Why This Decision Matters
Arbitration proceedings are typically intended to provide the parties with a quicker, more cost-effective means of resolving disputes. But what happens when that process is streamlined further? Can an arbitral award be set aside if one of the parties was not given an opportunity to fully present its case?
In Optiva Inc. v. Tbaytel1 ("Optiva"), the Ontario Superior Court of Justice (the "Court") recently had the opportunity to consider whether a motion for summary judgment within an arbitration constitutes a "hearing" in the context of s. 26(1) of the Ontario Arbitration Act2(the "Act").
The Court found that summary judgment in this context can satisfy the requirements for a hearing under the Act. Given the similarity in the procedural requirements under the Act and the Ontario International Commercial Arbitration Act3 (the "ICAA"), this decision can likely shed light on what constitutes a hearing under both the Act and the ICAA.
Background of Arbitral Award and the Application to Set it Aside
Optiva and Tbaytel entered into an arbitration agreement (the "Agreement"), namely providing the arbitrator with competence to consider and rule on procedural issues within the arbitration.
Tbaytel moved for summary judgment before the arbitrator in advance of the hearing of the arbitration. The arbitrator then set out a timeline for a number of procedural steps before the summary judgment motion. As part of these procedural steps, both parties were allowed to conduct cross-examinations on opposing affidavits.
At the hearing of the summary judgment motion, Optiva argued that the arbitrator lacked jurisdiction to hear the motion without both parties' consent. The arbitrator disagreed, citing the Agreement and s. 20 of the Act as support for his jurisdiction to rule on procedural matters. Ultimately, the arbitrator found in favour of Tbaytel. Optiva then brought an application to the Court seeking to set aside the award.
Issues Before the Court
Optiva grounded its application to set aside the award on the basis that s. 26(1) of the Act requires the arbitrator to hold a "hearing" if a party requests it. Optiva argued that a hearing requires the presentation of oral evidence, which is not available to the parties at a summary judgment motion. Further, Optiva submitted that the summary judgment denied the parties the opportunity to present their case as required by s. 19(2) of the Act.
Procedural Protections in Ontario Arbitrations
The Court ultimately rejected Optiva's argument on the basis that it failed to apply to set aside the matter within the statutorily required 30-day period following the decision to proceed by way of summary judgment.4 Nonetheless, the Court commented on the merits of Optiva's arguments.
The Court reiterated the foundational principle that Ontario courts have a "limited role" to play in arbitrations. S.20 of the Act allows the arbitral tribunal to determine its own procedure. Further, s. 17 of the Act states that the arbitral tribunal can rule on matters within its jurisdiction. Also, the arbitral tribunal must allow the parties to present their case and treat the parties equally and fairly.5
The Court determined that s. 26(1) of the Act does not require that hearings allow for oral evidence, only oral arguments. The parties had an opportunity to make oral arguments at the summary judgment motion. A hearing also requires the presentation of evidence, which in this case was satisfied by presenting affidavits and conducting cross-examinations in advance of the hearing of the motion.6
On whether summary judgment denies the parties the ability to present their case, the Court relied on the Supreme Court of Canada's decision in Hryniak v. Mauldin7, the leading authority on summary judgment motions in civil proceedings. Drawing from Hryniak, the Court noted that a summary judgment motion is appropriate in arbitrations if it:
- allows the arbitrator to make the necessary findings of fact;
- allows the arbitrator to apply the law to the facts; and
- is a proportionate, more expeditious and less expensive means to achieve a just result.8
Implications for Domestic and International Arbitrations in Ontario
This decision establishes that where appropriate, an arbitral tribunal hearing a domestic arbitration has jurisdiction to preside over, and issue an award arising out of a motion for summary judgment, even if one of the parties objects to the summary judgment motion.
As it pertains to international arbitrations in Ontario, the ICAA, which adopts the UNCITRAL Model Law on International Commercial Arbitration (the "Model Law"), provides, at Article 19 of the Model Law, that parties can agree to a procedure and, if they do not, the arbitrator may define the procedure.
With regard to "hearings", Article 24(1) of the Model Law sets out the following requirement:
Subject to any contrary agreement by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials. However, unless the parties have agreed that no hearings shall be held, the arbitral tribunal shall hold such hearings at an appropriate stage of the proceedings, if so requested by a party.
Article 24(1) of the Model Law is very similar to s. 26(1) of the Act. However, there are some potentially significant differences. Notably, the Model Law requires the arbitrator to provide a hearing "at an appropriate stage", which is absent in s. 26(1). Also, hearings under the Model Law are for the presentation of oral evidence or for oral argument, not both as under the Act.
Despite these distinctions, Optiva provides guidance on what is considered to be a "hearing" in international arbitrations in Ontario. The Model Law and the Act set out roughly analogous provisions with regard to the minimum procedural fairness requirements for arbitrations. They also provide that the parties are allowed to present their case and that they are treated equally. Yet, neither requires "hearings" with the rigour of a typical trial, including opening statements, viva voce evidence, and closing arguments. As such, the key consideration under both the Model Law and the Act is likely whether the process followed permitted the arbitrator to adequately consider the facts and apply the law in order to reach a decision.
1 Optiva Inc. v. Tbaytel, 2021 ONSC 2929 ("Optiva").
2 Arbitration Act, 1991, SO 1991, c 17.
3 International Commercial Arbitration Act, 2017, SO 2017, c 2, Sch 5.
4 Ibid at paras 42-45.
5 Act at s. 19.
6 Optiva at para 50.
7 Hryniak v. Mauldin, 2014 SCC 7. [Hryniak].
8 Ibid at para 52.
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