Followers of arbitration caselaw in Ontario will be feeling a sense of déjà vu — the Ontario Court of Appeal has released another decision that directs lower courts to proceed carefully when asked to interfere with arbitral awards. In Tall Ships Development Inc. v. Brockville (City),1 the court found that the application judge erred by setting aside three such awards, as the parties' arbitration agreement restricted appeals to questions of law and the arbitrator's alleged errors, properly construed, were not of that kind.
Fasken recently released a bulletin summarizing the Court of Appeal's holding in Mensula Bancorp Inc. v. Halton Condominium Corporation No. 137,2 a case that considered courts' ability to interfere with arbitral awards on the basis of alleged jurisdictional errors. The key takeaways from that case were that this power is a narrow one and the application judge erred by finding that the arbitrator had "in effect" exceeded his jurisdiction.3
In Tall Ships, the court emphasized similar considerations. It cautioned application judges that, when sitting on appeal of arbitral awards, they "should not be too ready to characterize particular issues as issues of law"; it was a "central" consideration that the parties in this case had agreed to restrict appeals to questions of law, such that over-eagerness to intervene could "render the point of consensual arbitration nugatory [...]."4 Parties to arbitration agreements with limited rights of appeal should therefore take note of Tall Ships and the Court of Appeal's recent trend toward leaving arbitral awards alone.
Tall Ships was an appeal by the City of Brockville from an application judge's decision setting aside three arbitral awards. Underlying the dispute was a public-private partnership between Brockville and the respondent, Tall Ships Landing Development Ltd., in respect of the development of waterfront property. The parties participated in a four-week arbitration hearing, following which the arbitrator dismissed Tall Ships' claims against Brockville. On appeal to the Ontario Superior Court of Justice, the application judge held in favour of Tall Ships. But the parties' arbitration agreement provided that the decision of the arbitrator was only subject to appeal on questions of law under subsection 45(2) of Ontario's Arbitration Act.5 Therefore, before the Court of Appeal, the main issue was whether the application judge had properly construed the arbitrator's alleged errors as questions of law, grounding the court's jurisdiction to intervene.
The appeal raised four categories of claims by Tall Ships against Brockville: (1) claims for remediation costs, which the arbitrator had held were out of time under the parties' agreement; (2) a claim for construction overrun costs, which the arbitrator had denied on the basis that Tall Ships had not kept Brockville informed as to such costs; (3) a claim for unjust enrichment, which had failed before the arbitrator because Tall Ships had not shown the requisite elements; and (4) a claim for interest, which the arbitrator had found Tall Ships was estopped from making. Where the application judge had found extricable questions of law, the Court of Appeal determined that no such extricable legal questions existed. The Court of Appeal was also critical of the application judge's findings on procedural fairness, holding that the application judge had "effectively bootstrapped the substantive arguments" in this part of the analysis, so as to bring these arguments within the ambit of section 46 of the Arbitration Act.6
Unfortunately, the court's analysis in Tall Ships does not provide much general guidance on distinguishing true extricable questions of law from questions of mixed fact and law for the purposes of arbitration appeals. However, the Court of Appeal set the tone for its analysis by excerpting from Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co.,7 in which Justice Cromwell stated that "the circumstances in which a question of law can be extricated from the interpretation process will be rare." The Court of Appeal further observed that the "heart" of the arbitrator's task in this case was "the interpretation of the contractual arrangements" of the parties, and that "there were volumes of evidence" and "4 weeks of hearings."8 In emphasizing these points, the court can be taken as signalling a reluctance to extricate legal issues from a factually complex and context-rich process of contractual interpretation, as was the case in the matter before it.
Footnotes
1 2022 ONCA 861 [Tall Ships].
2 2022 ONCA 769 [Mensula].
3 Mensula at paras. 5-6, 47.
4 Tall Ships at paras. 2, 16.
5 Arbitration Act, 1991, S.O. 1991, c. 17.
6 Tall Ships at paras. 2, 95.
7 2016 SCC 37 at para. 113, excerpting from Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at para. 55.
8 Tall Ships at paras. 39, 41.
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