Sport Maska Inc. v. Zittrer, [1988] 1 S.C.R. 564 (1988)
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Sport Maska Inc. v. Zittrer, [1988] 1 S.C.R. 564 (1988)
sport maska inc. v. zittrer, [1988] 1
S.C.R. 564Sport Maska Inc. Appellant v.Jack E. Zittrer, Herbert E. Siblin, Samuel S. Stein, Marvin B. Goldsmith, David B. Stein, Steven A. Yaphe, Morton S. Spector, Stanley Wener, Jeffrey L. Payne, Brahm D. Levine, Morrie L. Fogelbaum, Allan M. Liverman, Robert H. Zittrer Respondents indexed as: sport maska inc. v. zittrerFile No.: 19660.1987: October 22; 1988: March 24.Present: Beetz, Lamer, Wilson, Le Dain and L'Heureux-Dubé JJ.on appeal from the court of appeal for quebecArbitration -- Criteria -- Distinction between arbitration and expert opinion -- Undertaking to arbitrate -- Mediation -- Code of Civil Procedure, R.S.Q. 1977, c. C-25, ss. 940 to 951.The receiver of a bankrupt company sold a large part of its assets to a company which on the same day resold the assets to appellant. Clause 2.01 of the agreement with regard to this latter sale provided that the valuation of the inventory would be reviewed by the bankrupt's auditors, the respondents, who were to take into consideration the representations of appellant. Respondents had then to deliver a written opinion to all the parties to the effect that such inventory count and valuation was fairly presented, the whole at the cost of the bankrupt. Upon delivery of such opinion, the inventory count and valuation was to be deemed to be "definitively determined". In a letter sent to appellant (Exhibit DP-1), the bankrupt agreed that appellant attend the valuation of the inventory and make any representations, adding that respondents' valuation of the inventory would be "final and binding". Respondents confirmed the bankrupt's valuation of the inventory and appellant paid the amount so established. A year later, appellant brought an action for damages in the Superior Court against respondents in the amount representing the difference between the price it had paid and the price it would have paid if respondents had not been negligent in performing their task. Respondents made a declinatory exception alleging that they were acting in this matter as arbitrators and that, as such, they were covered by immunity. The Superior Court dismissed their motion. The Court of Appeal set aside that judgment. In its opinion, respondents were acting as arbitrators and that, in the absence of fraud or bad faith, they enjoyed the immunity from civil liability. This appeal is to determine whether the parties had agreed to submit a dispute to arbitration by a third party. This appeal must be disposed of according to the provisions then applicable, namely arts. 940 to 951 of the 1965 Code of Civil Procedure in force prior to the 1986 amendments.Held: The appeal should be allowed.Per curiam: For a third party to be classified as an arbitrator, it is essential for the agreement of the parties to contain the components of a submission, whether or not this submission is the result of an undertaking to arbitrate. A submission requires the existence of a dispute and an undertaking by the parties to submit that dispute to a third party. If the parties simply intended to avoid a possible dispute, the situation is not one of submission. However, they may have agreed to submit to the arbitration of a third party once a dispute has arisen, pursuant to an undertaking to arbitrate, the prerequisite to a submission. The search for the components of a submission presents no difficulty when the parties have clearly indicated their intent to have the dispute between them arbitrated, and have clearly identified that dispute. But in the absence of a clear intention, it is crucial to identify the precise function the parties intended to entrust to this third party under their agreement and in the circumstances of each case. The language used by the parties, the similarity between arbitration and the judicial process, the role assigned to the third party, the third party's independence and the compliance by the parties with the mandatory provisions of the Code of Civil Procedure are means of determining that function and the parties' intent. However, these criteria are neither exhaustive nor mutually exclusive.In the case at bar, an arbitration agreement (submission or undertaking to arbitrate) could not be found since there was no present or potential dispute either when the agreement was concluded between the parties or when respondents revised the valuation made by the bankrupt. Disagreement as to the value of the inventory only arose once the transaction had been completed, that is after the valuation has been checked by respondents. The parties did not intend to submit a dispute to arbitration by respondents, but simply agreed to rely on their opinion, as the essential components of the contract, namely the value of the assets sold, which essentially represented the selling price of those assets.The parties' intent confirmed this finding. Although they agreed to be bound by respondents' opinion and provided for representations to be made by a...See the full content of this document
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