Denison Mines Ltd. v. Ontario Hydro [Indexed as: Denison Mines Ltd. v. Ontario Hydro]
58 O.R. (3d) 26
[2002] O.J. No. 91
Docket No. C35227
Court of Appeal for Ontario
Carthy, Abella and Sharpe JJ.A.
January 18, 2002
Arbitration -- Appeal -- Sale agreement between parties contained arbitration clause which precluded appeal -- Dispute arose -- Applicant filed notice of arbitration under sale agreement -- Respondent commenced action against applicant and another party -- All three parties agreed to arbitrate dispute and entered written arbitration agreement -- Arbitration agreement did not expressly exclude appeal -- Arbitration agreement constituted freestanding agreement and not mere amendment to sale agreement -- Arbitration agreement governed arbitration -- Applicant had right to apply for leave to appeal decision of arbitration panel dismissing its claim.
The parties entered into a sale agreement in 1977 which contained an arbitration clause. The wording of that clause precluded any appeal. A dispute arose between the parties and the applicant filed a notice of arbitration under the sale agreement in respect of its claim that the respondent had breached that agreement. The respondent commenced an action in the Ontario Court (General Division) against the applicant and another party, TD, in respect of its claims. After the action was commenced, all three parties agreed to arbitrate the dispute. They entered a written arbitration agreement in 1992 staying the respondent's action and providing the terms for the arbitration. The arbitration agreement did not expressly exclude an appeal. The Arbitration Act, 1991, S.O. 1991, c. 17 came into force after the date of the sale agreement but before the date of the arbitration agreement. Section 45(1) of the Act provides that where the parties have not by agreement excluded an appeal, one lies with leave on a question of law. The applicant's claim was dismissed by a majority of the arbitration panel. The applicant sought leave to appeal pursuant to s. 45(1) of the Act. The application judge found that the arbitration was governed by the sale agreement, that the arbitration agreement did not, on its own, represent the contractual intention of the parties but rather constituted an amendment to the sale agreement, and that, accordingly, she had no jurisdiction to grant leave to appeal. The applicant appealed.
Held, the appeal should be allowed.
Per Sharpe J.A. (Carthy J.A. concurring): The application judge erred in her interpretation and appreciation of the legal effect of the arbitration agreement. On its face, the arbitration agreement was unambiguous. It was a complete and comprehensive agreement providing for the arbitration of a dispute between the contracting parties. If it were nothing more than an amendment to the sale agreement, one would expect to find some reference to that earlier document in the recitals or elsewhere in the text. No such reference existed. The arbitration agreement bore all the hallmarks of a free-standing agreement rather than an amendment to the sale agreement. It was significant that the parties to the arbitration agreement were different. As TD was not a party to the sale agreement, it was difficult to see how it could be held to the terms of that agreement precluding any right of appeal. It would surely be anomalous if one party to a tripartite agreement had the right to seek leave to appeal under s. 45(1) of the Act, but the other two parties did not.
The applicant's formal pleading in the arbitration stated that the arbitration was brought under the sale agreement. However, that did not amount to an admission on the applicant's part that the sale agreement governed. At the time the formal Statement of Position was delivered, the issue of the relative status of the sale agreement and the arbitration agreement had not been raised. There was nothing to suggest that the applicant or the other parties raised or adverted to the point at issue here and, therefore, there was nothing for the applicant to admit. Nor was there any evidence that the respondent relied on this aspect of the applicant's pleading or that it took, or failed to take, any action because of it.
In the circumstances, the Arbitration Act, 1991 and the right to seek leave to appeal under s. 45(1) applied.
Per Abella J.A. (dissenting): Section 3 of the Arbitration Act, 1991 defers to the intentions of the parties in determining the finality of arbitrations. The intention of the parties in this case, as set out in the operative sale agreement, was to have arbitral finality. The subsequent arbitration agreement did not displace this intention. It was merely an agreement to accommodate the participation of the TD in protecting its contingent interest in the resolution of the dispute between the applicant and the respondent under the sale agreement.
APPEAL from a judgment dismissing an application for leave to appeal arbitration award.
