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Arbitration - Court Set-Asides [AA s.46]. 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' (here, 'hearing fairness'), which allowed the respondent to access a statutory court set aside right under s.46 [court set aside on numerous grounds] 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.
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[36] The core of the application judge’s conclusion was that the arbitrator erred in finding that “time was of the essence” because the point was neither advanced nor argued. She reasoned that this finding was critical to his conclusion that Tall Ships, through its inaction, had lost its right to contest Brockville’s non-acceptance of them. In her view, basing his decision on this point thus “violated mandatory rules of procedural fairness in the Arbitration Act” TSL (ONSC), at para. 35. As she stated, at para. 33, of her reasons:The Arbitrator’s reasoning is problematic because it hinged on a contractual interpretation that was neither advanced nor argued. [Brockville] did not allege, in its statement of defence, that the parties agreed that time was of the essence in the performance of their obligations under the [B.A.] or, more specifically, in Tall Ships’ response to a Rejection Notice under clause 22.3(d). As already mentioned, there is no reference to time being of the essence in the [B.A.] itself. The point was not raised in written or oral argument to the Arbitrator, nor did he ask the parties, before reaching his decision, for additional submissions on this point. [37] With respect, the application judge erred in finding that Tall Ships’ procedural fairness rights under s. 46(1) of the Arbitration Act had been breached. As I discuss further below, I do not accept Tall Ships’ submission that the arbitrator’s conclusion on the “time of the essence” clause was neither advanced nor argued before the arbitrator. The application judge’s conclusion on procedural fairness rests on her finding that the arbitrator implied a term into the contract that had neither been advanced nor argued.
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[49] This was a question of mixed fact and law which fell squarely within the purview of the arbitrator, by which process the parties had chosen to resolve this dispute, with appeals on questions of law only. . Mensula Bancorp Inc. v. Halton Condominium Corporation No. 137
In Mensula Bancorp Inc. v. Halton Condominium Corporation No. 137 (Ont CA, 2022) the Court of Appeal considered a set aside provision [here, s.46(1)3] of the Arbitration Act:[5] As explained in Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254, 145 O.R. (3d) 481, leave to appeal refused, [2019] S.C.C.A. No. 202, s. 46(1)3 of the Arbitration Act, 1991 provides a narrow basis upon which a court may interfere with an arbitration award. It does not create a right of appeal, nor contemplate a review of the correctness or reasonableness of the arbitrator’s decision. It requires that the court not interfere with the arbitrator’s award as long as the issue decided was properly before the arbitrator.
[6] The application judge proceeded in a manner that s. 46(1)3 does not permit. The arbitrator said he decided the parties’ dispute by interpreting the condominium’s declaration. Whether he interpreted the declaration correctly or reasonably was irrelevant. Yet the application judge relabelled his decision as a purported interpretation that was “in effect” an amendment, because of her view that the result he arrived at could not be reached through a proper interpretive analysis. Under this approach, and contrary to that mandated by Alectra, only an award that resulted from an interpretation of the declaration that the court considered reasonable or correct would be immune from judicial intervention; anything else would “in effect” be an amendment beyond the jurisdiction of the arbitrator, and able to be set aside. There is more analysis at paras 35-53.
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