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Arbitration - General. 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. . Campbell v. Toronto Standard Condominium Corporation No. 2600
In Campbell v. Toronto Standard Condominium Corporation No. 2600 (Ont CA, 2024) the Ontario Court of Appeal allowed an appeal from a Superior Court application ruling that reversed an arbitrator's award ruling. The application held that s.46(1)9 ['Setting aside award - Fraud'] and s.47(2) of the Arbitration Act (AA) ['Time limit - Exception for Fraud'] operated, here on the argument that 'constructive fraud' (which is an equitable principle quite broader that typical fraud) applied in these AA provisions.
Here the court sets out the purpose of the Arbitration Act, emphasizing the intentionally-limited role of the court:(b) Purposes and objects of the Arbitration Act, 1991
[32] The purposes and objects of the Act are interrelated and well established.
[33] The central purpose of arbitration is to provide contracting parties with access to a method of dispute resolution that “can be more expedient and less costly than going to court”: Uber Technologies Inc. v. Heller, 2020 SCC 16, [2020] 2 S.C.R. 118, at para. 117, quoting Wellman, at para. 83.
[34] Relatedly, having agreed to resort to arbitration pursuant to the Act, parties must “hold to that course”: Wellman, at para. 49, quoting Ontario Hydro v. Denison Mines Ltd., [1992] O.J. No. 2948 (Gen. Div.), at para. 8; see also J. Kenneth McEwan & Ludmila B. Herbst, Commercial Arbitration in Canada: A Guide to Domestic and International Arbitrations (Thomson Reuters Canada Ltd., 2023) at § 1:4. The Act “entrenches the primacy of arbitration proceedings over judicial proceedings, once the parties have entered into an arbitration agreement, by directing the court, generally, not to intervene…”: Wellman, at para. 49, quoting Denison Mines, at para. 9.
[35] Efficiency and finality are therefore central objectives which underpin the Act: Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32, [2017] 1 S.C.R. 688, at paras. 1, 74 and 83.
(c) Scheme of the Act: limited court intervention
[36] The Act itself clearly manifests the legislative intent to limit court intervention in arbitral matters.
[37] For example, s. 6, which falls under the heading “Court intervention limited”, states as follows:6 No court shall intervene in matters governed by this Act, except for the following purposes, in accordance with this Act:
1. To assist the conducting of arbitrations.
2. To ensure that arbitrations are conducted in accordance with arbitration agreements.
3. To prevent unequal or unfair treatment of parties to arbitration agreements.
4. To enforce awards. [38] Consistent with the notion of limited court intervention, the Act includes five “no appeal” provisions: see e.g., ss. 7(6), 10(2), 15(6), 16(4), 17(9).
[39] Furthermore, s. 45, which permits appeals, “makes clear that the parties are free to establish or to preclude an appeal to the court on a question of law, fact, or a mixed question of law and fact”, and, “if an arbitration agreement is silent on this point, an appeal to the court on a question of law lies only with leave”: Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254, 145 O.R. (3d) 481, at para. 20 (emphasis added), leave to appeal refused, [2019] S.C.C.A. No. 202.
[40] If parties have agreed to an appeal on a question of law alone, courts are admonished to avoid strategic attempts to broaden the scope of the appeal by turning questions of mixed fact and law into questions of law: Teal Cedar, at para. 45. See also Tall Ships Development Inc. v. Brockville (City), 2022 ONCA 861, 476 D.L.R. (4th) 500, leave to appeal refused, [2023] S.C.C.A. No. 29. In Teal Cedar, Gascon J. issued the following warning, at para. 45:Courts should … exercise caution in identifying extricable questions of law because mixed questions, by definition, involve aspects of law. The motivations for counsel to strategically frame a mixed question as a legal question — for example, to gain jurisdiction in appeals from arbitration awards or a favourable standard of review in appeals from civil litigation judgments — are transparent…. A narrow scope for extricable questions of law is consistent with finality in commercial arbitration and, more broadly, with deference to factual findings. [Emphasis added.] [41] In summary, “appeals from private arbitration decisions are neither required nor routine” and courts are warned to guard against strategic attempts to enlarge the scope of appeal beyond what the parties have agreed to: Alectra, at para. 20 . Peace River Hydro Partners v. Petrowest Corp.
In Peace River Hydro Partners v. Petrowest Corp. (SCC, 2022) the Supreme Court of Canada considered the relationship between insolvency and arbitration. The case is essential reading for anyone involved with the two in the same case, especially regarding which proceeding governs (ie. stays) [paras 59-90, 107-110].
