Her Majesty the Queen in Right of Ontario v. Ontario First Nations Limited Partnership [Indexed as: Ontario v. Ontario First Nations Limited Partnership]
73 O.R. (3d) 439
[2004] O.J. No. 4445
Court of Appeal for Ontario,
Catzman, Doherty and Juriansz JJ.A.
November 3, 2004
Arbitration -- Jurisdiction -- Application judge appointing arbitrator pursuant to Arbitration Act -- Parties being unable to agree on form of order and presenting competing orders to application judge setting out scope of arbitration -- Application judge having jurisdiction to decide between two orders proposed by parties -- Application judge's decision reducing risk that second arbitration would be required -- Application judge not erring by intervening in arbitration process beyond appointing arbitrator -- Arbitration Act, 1991, S.O. 1991, c. 17. [page440]
The appellant and the respondent were among the parties to the Casino Rama Revenue Agreement ("CRRA"), which provided for the distribution of the net revenues from Casino Rama. Two lawsuits were brought against the respondent by the Chiefs of Ontario and the Chippewas of Mnjikaning First Nation in respect of the sharing of the Casino Rama revenues. The respondent believed that revenues from Casino Rama were being used to pay the legal costs of the litigation against it and that such use of funds was not permitted by the CRRA. The respondent delivered a notice of concern to the appellant stating its position that there was a material breach of art. 3 of the CRRA. After going through the first two stages of the dispute resolution process set out in the CRRA, the respondent applied pursuant to art. 9.3 of the CRRA and s. 10(1)(b) of the Arbitration Act, 1991 for the appointment of an arbitrator. The application judge appointed an arbitrator. The parties were unable to agree on the formal wo rding of the application judge's order, and asked him for the opportunity to make submissions. He agreed, and each party proposed an order which essentially appointed an arbitrator to resolve the dispute between the parties relating to the use of Casino Rama revenues to fund the conduct of litigation. The draft orders were similar, except that the respondent's order contained 20 additional words describing accurately the nature of the litigation. The application judge decided that the order should go in the form proposed by the respondent. He found that to give effect to the appellant's position would prevent the arbitrator from resolving the real issue between the parties and would create the possibility that yet another arbitration would be required following the completion of the one he had just ordered. The appellant appealed, arguing that the application judge exceeded his limited authority to appoint an arbitrator by also purporting to define the arbitrator's jurisdiction.
Held, the appeal should be dismissed.
The application judge had jurisdiction to decide between the two proposed orders. The Arbitration Act, 1991 does not in and of itself grant an arbitrator exclusive authority to decide questions of jurisdiction in the first instance. The legislative context in which the Arbitration Act, 1991 was enacted suggested that the legislature intended for the courts to play an important, albeit circumscribed, role in the regulation of arbitrations. Section 17(1) of the Arbitration Act, 1991, which provides that "the arbitral tribunal may rule on its own jurisdiction", is a permissive, rather than an exclusive, grant of jurisdiction.
Section 6 of the Arbitration Act, 1991 directs the court not to intervene except for the specified purposes, which should be construed narrowly in accordance with the objective of the section to restrain judicial intervention. In exercising its jurisdiction under s. 6, the court should take a pragmatic approach and intervene only when there are undoubted practical reasons for doing so. In this case, the arbitration judge reduced the risk that a second arbitration would be required and assisted the parties by deciding a question they jointly placed before him. This was entirely consistent with s. 6(1) of the Act and with the principle that the parties should be free to fashion a dispute resolution process that best meets their needs. The application judge did not err by intervening in the arbitration process beyond appointing the arbitrator.
APPEAL from an order of Campbell J., [2003] O.J. No. 2164, [2003] O.T.C. 475 (S.C.J.), appointing an arbitrator.
