expected that after these events, there would be a speedy resumption of the arbitration process and the rendering of an arbitration decision. That was unfortunately not to be either. [ 26 ] First, Mr. Marcil, the attorney of 270 Canada wrote that his client would not accept the hourly rate of $ 400 for each of the arbitrators [17] . His client’s position was that the rate of $ 400 was only agreed to with respect to Mr. Salomon acting as sole

arbitrator [18] . [ 27 ] On May 12, 2008, Mr. Nicholl proposed that the additional arbitrators act as experts to him only and that their role, involvement and importantly time be limited. This would mean that he would do the bulk of the work alone and as such significantly reduce the arbitration costs.

This proposal was accepted by the parties [19] . [ 28 ] On August 28, 2008, as matters were not advancing and given his responsibility as chairperson of the arbitration panel, confirmed by the judgment of Justice Gauthier, J.C.S., and his legal obligations as chairperson of the panel to be diligent in moving the arbitration forward to a conclusion, Mr. Nicholl issued an interlocutory arbitration decision adopting an arbitration protocol specifying the applicable rules of proof, production of evidence, fees, obligatory deposit of fee retainers by the parties and a timetable to adjudicate the matter [20] .

The decision confirmed the agreement of the parties that he would act alone essentially as sole arbitrator and that the two additional arbitrators, Mr. Salomon and Mr. Boulanger, would act as experts to him, when required [21] . [ 29 ] The interlocutory arbitration decision confirmed that each of the arbitrator’s rates was set at $ 400 per hour [22] and ordered the deposit of a retainer of $ 15,000 by each party in trust with Mr. Salomon [23] .

The arbitration hearing on the merits was set for December 4 and 5, 2008. [ 30 ] However, 270 Canada objected and instead required a flat or maximum fee for the arbitrators [24] . Also, 270 Canada refused to put any amount at all in trust [25] . Furthermore, as a result of the passage of time since the arbitration process was initiated and recent developments, 270 Canada had apparently concerns about the solvency of 651 Canada [26] .

Consequently, on September 8, 2008, counsel for 270 Canada requested that the arbitration panel issue a safeguard order requiring 651 Canada to deposit all future remittances received [27] into trust. [ 31 ] For its part, 651 Canada had no objections to the terms of the interlocutory arbitration decision regarding the arbitration protocol and complied with its terms. On or around September 9, 2008, counsel for 651 Canada deposited the $ 15,000 ordered as a retainer with Mr.

Salomon [28] . [ 32 ] At that point, it appears that 270 Canada was requiring the arbitration panel to convene, deliberate and issue interim orders but 270 Canada refused to pay its 50% share of the arbitrators’ previously agreed rates, deposit a retainer for arbitration costs, or sign or comply with the arbitration protocol. Issue of Independence of Mr. Nicholl and More Standstill [ 33 ] On September 8, 2008, 270 Canada requested a declaration by Mr. Nicholl that he had no connection with the law firm retained by 651 Canada, namely Heenan Blaikie [29] . [ 34 ] On September 10, 2008, Mr.

Nicholl responded as follows: “I declare that I am not aware of any ground of recusation. The only past professional connection between myself and Heenan Blaikie is that I represented the firm in 2006 against an attempt to have it declared in a conflict of interest in court file number 500-17-030305-067. Judgment was rendered in Heenan Blaikie’s favour on November 30, 2006, and the file was closed.

I have no other ongoing professional or commercial relationship with Heenan Blaikie.” [30] [ 35 ] On September 12, 2008, counsel for 651 Canada filed documents in accordance with the timetable set by the arbitration panel, including an apparent Cross-Demand on its part [31] . The documents were to the effect that 270 Canada was not owed money by 651 Canada but instead it was the reverse situation. The amount claimed by 651 Canada against 270 Canada was $ 419,712.10. [ 36 ] On September 15, 2008, 270 Canada objected to the fact that Mr.

Nicholl had represented the law firm of Heenan Blaikie in the past [32] . 270 Canada required that Mr. Nicholl recuse himself on that ground.

[ 37 ] On September 17, 2008, Mr. Nicholl issued a long (6 pages) and reasoned interlocutory arbitration decision declining to recuse himself on the basis that there was no legal justification for such a request of recusation. Mr. Nicholl informed the counsel of 270 Canada that it could make an application to the Court within 30 days under

Article 942.4 of the Code of Civil Procedure (“ C.C.P. ”) to revise his decision [33] . [ 38 ] On October 6, 2008, counsel for 270 Canada wrote to Mr. Salomon and Mr. Boulanger and requested that they also provide a declaration as to whether they had any connection with 651 Canada, its principal, Ronald Beaulieu, or the law firm Heenan Blaikie. On October 9, 2008, Mr. Nicholl, despite his reservations but simply to move the file forward, issued an order requesting that Mr. Salomon and Mr. Boulanger comply with this request of 270 Canada [34] . On October 16, 2008, Mr.

Salomon sent a letter which stated that he had no connection with 651 Canada, Ronald Beaulieu or the firm of Heenan Blaikie [35] . According to the testimony heard, Mr. Boulanger sent a letter to the same effect. [ 39 ] On October 17, 2008, 651 Canada filed a Court motion requesting the recusation of Mr. Nicholl [36] . [ 40 ] In light of that motion, Mr. Nicholl requested that counsel for the parties indicate to him whether they requested a suspension of the arbitration proceedings pending a decision of the Court on this question. The attorney for 270 Canada requested a suspension [37] .

