Arbitrator’s Decision Prevails in Court of Appeal
The Court of Appeal recently decided whether or not to overturn an arbitrator’s award for $2,240,000 arising out of a commercial dispute.
The Appellant—The Coliseum Inc. (“Coliseum”)—entered into a long-term lease agreement with the City of Ottawa (“City”) to operate an indoor sports and recreation facility at Frank Clair Stadium. The dispute centered on the terms of the Minutes of Settlement previously entered into by both parties, with a focus on two key paragraphs which gave Coliseum an option to renew the contract, conditional upon and subject to the City’s bona fide redevelopment plans. In the event the City, acting in good faith, initiated bona fide redevelopment plans, Coliseum would be given the option to lease a portion of Ben Franklin Park or a similar City-owned property. At arbitration, Coliseum claimed the City breached the Minutes of Settlement by offering to Coliseum a lease agreement for Ledbury Park. The Arbitrator found that although Ledbury Park was “similar” to Ben Franklin Park within the meaning of the Minutes, the City failed to take “meaningful steps” to determine that it was appropriate for Coliseum’s operations.
The City brought an application to appeal under section 45(1) of the Arbitration Act, which allows parties to appeal an arbitrator’s decision on a question of law. The application judge granted leave to appeal.
The Court of Appeal was charged with deciding two issues: (1) whether the Court of Appeal has jurisdiction to review a decision of the Superior Court judge granting leave to appeal an arbitral decision under section 45(1) of the Arbitration Act; and (2) the reasonableness of the arbitrator’s decision.
The Court ruled in the negative on the first issue, finding that an application judge’s decision to grant leave to appeal was not itself appealable. With respect to the second issue, writing for the court, MacPherson J.A. found that there were insufficient grounds to overturn the Arbitrator’s decision because the Arbitrator’s interpretation of the Minutes of Settlement was not “unreasonable”.
Arbitration clauses are relatively common in the world of commercial litigation. Businesses tend to like them because they avoid the publicity of trial and they can often be more stream-lined than litigation through the court system, especially when issues of jurisdiction may arise. Courts tend to give a high level of deference to arbitrators and arbitration clauses. In this case, the Court of Appeal refused to overrule the Arbitrator’s decision despite having acknowledged at least one other reasonable interpretation of the relevant paragraphs of the Minutes of Settlement. MacPherson, J.A. found that, in light of the principles of contract interpretation which require “determining the intent of the parties and the scope of their understanding,” the Arbitrator’s decision was not unreasonable. The Court found that the arbitrator was in a better position to make factual findings and appraise the parties’ respective positions when interpreting the contract.
This decision acts as a reminder to businesses that courts typically lend a high level of deference to the decisions of arbitrators. This is partly because of the confidence the court system has in arbitrators' fact-finding powers, and further because courts generally welcome methods of steering disputes out of the court system. The finality of an arbitrator’s decision can be either a plus or a minus depending on one’s situation. When entering into a contract, parties should always consider the strategic advantages or disadvantages of arbitration, specifically with respect to the finality of arbitrators’ decisions.
See: Ottawa (City) v. Coliseum Inc., 2016 ONCA 363
The above article is for general information purposes only and does not constitute legal advice. If you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere.