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Arbitration - Court Appeals [s.45]. Toronto Standard Condominium Corporation No. 2299 v. Distillery SE Development Corp.
In Toronto Standard Condominium Corporation No. 2299 v. Distillery SE Development Corp. (Ont CA, 2024) the Ontario Court of Appeal quashes an appeal - here in an Arbitration Act 1991, s.10 ['Appointment of arbitral tribunal'] context:[1] The Arbitration Act, 1991, S.O. 1991, c. 17 restricts court intervention in matters parties have agreed to arbitrate. In defined circumstances the Act permits the court to appoint an arbitrator for the parties’ dispute. But it does not permit an appeal from a court-ordered appointment.
[2] Whether this appeal from an order appointing an arbitrator is properly brought principally turns on the breadth of the power to appoint an arbitrator under the Act and therefore of its corresponding preclusion of appeals. Was the arbitrator appointed under the power to do so in s. 10 of the Act, or was there another source of jurisdiction for it which is free of any restriction on appeal rights?
[3] For the reasons below, I conclude that the power of the court to appoint an arbitrator under s. 10 of the Act exists when parties jointly have the power to appoint an arbitrator and they either fail to agree on the arbitrator or, having reached an agreement, one party then refuses to follow through on it. That was the situation the application judge found existed. Her order appointing an arbitrator in those circumstances was made under s. 10 of the Act. No appeal from it lies by reason of s. 10(2) of the Act.
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The Application to Appoint an Arbitrator and the Application Judge’s Decision
[8] The Condo Corp. brought an application seeking, among other things, an order from the application judge appointing Mr. Campbell as arbitrator and confirming that all issues raised in the 2022 Notice were within his jurisdiction. The application was styled as being made under ss. 6, 7 and 17 of the Act, and r. 14 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
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[15] The Condo Corp. submits that the application judge’s order was made under s. 10(1) of the Act, and that an appeal from it is precluded by s. 10(2). Section 10 provides, in relevant part, as follows:10 (1) The court may appoint the arbitral tribunal, on a party’s application, if,
(a) the arbitration agreement provides no procedure for appointing the arbitral tribunal; or
(b) a person with power to appoint the arbitral tribunal has not done so after a party has given the person seven days notice to do so.
(2) There is no appeal from the court’s appointment of the arbitral tribunal. [16] Distillery argues that s. 10(2) of the Act does not apply to preclude the appeal, because the order sought to be appealed was not made under s. 10(1). .... Second, it submits that the order could not have been made under ss. 10(1)(a) or (b) as they only pertain to narrow circumstances not applicable here.
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[21] I also reject Distillery’s second point, that the order could not have been made under s. 10(1) as the facts did not fit within it. I accept the Condo Corp.’s argument that the case fits within s. 10(1)(b).
[22] The issue is one of statutory interpretation. In “accordance with the modern approach to statutory interpretation, the meaning of [the provision in issue – here s. 10 of the Act] must be determined by considering its text, context and purpose”: R. v. Basque, 2023 SCC 18, 482 D.L.R. (4th) 203, at para. 63; Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559, at para. 26; Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27, at para. 21.
[23] Following that approach, I conclude that where parties jointly have the power to appoint an arbitrator and they either fail to agree, or they reach an agreement but one then refuses to follow through on it, “a person with power to appoint the arbitral tribunal has not done so”, triggering the court’s discretionary power to appoint within the meaning of s. 10(1)(b).
[24] The text of the section supports this reading. The phrase “person with power to appoint an arbitrator” is not limited to a person with the sole or exclusive authority to make the appointment. It clearly extends to a person whose power resides in the requirement for their agreement to an appointment. A person with that power will have “not done so” within the language of the section when they either fail to agree or, after agreeing, back away from the agreement and resist its implementation.
[25] The context and purpose of the Act also support this reading.
[26] First, the Act contemplates an important, but limited, role for the court in matters that are the subject of an arbitration agreement. It forbids court intervention in arbitrations except in accordance with the Act for specific purposes, among them “[t]o assist the conducting of arbitrations” and “[t]o ensure that arbitrations are conducted in accordance with arbitration agreements”: s. 6.