The attorney of 651 Canada objected to the proposed suspension [38] and requested that the arbitration process go forward. [ 41 ] Given the procedural dispute, Mr. Nicholl was required to issue a decision on that point. On October 23, 2008, Mr. Nicholl rendered an interlocutory arbitration decision declining to suspend the arbitration [39] . His decision was based on

Article 942.4

(2) C.C.P. which states as follows: “ The arbitrators, including the arbitrator whose recusation is proposed, may continue the arbitration proceedings and make their award while such a case is pending.” [ 42 ] On October 28, 2008, further to discussions with the counsel of 270 Canada, the counsel of 651 Canada, withdrew his request to move forward with the arbitration process and agreed with the request of 270 Canada to suspend the arbitration proceedings pending the outcome of an amendment to the motion requesting recusation of Mr.

Nicholl to also request the interim suspension of the arbitration proceedings [40] . [ 43 ] On the same day, as both parties now agreed to suspend the arbitration proceedings, Mr. Nicholl suspended the arbitration proceedings [41] . According to the testimony heard, on the day of the presentation of the motion for recusation of Mr. Nicholl, 651 Canada filed for bankruptcy.

Procedural Context [ 44 ] On September 17, 2010, the law firms and accounting firms of the arbitrators involved filed a joint legal proceeding (500-22- 174481-104) in the Court of Quebec (Civil Division) against 270 Canada claiming one half of the amounts invoiced for services rendered and disbursements incurred during the arbitration process. [ 45 ] The total amount charged for both arbitrating parties was $ 33,567.42. One half ($ 16,783.71) had been charged to 651 Canada and the other half to 270 Canada.

As 651 Canada had deposited the required advance of $ 15,000, the bulk of the amount owing by it was already paid. The remaining amount of $ 1,787.71 was a bad debt and uncollectible as a result of the bankruptcy of 651 Canada. [ 46 ] The arbitrators claimed the remaining $ 16,783.71 from 270 Canada. [ 47 ] On October 25, 2010, in a separate and additional proceeding (500-32-125627-101), 270 Canada filed a claim against Lionel Goldman for $ 7,000 in damages.

[ 48 ] On October 29, 2010, by order of Justice Armando Aznar, J.C.Q., the arbitrators were required to change the designation of Plaintiff parties from their professional firms to themselves personally. The respective amounts claimed totalling $ 16,783.71 were as follows: 1) Kenneth F. Salomon $ 6,268.34 2) John Nicholl $ 7,085.04 3) Lionel Goldman $ 2,279.00 4) Philippe Boulanger $ 1,151.33 [ 49 ] On November 16, 2010, Justice Armando Aznar, J.C.Q., also rendered a separate judgment transferring the claims of Mr. Salomon, Mr. Goldman and Mr.

Boulanger to the Small Claims Division of the Court of Quebec on the basis that amounts claimed by each of them, individually, were less than $ 7,000 (the monetary limit of the Small Claims Division at the time). As for the claim of Mr. Nicholl of $ 7,085.04, its amount was above the maximum threshold and therefore remained in the regular Civil Division of the Court of Quebec. Accordingly, each of the three claims in Small Claims Division proceeded under a separate Court file number as follows: 1) (500-32-131706-121) Kenneth F.

Salomon: $ 6,268.34 2) (500-32-131739-122) Lionel Goldman: $ 2,279.00 3) (500-32-131738-124) Philippe Boulanger: $ 1,151.33 [ 50 ] On April 26, 2013, Justice Eliana Marengo, J.C.Q., in virtue of

Article 271 C.C.P., ordered that these three proceedings along with the separate legal proceeding taken by 270 Canada against Mr. Goldman, all before the Small Claims Division of the Court of Quebec, be joined for common hearing and adjudication by the same judge. [ 51 ] On September 9, 2014, the hearing in this matter was set before the undersigned to proceed on October 29, 2014. [ 52 ] On October 10, 2014, Mr. Boulanger desisted from his proceeding. [ 53 ] With regard to the legal proceeding by Mr. Nicholl against 270 Canada for fees of $ 7,085.04, Mr.

Nicholl testified at the hearing that in May 2012, 270 Canada amended its cross-demand against him, and increased it to $ 547,966.00. Subsequently, that case was settled by way of mutual desistment, each party paying its own costs. [ 54 ] At the hearing before the undersigned, all of the parties testified, including Mr. Larry Shaffer for 270 Canada, Mr. Salomon and Mr. Goldman.

Furthermore, the Court benefitted from hearing the testimony of: 1) Paul Marcil, attorney, who acted for 270 Canada; 2) David Joanisse, attorney, who acted for 651 Canada; 3) Andrew Cohen, attorney, who acted for 651 Canada; 4) John Nicholl, attorney and arbitrator; and 5) Stanley Mazoff. [ 55 ] 270 Canada filed 73 exhibits. Mr. Salomon filed 19 exhibits. Mr. Goldman filed 12 exhibits. During Mr. Nicholl’s testimony, he produced various documents that were filed in a binder comprising 43 exhibits.

