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Arbitration - Court Appeals [s.45]

. Tall Ships Development Inc. v. Brockville (City)

In Tall Ships Development Inc. v. Brockville (City) (Ont CA, 2022) the Court of Appeal addressed a case where they held that an application judge had 'stretched' their interpretations to reach a 'question of law' (by finding an 'extricable' legal issue), which allowed the respondent to access a statutory court appeal right under s.45 [appeals on questions of law when provided in the arbitration agreement] of the Arbitration Act:
[2] Central to this appeal is the fact that the parties agreed that the decision of the arbitrator was to be final, subject only to appeals on questions of law under s. 45(2) of the Arbitration Act, 1991, S.O. 1991, c. 17 (“Arbitration Act”). The application judge erred by characterizing questions of mixed fact and law as extricable questions of law. Moreover, in characterizing the same arguments as breaches of procedural fairness falling under s. 46 of the Arbitration Act, the application judge effectively bootstrapped the substantive arguments. This court has recently emphasized the narrow basis for setting aside an arbitral award under s. 46 of the Arbitration Act, which is not concerned with the substance of the parties’ dispute and is not to be treated as an alternate appeal route: Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254, 145 O.R. (3d) 481, at paras. 20-27, 40-44, leave to appeal refused, [2019] S.C.C.A. No. 202; Mensula Bancorp Inc. v. Halton Condominium Corporation No. 137, 2022 ONCA 769, at paras. 5, 40.

[3] In this case, the parties selected an arbitrator to deal with a number of issues arising out of a large project with a number of interrelated contracts and agreements. Moreover, they specifically chose to agree that only questions of law would be subject to appeal. As a matter of policy, and as the Supreme Court of Canada has stated repeatedly, judges exercising their appellate powers under s. 45 of the Arbitration Act should be cautious about extricating questions of law from the interpretation process: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 54-55; Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32, [2017] 1 S.C.R. 688, at paras. 45-47. Failing to exercise such caution will result in the very inefficiencies, delays and added expense that choosing an arbitral process seeks to avoid. As I will explain in detail below, I conclude that none of the alleged errors made by the arbitrator could properly be considered extricable errors of law. Nor were there any breaches of procedural fairness that could attract review pursuant to s. 46 of the Arbitration Act.


[15] As I have indicated, this appeal turns on whether the arbitrator fell into any errors of law in the course of determining Brockville’s liability, and in particular, whether the application judge incorrectly categorized questions of mixed fact and law as extricable questions of law. In my view, she erred in so doing. The alleged breaches of procedural fairness depend on the substantive questions of whether the arbitrator fell into errors of law, which, in my view, he did not.

[16] The principle that in exercising their role as appellate courts, judges should not be too ready to characterize particular issues as issues of law because doing so may render the point of consensual arbitration nugatory is of particular importance when, as here, the impugned terms form a relatively small part of a large and complex arbitration decision. As the Supreme Court has stated, “the circumstances in which a question of law can be extricated from the interpretation process will be rare”: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23, at para. 113, citing Sattva, at para. 55.


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