[27] An interpretation that allows the court to appoint an arbitrator where the appointment is frustrated by the failure of the parties to agree or carry out an agreement about who will be the arbitrator furthers the important role of the court to “assist in the conduct of arbitration”. And since an agreement about who the arbitrator will be is deemed part of the arbitration agreement (as a “further agreement in connection with the arbitration” – see s. 5(2) of the Act), an interpretation that allows the court to make an appointment where the parties have agreed on the appointment and one side has backed away furthers the court’s important role of ensuring “that arbitrations are conducted in accordance with arbitration agreements”.
[28] Second, the Act contemplates a limited role for the court. One way it does this is by limiting appeal rights even where court intervention is permitted.[2] An interpretation of s. 10(1) that permits the court to meaningfully respond to a log jam in the appointment of an arbitrator is consistent with that limited role, because the corollary to finding the authority to make the appointment in s. 10(1) means that there is no appeal from an appointment order by reason of s. 10(2).
[29] This interpretation is also consistent with that suggested by a leading authority on arbitration as being applicable to a broad range of similarly worded arbitration legislation. In J. Brian Casey, Arbitration Law of Canada: Practice and Procedure, 4th ed. (Huntington, N.Y.: Juris, 2022), at p. 362, the author states:Under most of the Domestic Acts, the court, on a party’s application, may appoint the arbitral tribunal if an arbitration agreement provides no procedure for the appointment of the arbitral tribunal or the person with power to appoint the tribunal has not done so after being given proper notice. There is no appeal from the court’s appointment. […] Where the parties are to agree on a single arbitrator, they collectively are the “person with the power to appoint” and the same procedure would be followed if they collectively fail to appoint. [Internal citations omitted; emphasis added.] [30] In the situation found by the application judge – an agreement to appoint Mr. Campbell that continued in force as it had not been repudiated – the authority to make an appointment under s. 10(1) of the Act was clearly engaged.
[31] It is important to note that Distillery does not argue that the court is powerless to make an appointment in the situation the application judge found. It argues, however, that the court’s authority is simply the Superior Court’s general jurisdiction to enforce an agreement, rather than any provision of the Act.
[32] With respect, there are several flaws in this argument. First, s. 6 of the Act provides that “[n]o court shall intervene in matters governed by this Act, except for the following purposes, in accordance with this Act” (emphasis added). Subject to exceptions which are inapplicable here, the Act governs arbitrations under arbitration agreements, which includes the SFA’s arbitration provisions and the further agreement to appoint an arbitrator under it: ss. 2(1) and 5(2). Positing a free-standing jurisdiction, outside the Act, for the court to appoint an arbitrator is inconsistent with the Act’s restriction on court intervention except “in accordance with this Act”.[3]
[33] Second, placing the jurisdiction to appoint outside the Act does an end around the restrictions on appeal rights that the Act has so carefully crafted. Restricted appeal rights are a feature of the Act.
[34] As the application judge’s authority to make the appointment arose under s. 10(1), an appeal is precluded by s. 10(2): Toronto Standard Condominium Corporation No. 2130 v. York Bremner Developments Limited, 2014 ONCA 809, at para. 23.
[35] Distillery argues that even if the appeal from the appointment is precluded, the portion of the order that provides that Mr. Campbell would determine issues about his jurisdiction, his mandate, and the addition of a party is not part of the appointment order and therefore falls outside the appeal prohibition.
[36] I disagree. An appointment order will always relate to a dispute to be arbitrated. In giving effect to the principle in s. 17 of the Act,[4] which contemplates the arbitrator first ruling on his own jurisdiction and thus the scope of the dispute to be arbitrated, the application judge did not step outside the authority to make an appointment under the Act. It would be inconsistent with the Act to construe that part of the order as somehow severable from the appointment and subject to its own appeal regime. . Eyelet Investment Corp. v. Song
In Eyelet Investment Corp. v. Song (Div Court, 2024) the Divisional Court considered an interesting arbitration mess, where the arbitrator asserted a radical degree of independence that did not accord with the views the appeal judges involved. An arbitrator-sympathetic characterization is that of cultural differences between the judicial and the arbitration 'benches'. It's a useful and even entertaining read, although at the end the CA puts it's foot down firmly on the side of law:[1] Domestic arbitrations in Ontario must be decided in accordance with the law. Arbitrators are accorded broad deference for matters within their jurisdiction and in defining the scope of their jurisdiction. But they are not free to ignore the law or to decide cases in accordance with their whims.