Analysis and Decision Grounds of defence of 270 Canada to deny or reduce Mr. Salomon’s claim for services rendered [ 56 ] 270 Canada raises several defences to Mr. Salomon’s claim for services rendered and expenses incurred as an arbitrator. The Court will deal with each of them. 270 Canada never retained Mr. Salomon as an arbitrator [ 57 ] 270 Canada submits that it never retained Mr. Salomon to act as an arbitrator in the matter. At most, it states that it may have agreed that Mr. Salomon act as sole arbitrator only. But since that proposal was not accepted by 651 Canada, Mr.

Salomon was never appointed to act as its designated arbitrator. [ 58 ] That ground of defence is clearly unfounded in fact and in law. The evidence establishes that the attorney of 270 Canada met with Mr. Salomon and recommended him to the principal of 270 Canada. In his e-mail of May 1, 2007, Mr. Marcil wrote to Mr. Shaffer as follows: “As I mentioned, Ken is a lawyer. He has over 30 years experience as a commercial litigator. I have contacted Ken. He understands that we are not dealing with difficulties of a technical nature but merely with the

interpretation of a commercial contract.” [42] [ 59 ] Mr. Shaffer wrote on the e-mail: “Ken Salomon OK – do not know him” and faxed it back to Mr. Marcil. [ 60 ] On May 3, 2007, Mr. Marcil wrote to Mr. Shaffer and reported on the meeting with Mr. Salomon, along with Andrew Cohen. Mr. Marcil wrote: “Ken appears well suited for the job [43] .” [ 61 ] After Mr. Cohen for 651 Canada stated that in his client's opinion, it would be preferable to appoint as sole arbitrator someone with legal and accounting expertise, Mr. Marcil proceeded nonetheless to name, by way of Notice of Complaint, Mr. Salomon [44] .

In so doing, in full knowledge of 651 Canada’s position, he exercised the provision regarding the naming of arbitrators in the Sale Agreement, namely that if the proposed sole arbitrator of the Instituting Party (270 Canada) was not accepted, then the designated arbitrator would become the arbitrator appointed by the Instituting Party [45] . In fact, the notice drafted by Mr. Marcil clearly states: “Our client appoints Me Kenneth F. Salomon of the firm Sternthal Katznelson Montigny (514.878.1011) as Arbitrator in conformity with

Article 13.3 of the Agreement. Please be advised that failing receipt within 5 days of the date hereof from you of a notice concurring in the appointment of Me Salomon,

as Arbitrator or the appointment of an additional arbitrator, Me Salomon shall act as the Sole Arbitrator as provided by

Article 13.3.” [ 62 ] 651 Canada in fact did not concur in the appointment of Mr. Salomon, and therefore appointed Lionel Goldman as the additional arbitrator. [ 63 ] It is therefore clear that by virtue of the terms regarding the arbitration process agreed to by the parties in the Sale Agreement that 270 appointed Mr. Salomon as its choice as arbitrator to the arbitration panel. [ 64 ] At the trial, Mr. Marcil was clear in his testimony that he understood that he had appointed Mr. Salomon as the arbitrator appointed by 270 Canada. On this point, even Mr.

Marcil did not support the position now taken by 270 Canada. After these developments, 270 Canada and 651 Canada then left it to Mr. Salomon and Mr. Goldman the work of finding and jointly recommending a third arbitrator to act as chair of the arbitration panel. [ 65 ] Mr. Shaffer of 270 Canada objected to the first proposed chairperson arbitrator, Ralph Lipper, attorney with De Grandpré Chait but agreed to the second proposed person, Mr. Nicholl. In so doing, 270 Canada was well aware that Mr. Salomon was working as its designated arbitrator to complete the arbitration panel. [ 66 ] The evidence is that Mr.

Salomon advised both 270 Canada and 651 Canada at all times that his applicable hourly rate would be $ 400. [ 67 ] Furthermore, as appears from the extract referred to above from Mr. Justice Gauthier’s judgment, he rejected the request of 270 Canada to replace Mr. Salomon with another arbitrator and confirmed the position of Mr. Salomon as 270 Canada’s designated arbitrator.

No arbitration protocol was ever signed by 270 Canada [ 68 ] 270 Canada argues that since it never signed any arbitration protocol confirming the acceptance of each arbitrator and their hourly rates, it is not bound to pay any arbitrator for their fees. [ 69 ] That ground of defence is unfounded in fact and in law. The arbitration agreement clauses in the Sale Agreement were agreed to by the parties who are 270 Canada and 651 Canada.

Each party then utilised the arbitration mechanism, appointed its arbitrator, and then agreed to the designation of a third arbitrator acting as the chairperson of the arbitration panel. The existence of the arbitration panel was confirmed by judgment of Justice Gauthier. [ 70 ] On August 28, 2008, Mr.

Nicholl exercised his power as chair to issue an order imposing an arbitration protocol on the parties [46] . [ 71 ] Based on all the above, there can be no doubt that an arbitration panel was constituted at the instigation of the parties. [ 72 ] Based upon the proof, there can also be no doubt that the two parties to the arbitration agreed to pay equally (50%) of the costs of arbitration, including the fees and expenses of all the arbitrators whose hourly rates were fixed at $ 400. [ 73 ] The 50% split of the arbitration cost was proposed by Mr. Marcil and 270 Canada. It was accepted by 651 Canada.