Labourers' International Union of North America, Local 183 v. Carpenters and Allied Workers, Local 27 (1997), 1997 1429 (ON CA), 34 O.R. (3d) 472, 97 C.L.L.C. 220-057 (C.A.), distd Other cases referred to Denison Mines Ltd. v. Ontario Hydro (2001), 2001 5681 (ON CA), 56 O.R. (3d) 181, [2001] O.J. No. 3870 (C.A.); Eli Lilly and Co. v. Novopharm Ltd., 1998 791 (SCC), [1998] 2 S.C.R. 129, 152 F.T.R. 160n, 161 D.L.R. (4th) 1, 227 N.R. 201, 80 C.P.R. (3d) 321 Statutes referred to Arbitration Act, 1991, S.O. 1991, c. 17, ss. 3, 45(1)
David Stockwood, Q.C., and Johanna Braden, for appellant. Joseph M. Steiner and Joseph A. Starkman, for respondent.
Introduction
1SHARPE J.A. (CARTHY J.A. concurring): -- The issue in this case is whether there is a right of appeal from an arbitration award resolving a dispute between Denison Mines Limited ("Denison"), Ontario Hydro ("Hydro") and the Toronto Dominion Bank ("TD").
Facts
Facts
2Denison and Hydro entered an agreement for the supply of uranium in December 1977 (the "Sale Agreement"). Article XI of the Sale Agreement contained an arbitration clause. It is common ground that the wording of that clause precluded any appeal. It is in the following terms:
Art. XI. Except as otherwise specifically provided in this agreement or expressly otherwise agreed to by the parties, all disputes arising in connection with this agreement shall be finally settled under the provisions of the Arbitrations Act of Ontario by three arbitrators. Each of the parties hereto shall appoint one arbitrator and the two arbitrators so appointed shall appoint the third arbitrator. The proceedings before the arbitrators shall take place in Toronto, Ontario or such other place as the arbitrators may determine.
3A dispute arose between Denison and Hydro. Denison alleged breach of the Sale Agreement and claimed that Hydro had failed to pay $12.5 million due under certain invoices. Denison filed a Notice of Arbitration under the Sale Agreement for this claim. Hydro admitted the validity of the invoices, but claimed a right of set-off for the entire amount and alleged a conspiracy between Denison and the Toronto Dominion Bank ("TD") arising from a related tripartite financing arrangement between Denison, Hydro and TD. Hydro commenced an action in the Ontario Court of Justice (General Division) against Denison and TD in respect of its claims. After the Hydro action was commenced, all three parties agreed to arbitrate the dispute. They entered a written arbitration agreement dated September 2, 1992 (the "Arbitration Agreement") staying Hydro's action and providing the terms for the arbitration.
4The Arbitration Agreement, the terms of which are set out in full in the Appendix to these reasons, did not expressly exclude an appeal. The Arbitration Act, 1991, S.O. 1991, c. 17, (the "Act") came into force after the date of the Sale Agreement but before the date of the Arbitration Agreement. The Act changed the law respecting rights of appeal. Section 45(1) provides that where the parties have not by agreement excluded an appeal, one lies with leave on a question of law:
45(1) If the arbitration agreement does not deal with appeals on questions of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that,
(a) the importance to the parties of the matters at stake in the arbitration justifies an appeal; and
(b) determination of the question of law at issue will significantly affect the rights of the parties.
5The matter proceeded to arbitration and Denison's claim was dismissed by a majority of the arbitration panel. Denison then sought leave to appeal pursuant to s. 45(1) of the Act. On the application for leave to appeal, it was agreed that the application judge would deal first with the issue of jurisdiction to grant leave to appeal. The application judge found that that arbitration was governed by Article XI of the Sale Agreement precluding an appeal. She concluded that the Arbitration Agreement did not, on its own, represent the contractual intention of the parties, but that it was more appropriately interpreted as an amendment to the Sale Agreement, made to accommodate TD in the arbitration. She held, accordingly, that she had no jurisdiction to grant leave to appeal.
6Denison appeals to this court on the ground that the arbitration was governed by the Arbitration Agreement, not the Sale Agreement, and that, accordingly, it has the right to seek leave to appeal pursuant to s. 45 of the Act. Hydro's motion to quash the appeal on the ground that the order refusing leave to appeal was interlocutory in nature was dismissed by another panel of this court: Denison Mines Ltd. v. Ontario Hydro (2001), 2001 5681 (ON CA), 56 O.R. (3d) 181, [2001] O.J. No. 3870 (C.A.).