Jevco Insurance Co. v. Continental Insurance Co. of Canada, 2000 26969 (ON CA), [2000] O.J. No. 242, 132 O.A.C. 379 (C.A.), affg [1999] O.J. No. 2267, 98 O.T.C. 81 (S.C.J.); Unifund Assurance Co. v. Insurance Corp. of British Columbia, [2003] 2 S.C.R. 63, 227 D.L.R. (4th) 402, 306 N.R. 201, [2003] 9 W.W.R. 1, [2003] I.L.R. para. I-4209, 2003 SCC 40, 16 B.C.L.R. (4th) 1, [2003] S.C.J. No. 39, revg 2001 2966 (ON CA), [2004] O.J. No. 1885, 204 D.L.R. (4th) 732 (C.A.), distd [page441] Statutes referred to Arbitration Act, 1991, S.O. 1991, c. 17, ss. 3, 6, 10, 17 Insurance Act, R.S.O. 1990, c. I.8 International Commercial Arbitration Act, R.S.O. 1990, c. I.9 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 59.04 Authorities referred to Fortier, L.Y."Delimiting the Spheres of Judicial and Arbitral Power: 'Beware, My Lord, of Jealousy'" (2001) 80 Can. Bar Rev. 143 Pepper, R.A."Why Arbitrate? Ontario's Recent Experience with Commercial Arbitration" (1998) 36 Osgoode Hall L.J. 807
William J. Manuel, for respondent, Her Majesty in Right of Ontario. Lara Teoli, for Mnjikaning First Nations. John B. Laskin and Lisa K. Talbot, for appellant.
The judgment of the court was delivered by
1JURIANSZ J.A.: -- The legal issue in this appeal is the extent to which the court, when it is asked to appoint an arbitrator pursuant to the Arbitration Act, 1991, S.O. 1991, c. 17 ("Arbitration Act, 1991"), may get involved in resolving the parties' dispute.
2The Honourable Mr. Justice Archie G. Campbell, by order dated May 26, 2003, appointed the Honourable Peter Cory, Q.C. to arbitrate a dispute between the Ontario First Nations Limited Partnership ("OFNLP") and Her Majesty the Queen in Right of Ontario ("Ontario"). The order was not settled until December 29, 2003 because the parties could not agree on its terms.
3OFNLP now appeals the application judge's order, arguing that he exceeded his limited authority to appoint an arbitrator by also purporting to define the arbitrator's jurisdiction. OFNLP further argues that even if the application judge had the authority to define the arbitrator's jurisdiction, he erred in referring to arbitration matters that were beyond the scope of the parties' agreement. The Crown's position is that OFNLP is seeking to narrow the issue to be arbitrated, and that if OFNLP's position is given effect, the arbitration will be a fruitless exercise that will fail to resolve the real dispute between the parties.
4For the reasons that follow, I would dismiss the appeal. [page442]
A. Background
5Casino Rama was established for the benefit of Ontario's First Nations. It is located on the territory of the Chippewas of Mnjikaning First Nation ("MFN") near Orillia. The OFNLP, the Mnjikaning First Nation Limited Partnership, ("MFNLP"), the Ontario Lottery and Gaming Corporation and Ontario are parties to the Casino Rama Revenue Agreement ("CRRA"). The CRRA provides that 65 per cent of the net revenues from Casino Rama are to be distributed to OFNLP, and sets out the expenses and approved purposes for which those revenues may be used. OFNLP is a limited partnership whose mandate includes distributing to the 133 Ontario First Nations, other than MFN, their share of the revenues from Casino Rama.
6Chiefs of Ontario ("COO") is a non-profit corporation that represents the interests of Ontarios First Nations. It is not a party to the CRRA. In July 1998, it commenced an action against Ontario regarding the province's decision to collect 20 per cent of the gross revenues of Casino Rama ("the 20 per cent action"). In August 2001, MFN commenced an action that also attacked Ontario's decision to collect 20 per cent of the gross revenues of the casino, and further claimed that MFN had a contractual right to receive 35 per cent of the net revenues of Casino Rama beyond an initial five-year period ("the 35 per cent action"). Representation orders were made in these actions naming COO and OFNLP as joint representative plaintiffs for the 133 First Nations in the 20 per cent action, and as joint representative defendants in the 35 per cent action.
7Ontario believed that revenues from Casino Rama were being used to pay the legal costs of the litigation against it. Further, Ontario believed that such use of funds is not permitted by the CRRA.