This was what Justice Gauthier concluded was the agreement between the parties and recommended that it be confirmed. In his judgment, he stated:

“Le Tribunal ne voit aucune espèce de raison de déroger à l’engagement qui avait été pris initialement quant au paiement des honoraires des arbitres sur une base de 50/50. [47] ” [ 74 ] This is what was included in the arbitration protocol ordered by Mr. Nicholl [48] . Accordingly, there can also be no doubt that this was the binding agreement of the parties. Finally, as explained above, 270 Canada has benefited from the 50% split of all the invoices sent by the arbitrators as well as 651 Canada’s payment of the bulk of its 50% portion of the arbitration fees.

No arguments on the merits were ever heard before the Arbitration Panel [ 75 ] 270 Canada submits as a ground of defence that it should not pay Mr. Salomon’s invoices since no arguments on the merits were ever heard by the arbitration panel. With respect, this appears to be an extremely disingenuous argument on the part of 270 Canada.

From the evidence heard and the exhibits filed, the main reason why no argument was ever made to the arbitration panel on the merits was that 270 Canada and its counsel decided, at a certain point, that it would no longer cooperate with the arbitration process. [ 76 ] At that point, 270 Canada did not actively seek to set aside or annul the arbitration process, as constituted.

Instead, it passively resisted any progress by alternatively not responding to nor respecting interlocutory arbitration decisions, by delaying, by raising objections and by not respecting the arbitration timetable set out in the various orders to get to a final adjudication of the arbitration matter on the merits. [ 77 ] The objection to Mr. Goldman was first raised and dealt with by the arbitration panel on July 7, 2007. But despite repeated requests, 270 Canada never took the initiative to file a Court motion requesting the recusation of Mr.

Goldman. [ 78 ] Finally, on September 20, 2007, in order to move the process forward and break the impasse, 651 Canada made a motion to the Superior Court to confirm the legal status of the arbitration panel and each of its arbitrators. It was only on December 12, 2007, some 6 months after 270 Canada became aware of the social connection between Mr. Goldman and Mr. Stanley Mazoff, that 270 Canada (by way of contestation to 651 Canada’s motion) requested the recusation of Mr. Goldman. [ 79 ] After the judgment of Mr.

Justice Gauthier in March 2008, granting the Goldman recusation request, 270 Canada still remained passive for several months. Thereafter, 270 Canada suggested new pre-conditions before it would agree to continue the arbitration process, including changing the fee structure of the arbitrators and the issuance of a preliminary interim conservatory order for its benefit. 270 Canada also requested new declarations by the arbitrators. [ 80 ] More than seven months after Justice Gauthier’s judgment, 270 Canada finally made a motion to Court, this time requesting the recusation of Mr.

Nicholl. [ 81 ] In light of the above, the Court has no choice but to conclude that if no arguments on the merits were ever heard by the arbitration panel, it was certainly not for lack of effort of the arbitration panel or its arbitrators but instead was principally attributable to the conduct of 270 Canada intended to resist the advancement of the arbitration process by the arbitration panel. [ 82 ] At the hearing, Mr. Shaffer of 270 Canada speaking as its president, admitted that he did not want to proceed with the arbitration panel as instituted since he felt that that the ''dice were loaded against him''.

Mr. Salomon supported Mr. Nicholl who purportedly acted wrongly [ 83 ] The claim of Mr. Nicholl against 270 Canada has been settled. But 270 Canada now defends itself against the claim of Mr. Salomon by pleading that Mr. Nicholl acted improperly and that Mr. Salomon acted improperly in supporting Mr. Nicholl throughout the arbitration process. Therefore, the Court is called to assess the conduct of Mr. Nicholl as an arbitrator in the arbitration

process in issue, in particular in his role as president of the arbitration panel. [ 84 ] The principal grounds of attack of 270 Canada on Mr. Nicholl’s conduct are twofold. First, 270 Canada submits that Mr. Nicholl wrongly supported Mr. Goldman when in fact he was later recused by judgment of Justice Gauthier. Second, Mr. Nicholl omitted to disclose to the parties that he had previously acted for the law firm of Heenan Blaikie that was acting on behalf of 651 Canada for the arbitration and had previously done so for the transaction of the Sale Agreement. The Court will review each of these grounds.

a) Mr. Salomon’s support for Mr. Goldman [ 85 ] Regarding the first ground, the Court will deal with it in detail later when it addresses the merits of the claim of Mr. Goldman. As appears from the judgment of Justice Gauthier, the question of Mr. Goldman’s recusation was not clear cut. It was very grey. It was a question of deciding whether an objective third party making a thorough analysis of the issue would rebut the presumption of impartiality that an arbitrator enjoys at law on the basis of his social connection with Mr. Mazoff. There is no one correct answer to such a question.

Justice Gauthier came to the conclusion that the presumption was rebutted. That was not the same conclusion reached by both Mr. Nicholl and Mr. Salomon. It may well have been that a colleague of Justice Gauthier would have come to a different conclusion. [ 86 ] However, what is clear is that the principal of 270 Canada, Mr. Shaffer, initially did not take issue with Mr. Salomon’s opinion on the matter as a complaint against Mr. Salomon. Mr. Shaffer felt that even after Mr. Salomon had expressed support for Mr. Goldman and his independence as an arbitrator, Mr. Salomon had acted “honourably”.