Issue
Issue
7The following issue arises on this appeal:
Did the application judge err in finding that she had no jurisdiction to entertain Denison's application for leave to appeal?
Analysis
Analysis
8It is common ground between the parties that if the arbitration is governed by the terms of the Sale Agreement, there is no right of appeal, but that if the arbitration is governed by the Arbitration Agreement, Denison does have the right to apply for leave to appeal.
9In my respectful view, the application judge erred in her interpretation and appreciation of the legal effect of the Arbitration Agreement. On its face, the Arbitration Agreement is unambiguous. It is a complete and comprehensive agreement providing for the arbitration of a dispute between the three contracting parties. If it were nothing more than an amendment to the Sale Agreement, one would expect to find some reference to that earlier document in the recitals or elsewhere in the text of the Arbitration Agreement. The recitals, however, refer only to Hydro's action and the agreement of the parties to have that dispute settled by arbitration. The recitals provide that the dispute between the parties is to be referred to arbitration "on the terms set out below". The "terms set out below" make no reference whatsoever to the terms of the Sale Agreement. Clause 6 explicitly distinguishes the tripartite arbitration to be conducted under its terms from "the previous arbitration between Denison and Hydro pur suant to the Notice of Arbitration delivered by Denison dated February 26, 1992". While this refers to an earlier arbitration of another dispute between Denison and Hydro, it is significant that the only aspect of the Arbitration Agreement that even remotely refers to the Sale Agreement serves to distance it from the arbitration at issue here.
10The Arbitration Agreement deals comprehensively with the conduct of the arbitration. It sets out a different method of appointing the panel from that contemplated by the Sale Agreement. It provides for the terms of discovery, the jurisdiction of the panel to award costs and interest and even the method of setting down the time and place of the arbitration. In this respect as well, it bears all the hallmarks of a free-standing agreement rather than an amendment to the Sale Agreement.
11Perhaps even more significant is the fact that the parties to the Arbitration Agreement are different. As TD was not a party to the Sale Agreement, it is difficult to see how it could be held to the terms of that agreement precluding any right of appeal. It would surely be anomalous if one party to a tripartite agreement had the right to seek leave to appeal under s. 45(1) of the Act, but the other two parties did not.
12In my view, in the face of the terms of the Arbitration Agreement, Hydro's assertion that its purpose and effect was "merely to adjust the process to accommodate TD's presence in the arbitration" is untenable. It seems to me to be flatly inconsistent with the terms of the agreement TD and the other parties signed.
13Throughout her reasons for judgment, the application judge referred to the Arbitration Agreement as "the Amending Agreement". In reaching the conclusion that the Arbitration Agreement merely amended the Sale Agreement, and that the arbitration clause of the Sale Agreement was therefore controlling, the application judge relied on Denison's pleadings in the arbitration. In its formal Statement of Position in the arbitration, Denison stated: "This arbitration is brought pursuant to Article XI of the Sale Agreement." All of Denison's documents in the arbitration bore the caption "ARBITRATION UNDER ARTICLE XI OF THE DECEMBER 15, 1977 AGREEMENT BETWEEN ONTARIO HYDRO AND DENISON MINES LIMITED".
14Denison's formal pleading in the arbitration does not, in my view, amount to an admission that the Sale Agreement governs. At the time Denison submitted this document, the issue of the relative status of the Sale Agreement and the Arbitration Agreement had not been raised. There is nothing to suggest that Denison or the other two parties raised or adverted to the point at issue here and therefore there was nothing for Denison to admit. Nor is there any evidence that Hydro relied on this aspect of Denison's pleading or that Hydro took or failed to take any action because of it.
15Denison submits that the pleading should not even be considered as it constitutes parol evidence that is inadmissible in the face of the unambiguous terms of the Arbitration Agreement, citing Eli Lilly and Co. v. Novopharm Ltd., 1998 791 (SCC), [1998] 2 S.C.R. 129, 161 D.L.R. (4th) 1. Hydro submits that the pleading should not be excluded as extrinsic or parol evidence, but that it forms part and parcel of the arbitration itself. I do not find it necessary to deal with the issue of admissibility. Assuming, without deciding, that it is admissible, Denison's pleading, standing alone and without any other evidence, does not provide an adequate basis to ignore or overcome the very clear language and effect of the Arbitration Agreement.
