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Key Takeaways
Carefully scrutinize the terms of your arbitration agreement before commencing arbitration proceedings. Construction contracts often have dispute resolution provisions that allow for parties to resolve their disputes through arbitration. Courts asked to dissect a construction contract's arbitration agreement to determine whether there is a right to appeal will typically deny the appeal where the contract contains terms signifying that arbitral awards are final or binding, regardless of any subsequent agreements that may be made regarding the conduct of the arbitration.
What Happened?
Johnson Brothers Corporation, a Southland Company, was a contractor on an infrastructure project in Toronto, Ontario (the "Contractor") involving the construction of a water treatment plant for the City of Toronto (the "Project"). Soletanche Bachy Canada Inc. was subcontracted (the "Subcontractor") to the Contractor to perform the marine works for the outflow portion of the Project (the "Subcontract").
As a result of various disputes, the parties proceeded to arbitration pursuant to the terms of the Subcontract (the "Subcontract Arb Agreement"). The parties also entered into subsequent agreements in writing addressing specific terms for the conduct of the arbitration ("the Arb Agreement 2").
The Subcontractor was successful on the arbitration, with the arbitrator awarding the Subcontractor significant damages, interest, and costs, while dismissing the Contractor's counterclaim. The Contractor sought leave to appeal the arbitrator's decision to the Ontario Superior Court of Justice, arguing that the Subcontract Arb Agreement, was superseded by the terms of Arb Agreement 2 which was silent on appeal rights and therefore did not preclude an appeal.
Question(s) Considered by the Court
Did the Contractor have a right to seek leave to appeal the arbitrator's award on the basis that the Subcontract Arb Agreement was superseded by the Arb Agreement 2, such that the arbitration award was not "final and binding"?
What Did the Court Say?
Arbitration agreements can address appeals of an arbitrator's award on questions of law in three different ways:
- expressly, giving parties an appeal as of right;
- silently, giving parties an opportunity to appeal but only with leave; or
- precluding appeals, giving parties no appeal as of right, nor a right to seek leave to appeal.
The Subcontract Arb Agreement included the words "finally resolved," which the Court found precluded any appeal. The Court confirmed that "finally resolved" means the same thing as "final and binding," language that has long been held to mean "unappealable."
The Court also held that Arb Agreement 2 did not supersede the Subcontract Arb Agreement based on section 5(2) of the Arbitration Act which states: "If the parties to an arbitration agreement make a further agreement in connection with the arbitration, it shall be deemed to form part of the arbitration agreement." Since both agreements could apply at the same time, the "finally resolve[d]" language of the Subcontract Arb Agreement still applied to hold that the arbitration award was final and binding.
The Court refused to grant leave for the Contractor to appeal the arbitral award, and thereby upheld the damages and costs awarded to the Subcontractor. Read the Court's full decision here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