This was expressly stated by Mr. Shaffer. In his letter of July 18, 2007, after Mr. Nicholl and Mr. Salomon had both stated their support of Mr. Goldman’s independence, Mr. Shaffer wrote that Mr. Salomon had “acted honourably throughout” [49] . On that basis, the Court finds no merit to the new criticism of 270 Canada of Mr. Salomon's conduct and integrity when both were previously considered by Mr. Shafer as being honourable.

b) Mr. Salomon’s support for Mr. Nicholl [ 87 ] On September 2 and September 8, 2008, subsequent to the initial confirmation by Mr. Nicholl that he had no conflict of interest to act as an arbitrator in the conflict between 270 Canada and 651 Canada, 270 Canada, through its attorneys, requested a further statement by Mr. Nicholl regarding any connection between himself and the law firm of Heenan Blaikie [50] . On September 10, 2008, Mr. Nicholl wrote to the parties and reiterated that he was not aware of any ground of recusation on his part.

He did add however that in 2006 he had represented that firm in a motion to have it declared unable to act as a result of an alleged conflict of interest. That matter was closed in November 30, 2006 [51] . Mr. Nicholl also later wrote that he had not met either of the individual attorneys representing each party (Mr. Joanisse for 651 Canada or Mr. Marcil for 270 Canada). At the time that Mr.

Nicholl was appointed chair of the arbitration panel on June 7, 2007 and thereafter, there was no professional or commercial relationship between him and the law firm of Heenan Blaikie. [ 88 ] The Court does not find that that past connection with a law firm representing one of the parties in the arbitration was a cause of conflict or a valid cause of recusation of Mr. Nicholl. [ 89 ] First and foremost, conflicts of interest of attorneys as arbitrators are verified at a given time. According to the facts, at the time of verification of whether a conflict existed on June 7, 2007, Mr.

Nicholl had no conflict of interest, connection or relationship with either of the parties. He had no reason to favour one or the other. [ 90 ] Second, conflicts of interest relate and are limited, barring special circumstances, to the actual parties involved in a dispute and not to their attorneys. On the contrary, Heenan Blaikie was a competitor to Mr. Nicholl’s firm.

There is no objective or serious reason to believe that a founding partner in an established law firm named as an arbitrator would have any reason to favour one of the parties simply because as an attorney he had previously represented one of the law firms acting on behalf of a party in the arbitration. The undersigned has reviewed 270 Canada's motion to the Court to disqualify Mr. Nicholl that was never presented or heard by the Superior Court. The undersigned has also reviewed Mr.

Nicholl’s interlocutory arbitration decision refusing 270 Canada's request to recuse himself. [ 91 ] In the Court’s view, based upon the applicable rules regarding recusation of an arbitrator, the motion to recuse Mr. Nicholl would have failed. The motion does not address the fact that an arbitrator benefits from a legal presumption of impartiality. A cogent and clear reason to favour one party is required to be shown in order to rebut that presumption. The fact that an arbitrator, being an attorney

with an expertise in defence liability, would have previously represented a major national law firm in a totally separate and closed matter before the arbitration, would be insufficient grounds to order his recusation. An informed third party who would objectively evaluate whether there was a reasonable risk of partiality or bias in such circumstances would have concluded in the negative. [ 92 ] In the Court’s view, 270 Canada has confused the mere existence of a connection with a valid cause of partiality.

An arbitrator cannot be recused or disqualified on the mere ground that there existed in the past a commercial connection with a legal representative of one of the parties when there is no reason to believe that that fact would affect the independence of the arbitrator. At the time of the arbitration in issue, there was no reason for Mr. Nicholl to favour one party over the other. [ 93 ] After reviewing all the evidence, the Court is of the view that Mr. Nicholl acted throughout in a highly professional, competent and impartial manner, in very trying circumstances.

The Court also adds that he appears to have done so at a very reasonable cost considering that his total fees from July 2006 to November 2008 were approximately $ 14,000, including expenses and applicable taxes. [ 94 ] It must be stated that as chairperson of the arbitration panel, Mr. Nicholl's primary legal responsibility was to ensure that the arbitration process move forward and conclude. Since 270 Canada was not cooperating to move the arbitration process forward, its perception was that Mr. Nicholl was biased since he was attempting to advance the process to an adjudication.

Instead, he was simply doing his job as an arbitrator, as required by professional arbitration norms and legislatively imposed duties. [ 95 ] In light of the above, the Court concludes that it was entirely reasonable for Mr. Salomon to support Mr. Nicholl’s decision not to recuse himself since a request for recusation in the circumstances was not founded in fact or in law. Therefore, that ground of defence of 270 Canada is rejected. [ 96 ] It is important to note that there has never been any cause or ground raised to question the integrity or independence in any way of Mr.

