Ontario – court declines to defer costs determination but orders information sent to non-party/arbitrator in related arbitration

In her post-trial costs decision in G.E.X.R. v. Shantz Station and Parrish & Heimbecker, 2019 ONSC 5192, Madam Justice Catrina D. Braid declined to defer determination of court costs in litigation involving GEXR and P&H until a related, ongoing arbitration between GEXR and CN was complete.  Ostensibly to pre-empt any potential for double recovery of costs once the arbitration concluded and determined its costs, she also directed that P&H’s cost submissions filed in the court litigation and her reasons on costs be given (i) to CN which was not a party to the court litigation and (ii) to the arbitrator.

The dispute involved four (4) parties: (1) Goderich-Exeter Railway Company Limited (“GEXR”), a railway company, which operates a shortline track (“Guelph Line”) owned by (2) Canadian National Railway (“CN”) and connecting to other CN operated lines and used by (3) Parrish and Heimbecker (“P&H”), a grain company, shipping cash grain eastward from the prairies and suppliying the Eastern Canadian flour milling industry through, among others, (4) Shantz Station Terminal Ltd. (“Shantz Station Terminal”), incorporated by P&H. 

For more facts and the issues addressed in an earlier decision by Braid J., see G.E.X.R. v. Shantz Station and Parrish & Heimbecker, 2019 ONSC 1914 paras 66-71 and the Arbitration Matters note “arbitral award given no weight in court when litigant not party to the arbitration

CN and GEXR have a rail track lease agreement authorizing GEXR to provide rail services over the Guelph Line.  In the court litigation before Braid J., GEXR claimed P&H owed it demurrage in accordance with GEXR’s published tariff for delayed unloading at the Shantz Station Terminal.

P&H refused to pay the charges on the basis that, absent a contract between GEXR and P&H, GEXR had neither a contractual right nor legislative authority to require demurrage.  P&H asserted that it was prepared to pay demurrage at its station but only against invoices from CN.

P&H initiated arbitration against CN.  GEXR was not a party to the arbitration.  The arbitrator determined that (i) CN had agreed that only it would invoice P&H for demurrage and (ii) CN had breached the agreement.  The arbitrator awarded P&H damages but adjourned quantification of the damages until after completion of the court litigation held before Braid J.

Asked by P&H to give the arbitral award evidentiary weight in the trial before her, Braid J. declined to do so. See paras 70-71 of her earlier decision. 

For reasons stated in her earlier decision, Braid J. dismissed GEXR’s action. 

Her current decision dealt with costs.  GEXR sought to defer Braid J.’s decision on costs until after the arbitration between P&H and CN was completed but Braid J. refused to do so.

[10] During the trial, I found that portions of the agreement between P&H and CN are directly contrary to CN’s agreement with GEXR, especially as it relates to GEXR’s ability to bill accessorial charges. This was stated as a fact but was not a finding of liability against CN, who was not a party to this action.

[11] The trial dealt with the issue of whether the defendants were liable to pay demurrage to GEXR. The plaintiff’s costs submissions suggest that GEXR bears no responsibility for the defendants’ costs because CN is responsible for those costs.

[12] I reject this submission. The claim was solely advanced against P&H and Shantz Station, and was dismissed in its entirety. GEXR did not add CN as a party to this action. CN did not compel GEXR to advance this action or to take it to trial.

[13] It is not appropriate to defer this determination of costs until after the arbitration. The fair approach is to determine the costs owing by GEXR and let the arbitrator decide what additional costs of the defendants (if any) should be paid by CN. I decline to defer the costs determination or to stay the enforcement of this costs ruling until the arbitration is complete.

Braid J. did not leave the costs issues as entirely separate subjects.  Rather, she directed that a “copy of the entire cost submissions filed by the defendants in these proceedings” and her reasons on costs be given (i) to CN which was not a party to the court litigation and (ii) to the arbitrator. She did so because she held that P&H and Shantz Station Terminal “were not entitled to double recovery of costs”.

urbitral note – The decision addresses a seldom-reported handling of costs generated by (i) parallel activity in court and in arbitration and (ii) overlapping disputes.  In this case, only GEXR was involved in different venues against different entities, CN and P&H/Shantz Station Terminal, over a dispute which proceeded sequentially in those different venues.  Braid J.’s solution served to assert finality to and independence of the court litigation but also to insert relevant information into the ongoing arbitration so that it would be taken into account. 

Braid J. ordered only the sharing of such information. She imposed no rules on how the information was handled, other than to inform the arbitrator of the court’s motivation to avoid double recovery. Part of that information is ostensibly public (her endorsement) and the other part is a document filed in the court record but perhaps filed under court-approved restrictions.  To the extent that any of the latter information was not public, her order gave cause to share it with those (CN and the arbitrator) who would not otherwise have access.  Though her reasons may be public, CN would not have access to the memorandum.  The arbitrator, in addition to not having access to the memorandum on costs, ought not to undertake independent research to locate the decision.

The reasons also contain helpful guidance on determining allowable costs and would apply in arbitration when seeking or contesting costs.  See paras 19-23.

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