8The CRRA provides for a three-stage process for resolving disputes among the parties. At the first stage, a party may provide a "notice of concern" about "any dispute, claim, difference or question . . . concerning the construction, meaning, effect, implementation of or compliance with [the] Agreement". The party who receives the notice of concern has 45 days to consider and address it. If the concern is not addressed, the second stage is 60 days of good faith discussion to resolve it. If the concern is still not resolved, art. 9.3 of the CRRA provides that ôthe concern shall be referred to a single Arbitrator mutually agreed upon by the parties or, failing agreement, an Arbitrator appointed pursuant to the Arbitration Act, 1991". [page443]
9Ontario delivered a notice of concern to OFNLP on October 11, 2001 stating its position that there was a material breach of art. 3 of the CRRA as follows:
(a) contrary to subsection 3.1.1, funds received by the OFN Limited Partnership pursuant to this section are being diverted to pay legal costs associated with the WIN contribution litigation.
(b) in that circumstance, the said funds are not being used for one of the approved purposes set out in subsection 3.3.1.
10Ontario later delivered a similar notice of concern to MFNLP.
11After going through the first two stages of the dispute resolution process, Ontario applied to the court, pursuant to art. 9.3 of the CRRA and s. 10(1)(b) of the Arbitration Act, 1991, for appointment of an arbitrator to hear both concerns. Section 10(1)(b) of the Arbitration Act, 1991 provides that the court may appoint the arbitral tribunal if a person with power to appoint the arbitral tribunal has not done so after a party has given the person seven days' notice to do so.
12The application against OFNLP and the application against MFNLP were heard together on consent. The application judge, in his endorsement dated May 26, 2003, appointed the Honourable Peter Cory as an arbitrator "pursuant to the agreement and the statute". The parties were unable to agree on the formal wording of the application judge's order. Rather than resorting to the process for settling disputed orders under rule 59.04 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194], the parties asked the application judge for the opportunity to make submissions to him regarding their respective positions, and he agreed.
13In its written submission Ontario proposed the following wording:
THIS COURT ORDERS that the Honourable Peter Cory, Q.C. is appointed as an Arbitrator pursuant to the Casino Rama Revenue Agreement and the Arbitrations [sic] Act, 1991, to resolve the dispute between the parties relating to the use of Casino Rama Revenues to fund the conduct of the litigation by the Chiefs of Ontario and Ontario First Nations Limited Partnership together suing in a representative capacity on behalf of 133 First Nations in Ontario, the Mnjikaning First Nations Limited Partnership, and the Chippewas of Mnjikaning First Nation in Court File No.: 98-CV-152417CM and Court File No.: 01-CV-219345CM.
14In its written submission OFNLP proposed the following wording:
THIS COURT ORDERS that the Honourable Peter Cory, Q.C. is appointed as an Arbitrator pursuant to the Casino Rama Revenue Agreement and the Arbitration Act, 1991, to resolve the dispute between the parties relating [page444] to the use of Casino Rama revenues by the Ontario First Nations Limited Partnership and the Mnjikaning First Nations Limited Partnership to fund the conduct of Court File No. 98-CV- 152417CM and Court File No. 01-CV-219345CM.
15The application judge decided that the order would go in the form proposed by Ontario. He said that to give effect to OFNLP's position would prevent the arbitrator from resolving the real issue between the parties, and would create the possibility that yet another arbitration would be required following the completion of the one he had just ordered. The application judge said that to expose the parties to that risk would be contrary to the policy against useless and expensive multiplicity of proceedings, and would be contrary to the principles underlying the representation order and its conditions. He accepted Ontario's position that the order proposed by OFNLP would deprive the arbitrator of the ability to determine the entire dispute between the parties.
B. Analysis
i. Did the application judge have jurisdiction to decide between the two orders proposed by the parties?
16OFNLP's primary argument is that under the Arbitration Act, 1991, the arbitrator has exclusive authority (absent constitutional questions) to decide questions of jurisdiction and other questions of law in the first instance. OFNLP therefore takes the position that the application judge's authority was confined to naming an arbitrator, and that he exceeded this authority in accepting Ontario's form of order, which OFNLP submits, defines the scope of the arbitrator's jurisdiction. In support of its argument, OFNLP seeks to distinguish the Supreme Court of Canada's decision in Unifund Assurance Co. v. Insurance Corp. of British Columbia, 2003 SCC 40, [2003] 2 S.C.R. 63, 227 D.L.R. (4th) 402, revg 2001 2966 (ON CA), [2001] O.J. No. 1885, 204 D.L.R. (4th) 732 (C.A.) ("Unifund"), and relies on this court's decisions in Jevco Insurance Co. v. Continental Insurance Co. of Canada, 2000 26969 (ON CA), [2000] O.J. No. 242, 132 O.A.C. 379, affg [1999] O.J. No. 2267, 98 O.T.C. 81 (S.C.J.), and in Unifund.