Salomon. [ 97 ] Accordingly, based upon all the evidence, the Court considers that Kenneth Salomon’s conduct during the entire arbitration process was irreproachable and that he acted with probity and honesty throughout. [ 98 ] All the invoices of Mr. Salomon are fully justified and the Court will grant Mr. Salomon’s motion to order 270 Canada to pay them, with costs.

c) Cross-Demand of 270 Canada against Mr. Salomon [ 99 ] 270 Canada has taken a cross-demand against Mr. Salomon claiming $ 7,000 for damages. In order for such a motion to succeed, 270 Canada was obliged to establish that Mr. Salomon had committed a fault in his duties as an arbitrator. As appears from the previous section, the Court concludes that there is no scintilla of proof of any fault on the part of Mr. Salomon. The Cross-Demand will accordingly be dismissed.

d) Damages suffered by 270 Canada as a result of the alleged fault of Mr. Salomon [ 100 ] In light of the findings of the Court mentioned in

b) and

c) above, it is not necessary to analyse the question of alleged damages of 270 Canada. But the Court indicates nonetheless that the evidence shows no connection between the alleged losses suffered by 270 Canada as a result of not obtaining an arbitration decision earlier and the conduct of Mr. Salomon who acted diligently and with integrity throughout the arbitration process. Grounds of Defence of 270 Canada to deny or reduce the claim of Mr. Goldman for services rendered

[ 101 ] 270 Canada invokes two defences regarding the claim of Mr. Goldman. The Court will review each of them. They are: a) 270 Canada never retained Mr. Goldman and did not agree to pay him [ 102 ] The arbitration clause in the Sale Agreement sets out the process under which the arbitration panel was constituted. If the proposed sole arbitrator is rejected by the Responding Party, then that arbitrator will become the arbitrator designated by the Instituting Party. The Responding Party will then name its designated arbitrator.

Together the two arbitrators will attempt to agree on the chairperson arbitrator. [ 103 ] This is what occurred here. Mr. Salomon was appointed by the Instituting Party. Mr. Goldman was appointed by the Responding Party. Mr. Goldman and Mr. Salomon endeavoured and succeeded in jointly proposing a mutually acceptable arbitrator to act as chairperson, namely Mr. Nicholl.

In order to ensure that their joint recommendation for the presiding arbitrator was acceptable to the parties, they even requested that the parties to the arbitration approve their recommendation and the parties did so. [ 104 ] The arbitrating parties also agreed, at the request of 270 Canada, that the rule regarding costs be adjusted so that each party would pay half of all the costs of arbitration, including the fees of the arbitrators. [ 105 ] In light of the above, this ground of defence is unfounded in fact and in law. 270 Canada agreed to the mechanism to institute the arbitration panel stipulated in the Sale Agreement and to the rule of shared costs on a 50/50 basis.

As a result, 270 Canada agreed to assume 50% of the fees of each arbitrator, including those of Mr. Goldman.

b) Mr. Goldman failed to disclose in a timely way a valid ground of recusation [ 106 ] In addition to customary practice and usage, the obligation for an arbitrator to state a ground of recusation is found at

Article 942.1 C.C.P. reads as follows: L'arbitre doit signaler aux parties toute cause valable de récusation en sa personne. An arbitrator must declare to the parties any ground of recusation to which he is liable. [ 107 ] 270 Canada reproaches Mr. Goldman for failing to disclose to each of the parties before accepting the appointment as an arbitrator that he had a social connection to a person involved with the management of 651 Canada, Mr. Stanley Mazoff, who was in fact the source of the recommendation to 651 Canada’s attorney Andrew Cohen to appoint Mr. Goldman. Mr.

Goldman testified that he did mention this connection to Mr. Cohen when he received the initial call from him to put his name forward. Mr. Goldman testified that he queried Mr. Cohen as to whether this connection presented a problem and Mr. Cohen responded that as long as Mr. Goldman felt that he would exercise his judgment fairly and independently, it would not. In his testimony to the Court, Mr. Cohen generally confirmed the terms of that conversation. [ 108 ] Further to an inquiry from 270 Canada’s attorney to the arbitrators regarding Mr. Goldman’s connection to 651 Canada, on July 6, 2007 Mr.

Goldman wrote an e-mail to his fellow arbitrators. The e-mail [52] reads as follows: “Gentlemen, To be sure, I have surveyed my partners, and we know of no professional conflict re this mandate. However, as I told both Ken, when he originally asked me, my name was suggested to Andrew Cohen by the purchaser, because Stan

Mazoff, who has been consulting for the purchase entity, for a number of months, recommended me as someone capable and trustworthy. Stan is a neighbour and a friend, and from time to time he suggests our name for possible mandates. He is not a client, and I also understand he has no financial interest in these matters. Furthermore, when my name was put forward, I spoke to Stan to inform him that I feel no obligation to him, and that my input into this process will be governed solely by what I consider to be fair and correct, not by who I know, or don’t. He understood completely.

It occurs to me that it would be advisable to put the question to Larry Shaffer directly, i.e. what is behind his request, and if this is it-let’s get it out on the table now. We all would take great offence to someone coming along later, taking exception to our ruling, and implying that this relationship was not fully disclosed. I believe it can do us no harm to have this clearly out in the open, now, so that it cannot be used later to discredit our work. Let me know if you concur, Lionel” [ 109 ] On the same day, that information was conveyed to the attorneys of the parties by Mr.

Nicholl [53] in an e-mail already reproduced at paragraph 16 of the present judgment. [ 110 ] On July 11, 2007, Mr. Nicholl and Mr. Salomon went on record that they supported Mr. Goldman and that their view was that he would carry out his duties with probity and impartiality [54] . [ 111 ] In his defence to the claim of 270 Canada (500-32-125627-101), Mr. Goldman states: ''Defendant denies the allegation contained in paragraph 9, and wishes to make very clear that he was most transparent in disclosing his status as a neighbour and friend of Mr. Mazoff.