. Peace River Hydro Partners v. Petrowest Corp.
In Peace River Hydro Partners v. Petrowest Corp. (SCC, 2022) the Supreme Court of Canada comments on the significant value of arbitration to commercial parties, and the current status of arbitration in the Canadian world:[46] Recently, two trends have thrown this tension into sharp relief. First, arbitration has become an increasingly popular mechanism for resolving commercial disputes, both in Canada and abroad (Wellman, at para. 54; Seidel, at para. 23). Today, parties and counsel alike recognize the potential strategic and tactical advantages of arbitration as compared to traditional litigation. These may include privacy and confidentiality, efficiency and timeliness, relaxed rules of evidence, freedom to determine procedural rules and select decision makers with relevant expertise, and cross‑border enforceability of awards (J. B. Casey, Arbitration Law of Canada: Practice and Procedure (3rd ed. 2017), at ch. 1.6).
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(1) Dispute Resolution by Arbitration
[49] The modern view expressed in Canadian arbitration legislation is that parties should be held to their contractual agreements to arbitrate. This gives effect to the concept of “party autonomy”, according to which parties are free to “charter a private tribunal” to resolve their disputes (Wellman, at para. 52, citing Astoria Medical Group v. Health Insurance Plan of Greater New York, 182 N.E.2d 85 (N.Y. 1962), at p. 87; M. Pavlović and A. Daimsis, “Arbitration”, in J. C. Kleefeld et al., eds., Dispute Resolution: Readings and Case Studies (4th ed. 2016), 483, at p. 485). Party autonomy is closely related to freedom of contract (Hofer v. Hofer, 1970 CanLII 161 (SCC), [1970] S.C.R. 958, at p. 963). Modern arbitration legislation is premised on these principles, which inform the policy choices embodied in provincial arbitration statutes like the Arbitration Act (Wellman, at para. 52).
[50] Party autonomy and freedom of contract go hand in hand with the principle of limited court intervention in arbitral proceedings. This latter principle is “fundamental” to modern arbitration law and “finds expression throughout modern Canadian arbitration legislation” (Wellman, at paras. 52‑55; McEwan and Herbst, at § 10:2; Casey, at ch. 7.1). For instance, s. 4(a) of British Columbia’s new Arbitration Act, S.B.C. 2020, c. 2, provides that “[i]n matters governed by this Act, a court must not intervene unless so provided in this Act”. Similar expressions of principle are found in provincial arbitration legislation across the country. It follows that, generally speaking, judicial intervention in commercial disputes governed by a valid arbitration clause should be the exception, not the rule. . Optiva Inc. v. Tbaytel
In Optiva Inc. v. Tbaytel (Ont CA, 2022) the Court of Appeal comments generally on commercial arbitration:[29] Optiva and Tbaytel, both sophisticated commercial actors, agreed that any disputes arising out of the contract would be resolved by private arbitration. When a dispute did arise, Optiva and Tbaytel, in accordance with the agreement and with the assistance of counsel, prepared an arbitration agreement and entered into arbitration on the terms of that agreement. Pursuant to the agreement, the parties chose their arbitrator. The parties’ fashioning of their own rules governing the conduct of the arbitration and their selection of a mutually agreeable arbitrator implies a very limited role for judicial oversight of the conduct or outcome of that arbitration: Popack v. Lipszyc, 2016 ONCA 135, 129 O.R. (3d) 321, at para. 26.
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[34] Generally speaking, arbitrations must be conducted in accordance with the applicable terms of the arbitration agreement entered into by the parties, any rules or procedures applicable to the particular arbitration, and any relevant statutory provisions. The procedures must also treat the parties fairly and equally: Desputeaux v. Éditions Chouette (1987) inc., 2003 SCC 17, [2003] 1 S.C.R. 178, at para. 70; Travis Coal Restructured Holdings LLC v. Essar Global Fund Ltd., [2014] EWHC 2510 (Comm), [2014] All E.R. (D) 240 (Q.B.), at para. 44. . Optiva Inc. v. Tbaytel
In Optiva Inc. v. Tbaytel (Ont CA, 2022) the Court of Appeal comments on the effect of arbitration and court findings with respect to each other:[38] ... It is hardly surprising that the arbitrator, in exercising his power to determine appropriate procedures, would look to the procedures routinely used in civil proceedings under the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The advantages flowing from a properly invoked summary judgment process have equal application in the arbitration and the civil trial context: see Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 27.
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