16In my view, this case is distinguishable from Labourers' International Union of North America, Local 183 v. Carpenters and Allied Workers, Local 27 (1997), 1997 1429 (ON CA), 34 O.R. (3d) 472, 97 C.L.L.C. 220-057 (C.A.). In that case, the parties had entered into an arbitration agreement before the date the Act came into force, but the arbitration itself took place after the operative date of the Act. The arbitration agreement provided that the arbitration would be "final and binding" and was otherwise silent as to appeals. The applicant argued that since the arbitration agreement was silent on the question of an appeal, it could have recourse to the new s. 45(1) and apply for leave to appeal. This court rejected that submission, finding that the arbitration agreement had to be interpreted in light of legal regime prevailing at the date it was written. When the parties entered the agreement, it was not necessary to exclude a right of appeal expressly. The words "final and binding" indicated an intention to exclude any right of appeal, and the parties could not be expected to have expressly contracted out of a legislative scheme that did not exist when they wrote the agreement. In the case at bar, the situation is different. The parties did turn their minds to the terms of the arbitration after the new Act came into effect. They entered a complete and comprehensive agreement that made no reference to the Sale Agreement or to rights of appeal. In these circumstances, the 1992 Act and the right to seek leave to appeal under s. 45(1) apply.
Conclusion
Conclusion
17For these reasons, I would allow the appeal with costs here and before the application judge, and direct that Denison's application for leave to appeal proceed before the Superior Court of Justice.
Dissenting Reasons
18ABELLA J.A. (dissenting): -- I have had the benefit of reading the reasons of Sharpe J.A. but do not, with respect, agree with his conclusion. In my view, essentially for the reasons of Macdonald J., the appeal should be dismissed.
19Section 3 of the current Arbitration Act, 1991, S.O. 1991, c. 17 defers to the intentions of the parties in determining the finality of arbitrations. The intention of Denison and Hydro, as set out in the operative Sale Agreement, was to have arbitral finality. The subsequent September 2, 1992 Tripartite Agreement does not displace this intention. It is merely an agreement to accommodate the participation of the Bank in protecting its contingent interests in the resolution of a dispute between Hydro and Denison under the Sale Agreement.
20The dispute arose as a result of Denison's allegation that Hydro was in breach of its obligations to Denison under the Sale Agreement in making payments to the Bank instead of to Denison. When Hydro suspected -- correctly, as Denison conceded at the arbitration -- that Denison had devised a scheme to force Hydro, as guarantor, to pay Denison's debt to the Bank, Hydro prepaid the full guarantee to the Bank and set off the amount of these prepayments against amounts it owed Denison for the final shipments of uranium.
21Denison, in response to these deductions of prepayments, delivered Notices of Arbitration to Hydro, alleging that Hydro had breached the Sale Agreement by failing to pay for the uranium deliveries. This is what the arbitration was about -- a dispute between Denison and Hydro about whether Hydro had breached the Sale Agreement.
22Denison's position is set out in the numerous Notices of Arbitration it submitted to Hydro. These Notices, as well as Denison's pleadings in the arbitration, all set out clearly that the arbitration is under Article XI of the Sale Agreement. These pleadings are not extrinsic evidence. They are explicitly mentioned in the first paragraph of the 1992 Tripartite Agreement and are thereby incorporated by reference into that agreement. That paragraph states:
The parties hereby submit to arbitration at Toronto all issues in respect of the Tripartite Agreement which are raised in the Statement of Claim in the Action, and in the Statements of Position to be filed by the parties on this arbitration, including all claims and defences which properly could be raised under the Rules of Civil Procedure were the matter to proceed by way of action in the Ontario Court (General Division).
(Emphasis added)
23The pleadings are therefore relevant in determining the intentions of the parties. Denison styled its Amended Statement of Position as "Arbitration Under Article XI of the December 15, 1977 Agreement Between Ontario Hydro and Denison Mines Limited". Similarly, the majority of the arbitration panel styled the award: "IN THE MATTER OF AN ARBITRATION PURSUANT TO THE ONTARIO ARBITRATIONS ACT", referring to the legislation that governed arbitrations at the time the Sale Agreement was signed, and was designated as binding in Article XI. It is therefore incongruous for Denison to now argue that its declared intention, when it was actually participating in the arbitration, can be retroactively retracted.