From the first phone call on May 15th 2007, requesting that Defendant accept the mandate, Defendant enquired as to the source of the recommendation, and, when informed that the referral was made by Mr. Mazoff, disclosed his relationship with Mr. Mazoff, and although it is customary for the parties to the dispute to choose arbitrators who are familiar to them, Defendant queried whether the nature of his relationship with Mr. Mazoff would create a problem for the parties.

Defendant submits as Exhibit D-5, his email of July 6th 2007 to co-Arbitrators, voluntarily articulating the nature of the relationship, and the desire that everything be out in the open, so that the outcome of their deliberations could not subsequently be called into question;'' [ 112 ] The fact remains that this issue or possible cause of recusation was not disclosed to 270 Canada, one of the parties, before Mr. Goldman accepted his appointment. Mr. Goldman testified in Court that he regretted that omission and assumed responsibility for it.

Objectively and with the benefit of hindsight, that was a mistake. [ 113 ] But the fundamental question is whether that social connection had to be disclosed pursuant to

Article 942.1 C.C.P. That

article does not state that any possible ground of recusation must be declared but only one to which the potential arbitrator is ''liable''. In French, the text requires only that a " cause valable " (or valid cause or ground) be declared. [ 114 ] What is a valid cause of recusation is subject to a legal test articulated by the Courts. The standard applied to judges is applied by analogy to arbitrators [55] . The relevant case law authorities are as follows:

• Wewaykum Indian Band v. Canada, [2003] SCC 45 at para. 76: [1] it is worth repeating that the standard refers to an apprehension of bias that rests on serious grounds, in light of the strong presumptionof judicial impartiality. • R. v. S.(R.D.), (SCC), [1997] 3 S.C.R. 484 at 503 (L'Heureux-Dubé, J.) and 532-33 (Cory, J.): Notwithstanding the strong presumption of impartiality that applies to judges ... [...] Regardless of the precise words used to describe the test, the object of the different formulations is to emphasize that the threshold for afinding of real or perceived bias is high.

It is a finding that must be carefully considered since it calls into question and element ofjudicial integrity. Indeed an allegation of reasonable apprehension of bias calls into question not simply the personal integrity of thejudge, but the integrity of the entire administration of justice. .... Courts have rightly recognized that there is a presumption that judges will carry out their oath of office.

This is one of the reasons whythe threshold for a successful allegation of perceived judicial bias is high. ... [115] The Courts have declared that to be a valid cause for recusation, an alleged apprehension of bias must be supported by seriousand substantial grounds: Committee for Justice and Liberty v.

Canada (National Energy Board), (SCC), [1978] 1 S.C.R. 369 at 394-395: [T]he apprehension of bias must be a reasonable one held by reasonable and right minded persons, applying themselves to the questionand obtaining thereon the required information ... that test is ''what would a informed person, viewing the matter realistically andpractically - and having thought the matter through - conclude.

Would he think that it is more likely than not that [the judge], whetherconsciously or unconsciously, would not decide fairly.'' I can see no real difference between the expressions found in the decided cases, be they 'reasonable apprehension of bias', 'reasonablesuspicion of bias' or 'real likelihood of bias'. The grounds for this apprehension must, however, be substantial ... [116] So the legal question is whether the social connection that existed between Mr. Goldman and Mr.

Mazoff constituted, for aninformed and objective third party, viewing the matter realistically and practically - and having thought the matter through - a reason tohave a substantial apprehension of bias. If yes, the ground should have been disclosed to the arbitrating parties before confirmingacceptance of the nomination. If not, it did not have to be. [117] Mr. Nicholl and Mr. Salomon did not consider this social connection to be a valid ground for recusation. 270 Canada andMr.

Shaffer obviously did not share that assessment. [118] Justice Gauthier decided that it was, but at the same time clearly expressed his opinion that the omission to declare the socialconnection was not an issue of probity or integrity on the part of Mr. Goldman. Justice Gauthier held that in the eyes of an objective wellinformed third party, this social connection could put into question the impartiality of Mr. Goldman.

[ 119 ] In his judgment, Justice Gauthier appears to recommend that all the fees, including those charged by Mr. Goldman, before the order of recusation be paid in equal shares of 50% by 270 Canada and 651 Canada. However, in the absence of any conclusion in the motion before him regarding the payment of fees, he made no formal order to that effect on the basis that the parties would resolve the issue in good faith. The parties have been unable to resolve it and this Court must now do so. [ 120 ] The Court concludes that the amount of fees of Mr.

Goldman should be affected by his omission to notify 270 Canada of the existence of his social connection with Mr. Mazoff, which subsequently gave rise to his recusation. [ 121 ] Although the area is a grey zone, the Court must take into account the predominant fact that the final determination of Justice Gauthier was to order the recusation of Mr. Goldman. [ 122 ] Accordingly, the Court will reduce the amounts charged by Mr. Goldman by 60%. The Court does however not find that the omission by Mr. Goldman to declare that connection was a fault giving rise to his civil liability. It was an error, in good faith.

However, that error objectively had a negative impact on the value of his services and that negatively affected the arbitration process. [ 123 ] The Court emphasizes that based upon the evidence and in echo of Justice Gauthier's comments, the Court is of the view that Mr. Goldman demonstrated throughout his role in the arbitration process his integrity, honesty and impartiality. The Court also has no doubt that had Mr. Goldman not been recused, he would have examined the proof fairly, without any bias and cast his arbitration vote objectively.