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The Law Applies to Arbitrations
[31] Arbitrators, like judges, are required to follow the law of the land. Section 31 of the Arbitration Act, 1991 provides:Application of law and equity
31 An arbitral tribunal shall decide a dispute in accordance with law, including equity, and may order specific performance, injunctions and other equitable remedies. [32] In Omers Realty Corp. v. Sears Canada Inc. (2005), 2005 CanLII 3983 (ON SC), 74 O.R. (3d) 423 (S.C.), at para. 22, aff’d (2006), 2006 CanLII 16477 (ON CA), 80 O.R. (3d) 561 (C.A.), Pepall J. (as she then was) explained at para. 22:Section 31 of the Arbitration Act, 1991 provides that an arbitral tribunal is to decide a dispute in accordance with the law. The arbitration represents a process to address a dispute; it does not confer jurisdiction to ignore or rewrite the law and established legal principles. Put differently, the arbitration provision does not confer on the arbitrators the ability to do what they please unencumbered by applicable legal principles. [33] There are many sources of law. The courts do not have a monopoly on establishing the content of the law. But the Arbitration Act, 1991 creates a hierarchy that feeds into the judicial hierarchy and attracts the doctrine of stare decisis. Section 37 of the statute provides:Binding nature of award
37 An award binds the parties, unless it is set aside or varied under section 45 or 46 (appeal, setting aside award). [34] Subsection 45 (5) of the Arbitration Act, 1991 provides,Idem
(5) The court may confirm, vary or set aside the award or may remit the award to the arbitral tribunal with the court’s opinion on the question of law, in the case of an appeal on a question of law, and give directions about the conduct of the arbitration. [35] The effect of these provisions is that once an arbitrator’s decision is set aside, it no longer binds. The court is expressly provided with the authority to opine on questions of law and to give directions to the arbitrator in consequence. It is implicit in the section and consonant with stare decisis and common sense, that the court’s determination of the law and the court’s directions do indeed bind the arbitrator as they bind the parties.
[36] It was not open to the Arbitrator to ignore the findings of the court on appeal regardless of whether he believes that he is correct in his view of the merits. Nor is he entitled to impose a burden on a court to convince him of the existence of breaches of contract even if they are the opposite of the findings he made. His findings were wrong in law and O’Brien J. was empowered, entitled, and duty-bound to say so. He, on the other hand, was bound to implement the findings of the court regardless of whether he accepts the applicable principles.
[37] It is not a question of the status of individuals binding or trumping others. Rather, as stated by Pepall J., all decision-makers under the Arbitration Act, 1991, whether arbitrators or judges on appeal, are governed by applicable legal principles. Just as my assessment of applicable principles yields to courts of appeal with statutory jurisdiction to correct my mistakes, so too do the decisions of arbitrators yield to correction on appeal. . Baffinland Iron Mines LP v. Tower-EBC G.P./S.E.N.C.
In Baffinland Iron Mines LP v. Tower-EBC G.P./S.E.N.C. (Ont CA, 2023) the Court of Appeal considered the arbitration court appeal provisions under both s.45 and s.49 of the Arbitration Act in a mucky, convoluted context. Section 45 provides for appeals to the Superior Court, with or without leave to appeal, as the parties agree - or no appeal, also if the parties agree. If a Superior Court appeal is heard and decided, further appeal lays to the Court of Appeal - with leave [s.49].
Here, the appellant sought leave to appeal to the Superior Court, which was denied - but then they further sought an appeal of that denial (which is not normally allowed). The respondent in that appeal sought to quash it, which - surprisingly - was denied. The Court, drawing upon the Denison case, drew a distinction between denial of appeal grounded on the merits of the leave to appeal motion versus denial on it on Arbitration Act availability. In the former case the Court of Appeal could hear an appeal from a denial of leave to appeal (whew):[1] When an arbitration agreement provides that an award made under it may be appealed on a question of law, a party dissatisfied with the award may appeal on such a question to the Superior Court of Justice as of right. But when no such appeal is provided for in the arbitration agreement, a party may only appeal an award on a question of law with leave of that court, and only “[i]f the arbitration agreement does not deal with appeals on questions of law”: Arbitration Act, 1991, S.O. 1991, c. 17, ss. 45(1) and (2) (the “Arbitration Act”).[1]
[2] In other words, the Arbitration Act contemplates three different scenarios regarding appeals to the court on questions of law. The arbitration agreement may expressly provide for, be silent on, or preclude such appeals. In the first scenario there is an appeal as of right; in the second, there is an opportunity to appeal but only with leave; and in the third, there is no appeal or right to seek leave to appeal at all.