24This declared intention should be respected as having been genuine at the time, if only because of the undue prejudice that imputing a contrary intention would impose on Hydro. In taking at face value Denison's representation that the arbitration was under Article XI, Hydro lost the opportunity, prior to embarking on the expense of the arbitration, to address the possibility that its confidence in the finality protected under Article XI might be misplaced.
25In my view, therefore, the 1992 Tripartite Agreement, on its face, manifests the parties' intention not to displace the Sale Agreement. In addition, the context in which the 1992 Tripartite Agreement was signed also illuminates the intentions of Hydro and Denison at the time as being to preserve the finality agreed to in Article XI of the Sale Agreement. (See Labourers' International Union of North America, Local 183 v. Carpenters and Allied Workers, Local 27, supra.
26The issues raised in the Statements of Position all relate to the core dispute between Denison and Hydro under the Sale Agreement. The Statement of Claim by Hydro against the Bank was contingent on the outcome of this central dispute, with Hydro claiming that if it were found liable to Denison under the Sale Agreement, the Bank should correspondingly be found liable to Hydro. Denison asserted no claim against the Bank and the Bank asserted no claim against Denison.
27The Bank agreed to participate in the arbitration as a party with interests derivative of those of Hydro, and Hydro accordingly abandoned its court action to permit the resolution in one forum of all the issues related to Denison's Notices of Arbitration. In so doing, Hydro did not abandon, and should not be penalized by being held to have abandoned, its pre-existing rights under the Sale Agreement with Denison. And Denison should not now be permitted to assert that the Bank's participation in its claim against Hydro nullified its agreement with Hydro that there would be no appeal from an arbitrator without a clear expression that this was the parties' joint intention.
28The procedure in Article XI for selecting the arbitrators necessarily anticipated the participation of only Denison and Hydro and therefore needed revision to accommodate the presence of a third party in the arbitration. It is, in my view, only for the limited purpose of facilitating the presence of the Bank that the 1992 Tripartite Agreement was entered into. It did not change what the arbitration was about: the determination of the respective rights of Denison and Hydro under their Sale Agreement.
29The essence of the dispute, as reflected not only in the parties' Statements of Position, but also in the arbitral award, involved the interpretation of the Sale Agreement, including the Aggregate Advance Payment Provision in Article IV, s. 8, and the propriety of Hydro's payments to the Bank under the May 7, 1991 Amending Agreement, s. 9 of which provided for the remedy of set-off that Hydro purported to invoke when it made the prepayments to the Bank.
30Far from being a free-standing agreement with an independent life of its own, the 1992 Tripartite Agreement is meaningless without reference to the Sale Agreement. The Tripartite Agreement did not change what was at the heart of the dispute. In particular, it did not change the underlying agreement between Hydro and Denison or shift the intentions of the parties, including the intention, as set out in Article XI of the Sale Agreement, that all disputes arising in connection with that agreement be "finally settled" except as "expressly otherwise agreed to by the parties".
31Under Article XI, Hydro and Denison not only expressed their clear intention regarding appeal rights, but also declared that this intention could only be displaced by express language. The 1992 Tripartite Agreement is silent about whether its provisions supercede this provision in Article XI. The parties' intentions in the Sale Agreement that finality can be amended only by express language, should not be implicitly displaced by the failure in the 1992 Tripartite Agreement to express any intention at all.
32In fact, there is nothing in the 1992 Tripartite Agreement to displace the intended finality of any arbitrated disputes between Hydro and Denison as explicitly expressed in the Sale Agreement. And while I do not have to decide the issue of the Bank's appeal rights under the 1992 Tripartite Agreement, I would see nothing anomalous or unduly prejudicial in the possibility that the Bank might not be bound to this finality.