It is necessary to underline that whether a social connection became a valid cause for recusation is a matter of legal uncertainty and contradiction, as the evidence shows, even for expert jurists. [ 124 ] Mr. Goldman's motion for recovery of his fees will be granted for 40% of the amount charged. Given the mixed result, it will be without judicial costs. Claim of 270 Canada against Mr. Goldman [ 125 ] This claim of $ 7,000 could only succeed if 270 Canada established that Mr. Goldman committed a fault giving rise to his civil liability in the course of his arbitration duties.

For the reasons stated above in the previous section, 270 Canada failed to establish the commission or omission of any act by Mr. Goldman that would constitute a civil fault. This motion for damages will be dismissed, without costs. Damages allegedly suffered by 270 Canada as a result of the alleged fault of Mr. Goldman [ 126 ] As there has been no fault of Mr. Goldman, it is not necessary to consider the damages claimed by 270 Canada. But it is important to point out that there appears to be no causal link between the alleged fault of Mr.

Goldman and the alleged damages sought. [ 127 ] 270 Canada argues that because Mr. Goldman did not disclose his social connection earlier, 270 Canada lost $ 600,000 because it did not obtain an arbitration award before 651 Canada went bankrupt. [ 128 ] First, there is insufficient proof that 270 Canada would have obtained a $ 600,000 award, especially in light of the defence of complete denial of 651 Canada and its Cross-Demand for approximately $ 500,000 that was not adjudicated. [ 129 ] Second, the issue of the social connection of Mr. Goldman was raised in July 2007.

As a result of the inaction of 270 Canada, it was only raised before the Court in December 2007 and adjudicated upon in March 2008. [ 130 ] Third, after the judgment of Justice Gauthier, the arbitration process remained stalled for reasons completely independent of Mr. Goldman for at least another 8 months until November 18, 2008 when 651 Canada filed for bankruptcy. Therefore, even in the absence of the issue regarding Mr. Goldman, the arbitration remained stalled.

[ 131 ] Mr. Shaffer of 270 Canada testified that he had decided that he could not go forward with the arbitration process as constituted because he feared that the ''dice were loaded against him''. [ 132 ] But in fact, after the departure of Mr. Goldman, there was no objective or rational ground for such a fear. There was no reasonable apprehension of bias on the part of Mr. Nicholl; there was not even a suggestion of a reasonable apprehension of bias on the part of Mr. Salomon; the same was true for Mr. Boulanger. [ 133 ] However, there were other issues that impeded the advancement of the arbitration.

Starting on April 14, 2008, 270 Canada wanted to change the terms of payment of the arbitrators and impose a new fixed amount on the fees and required that the hourly rates of the arbitrators be reduced from $ 400 to approximately $ 135 [56] . All the arbitrators objected to renegotiating their fees.

Later, 270 Canada was becoming gradually aware of information regarding a negative financial outlook for 651 Canada and probable insolvency [57] . [ 134 ] 270 Canada appears to have acted as though its previous approval of arbitrators and their fees was not binding and could be re- negotiated during the arbitration process. That is not the case. After an arbitrator is appointed, his position and the financial terms under which he or she has been appointed are permanent until adjudication, except in very special circumstances which could justify recusation or intervention of the Courts.

That permanency is essential to the proper functioning and integrity of the arbitration process so that the arbitrator enjoys an independence akin to judicial independence in order that he or she decide the arbitration matter based solely upon the facts proven, the law and his or her conscience. [ 135 ] Starting in July 2008, 270 Canada started to express its fears that an arbitration decision in its favour might not be enforceable and questioned the utility of continuing and paying for the arbitration proceedings.

It appears that 270 Canada decided not to proceed to the merits of the arbitration matter for its own reasons. But the evidence does not show that the arbitration did not proceed for any rational or objective issue regarding the integrity, impartiality or professionalism of the arbitrators in place after March 2008. FOR THESE REASONS, THE COURT: In case no. 500-32-131706-121: GRANTS Kenneth F. Salomon's motion; CONDEMNS 2700620 Canada Inc. to pay Kenneth F. Salomon $ 6,286.34, plus legal interest of 5% per year, plus the additional indemnity provided at

Article 1619 of the Civil Code of Quebec from the demand letter dated December 8, 2009 (Exhibit P- 12, K. Salomon's Exhibits); WITH JUDICIAL COSTS of $ 264 in favour of Kenneth F. Salomon. In case no. 500-32-131739-122: GRANTS in

part Lionel Goldman's motion; CONDEMNS 2700620 Canada Inc. to pay Lionel Goldman $ 911.60, plus legal interest of 5% per year, plus the additional indemnity provided at

Article 1619 of the Civil Code of Quebec from the demand letter dated December 8, 2009 (Exhibit P-12, K. Salomon's Exhibits); WITHOUT COSTS .

In case no. 500-32-125627-101: DISMISSES 2700620 Canada Inc.'s motion; WITHOUT COSTS . __________________________________ Jeffrey Edwards, J.C.Q. 2700620 Canada Inc. Represented by Larry Shaffer Mr. Kenneth F. Salomon: For himself Mr. Lionel Goldman: For himself Date of hearing: October 29, 2014