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[22] If the Superior Court has decided an appeal, either because leave to appeal was granted by the Superior Court or because there was an appeal to that court as of right, s. 49 of the Arbitration Act provides for a further appeal, with leave, to this court. But, as TEBC emphasizes, that is a process available only when the Superior Court has entertained and decided an appeal − the Arbitration Act does not provide for an appeal to this court from a refusal by the Superior Court to grant leave to appeal and thus to entertain an appeal at all.
[23] TEBC places heavy reliance on Hillmond Investments Ltd. v. Canadian Imperial Bank of Commerce (1996), 1996 CanLII 413 (ON CA), 29 O.R. (3d) 612 (C.A.), in which an appeal to this court from the refusal of a Superior Court judge to grant leave to appeal an arbitration award was quashed: at p. 626. The Hillmond court, at pp. 617-18, gave a number of reasons for doing so: the Arbitration Act does not grant a right of appeal from an order refusing leave to appeal; the appellant could not rely upon s. 6(1)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43 (the “CJA”), which provides for an appeal to this court from a final order of a Superior Court judge, as the refusal by the lower court to grant leave to appeal was an interlocutory order; and allowing an appeal from a refusal to grant leave to appeal defeats the object of arbitration by frustrating the legislated impediment to appeals.
[24] However, Hillmond was distinguished in Denison Mines Ltd. v. Ontario Hydro (2001), 2001 CanLII 5681 (ON CA), 56 O.R. (3d) 181 (C.A.). In Denison, the appellant had applied to a Superior Court judge for leave to appeal an arbitration award; leave to appeal was refused. The appellant appealed the dismissal of its application for leave to this court. The respondent’s motion to quash the appeal, relying on Hillmond, was dismissed.
[25] The court in Denison acknowledged the general rule that no appeal lies from an order granting or refusing leave to appeal. However, it also held that there was an established exception to that general rule where the appeal from the refusal to grant leave to appeal is premised on a submission that the judge refusing leave to appeal mistakenly declined jurisdiction to consider whether leave to appeal was warranted: at para. 8. The court went on to hold that in these circumstances the order declining leave to appeal is final within the meaning of s. 6(1)(b) of the CJA: at para. 21.
[26] The key distinction between these two authorities is that in Denison, unlike in Hillmond, the judge had dismissed the leave to appeal application holding that the parties’ arbitration agreement precluded appeals − the parties had contracted out of any right of appeal − and that s. 45(1) was not available as a route to seek leave to appeal. She had not gone on to consider the grounds on which leave to appeal was sought, as she in effect considered herself to be without jurisdiction to do so based on her interpretation of the appeal provisions of the arbitration agreement. The appeal to this court from that decision was premised on the application judge’s interpretation, and therefore her declining of jurisdiction, being mistaken.[4]
[27] The case at bar is indistinguishable from, and is governed by, Denison. As in Denison, here the application judge interpreted the arbitration agreement as precluding appeals, rendering s. 45(1) of the Arbitration Act unavailable to BIM. Given his interpretation of the arbitration agreement, he did not consider whether the grounds of appeal raised by BIM were deserving of leave. He therefore declined to exercise any jurisdiction to consider whether leave to appeal should be granted. The main point of BIM’s appeal to this court is its contention that the application judge misinterpreted the arbitration agreement as precluding appeals and therefore mistakenly declined jurisdiction to consider whether leave to appeal should be granted under s. 45(1).
[28] TEBC argues that Denison is distinguishable because there the parties had agreed not to argue the grounds for leave until the application judge decided whether the arbitration agreement precluded appeals, whereas here the parties argued the grounds for leave at the same hearing that they argued whether the contracts precluded appeals.
[29] It is not germane how many issues the parties put before the application judge − what is germane is that the application judge declined to exercise any jurisdiction to consider whether BIM’s grounds were deserving of leave to appeal, having decided, as a preliminary issue, that the contracts precluded appeals, which made s. 45(1) of the Arbitration Act unavailable. On the authority of Denison, an appeal on the question of whether he mistakenly declined jurisdiction lies to this court. . 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.
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[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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