33This is, in short, an arbitration under the Sale Agreement, which expressed a clear substantive intention concerning the finality of arbitration, an intention that should not be displaced by the ambiguity of a subsequent procedural agreement. The 1992 Tripartite Agreement, in my view, does not supercede the intended finality expressed in the Sale Agreement, and is not a rewriting of its core terms and express intentions. It is nothing more than an adjunct to the Sale Agreement designed to facilitate the Bank's ability to respond to the possibility that its contingent interests could be triggered by the outcome of the arbitrated dispute between Hydro and Denison.
34I would therefore dismiss the appeal with costs.
Appeal allowed.
APPENDIX
Appendix
THIS AGREEMENT MADE as of September 2, 1992
BETWEEN:
ONTARIO HYDRO ("Hydro")
- and -
DENISON MINES LIMITED ("Denison")
- and -
THE TORONTO-DOMINION BANK ("the Bank")
RECITALS:
A. Whereas Hydro has commenced Action no. B175/92 in the Ontario Court (General Division) -- Commercial list at Toronto claiming certain relief in respect of an arrangement ("the Tripartite Arrangement") between the parties.
B. And whereas the parties have consented to an Order that the Action be stayed and the matters raised therein, and any related matters, be referred to arbitration on the terms set out below.
THE PARTIES THEREFORE AGREE AS FOLLOWS:
The parties hereby submit to arbitration at Toronto all issues in respect of the Tripartite Agreement which are raised in the Statement of Claim in the Action, and in the Statements of Position to be filed by the parties on this arbitration, including all claims and defences which properly could be raised under the Rules of Civil Procedure were the matter to proceed by way of action in the Ontario Court (General Division).
(a) It is understood and agreed that the relief sought by Denison in the arbitration is payment by Hydro of the sum of $12,500,000, said by Denison to be owing by Hydro in respect of deliveries of uranium, and that the $12,500,000 paid by Hydro to the Bank is not repayable to Hydro.
(b) It is further understood and agreed that the relief sought by Hydro in the arbitration is an award which will result in Hydro not being obliged to pay the aforesaid sum of $12,500,000, or any part thereof, to Denison unless it is also entitled to recover the same sum from the Bank and is correspondingly released from its undertaking to the Bank.
(c) It is further understood and agreed that the Bank's position in the arbitration is that, under no circumstances, is it obliged to return to Hydro all or any portion of the sum of $12,500,000 paid by Hydro to the Bank and applied by the Bank to Denison's indebtedness under the Nordic Lake Housing Mortgage.
- Thus the parties contemplate that the outcome of the arbitration will be one of the following:
(a) Hydro is required to pay Denison all or part of the sum of $12,500,000 and the Bank is required to pay all or part of the sum of $12,500,000 to Hydro;
(b) Hydro is required to pay Denison all or part of the sum of $12,500,000 but is not entitled to any recovery from the bank; or
(c) No party is required to make any payment to any other party.
The arbitrators will also have jurisdiction to make awards in respect of interest and prepayment penalties consistent with their award in respect of the aforesaid sum of $12,500,000.
There will be three arbitrators, one appointed jointly by Denison and the Bank, one appointed by Hydro and the third, who shall be the chairperson, appointed by agreement of the parties or, failing such agreement, by the other two arbitrators.
The arbitration will be separate from and before an entirely different panel of arbitrators than the previous arbitration between Denison and Hydro pursuant to the notice of Arbitration delivered by Denison dated February 26, 1992.
The parties will make production of documents by way of unsworn lists of documents, the scope of such production to be the same as if these issues were proceeding in an action in the Ontario Court (General Division).
Hydro will be entitled to pre-hearing oral discovery of Denison and the Bank. Denison and the Bank will be entitled to pre-hearing oral discovery of Hydro.
The arbitration hearing will be conducted at a time and place to be agreed by the parties and the arbitrators and, failing such agreement, to be determined by the arbitrators.
The Action will be dismissed on consent without costs and there will be no costs of the motions of Denison and the Bank returnable on September 2, 1992.
The costs of the arbitration will be in the discretion of the arbitrators. Until the disposition of costs by the arbitrators, Denison and the Bank will pay the fees and disbursements of the arbitrator nominated by them, Hydro will pay the fees and disbursements of the arbitrator nominated by it, and Denison and the Bank, on the one hand, and Hydro, on the other hand, will each pay fifty percent of the fees and disbursements of the chairperson.