17In Jevco and Unifund, this court held that an arbitrator has the authority to determine questions of jurisdiction in the first instance. In allowing the appeal in Unifund, the Supreme Court held that an arbitrator appointed under the Arbitration Act, 1991 pursuant to the Insurance Act, R.S.O. 1990, c. I.8 ("Insurance Act") did not have exclusive jurisdiction, even in the first instance, to determine the constitutional applicability of Ontario's Insurance Act to an insurer from another province. Binnie J. said at para. 41: [page445]
There is nothing in the Insurance Act of Ontario, which was the Court of Appeal's springboard into the Arbitration Act, 1991, to suggest that the legislature intended an arbitrator appointed under that Act, usually an insurance specialist, to have exclusive jurisdiction (even in the first instance) to determine the constitutional applicability of that Act under the division of legislative powers in the Canadian Constitution.
(Emphasis in original)
18OFNLP submits that the Supreme Court in Unifund merely carved out an exception to the general rule that the arbitrator has exclusive jurisdiction for those cases in which the constitutionality of the arbitration itself is under attack.
19This argument does not assist OFNLP, because Jevco and Unifund are different from this case in an important respect. Those cases dealt with the combined effect of the Insurance Act and the Arbitration Act, 1991, which, as Wilkins J. explained at para. 25 in Jevco, together create a statutory "code" to determine the rights of parties in a no-fault automobile insurance contract. By contrast, the only statute that governs the arbitration in this case is the Arbitration Act, 1991.
20In considering the effect of the Arbitration Act, 1991, Binnie J. said at para. 38 that there is nothing in that Act to suggest an arbitrator's authority to decide jurisdictional questions "was intended in all circumstances to be exclusive". In my view, this goes beyond merely carving out an exception only for constitutional questions. This comment suggests that, absent another statute to consider, the Arbitration Act, 1991 is insufficient to support an inference that the legislature intended the arbitrator to have exclusive authority to decide jurisdictional questions.
21The legislative context in which the Arbitration Act, 1991 was enacted suggests that the legislature intended for the courts to play an important, albeit circumscribed, role in the regulation of arbitrations. As observed by the Supreme Court in Unifund, Ontario's Arbitration Act, 1991 is based in part on the UNCITRAL Model Law ("Model Law"), which was developed by the United Nations Commission on International Trade Law in response to the perceived inadequacy of existing domestic legal instruments to resolve international trade disputes. The Model Law was intended to foster predictability and ensure consistency in the resolution of these disputes, which would in turn facilitate and promote international trade [See Note 1 at the end of the document]. [page446]
22Ontario adopted the Model Law with few changes when it passed the International Commercial Arbitration Act, R.S.O. 1990, c. I.9, the subject matter of which is, as the title suggests, commercial arbitrations involving a foreign party. However, when Ontario enacted the Arbitration Act, 1991 to deal with the resolution of domestic disputes, it deviated from the Model Law in a significant way. The Model Law only sanctions judicial participation when the parties cannot agree on a procedural step (for example, appointing an arbitrator), or where the arbitrator has already ruled on the matter at issue. By contrast, the Arbitration Act, 1991 provides a wider scope for judicial intervention. Section 6 states:
No court shall intervene in matters governed by this Act, except for the following purposes, in accordance with this Act:
To assist the conducting of arbitrations.
To ensure that arbitrations are conducted in accordance with arbitration agreements.
To prevent unequal or unfair treatment of parties to arbitration agreements.
To enforce awards.
23In his article on commercial arbitration in Ontario, Randy A. Pepper explains that the Arbitration Act, 1991 does not incorporate the Model Law to the same extent as the Ontario International Commercial Arbitration Act does precisely because the legislature sought to retain "a wider measure of court supervision in tribunal procedure and awards" in domestic arbitration [See Note 2 at the end of the document].
24Given the language of s. 6 of the Act, and the legislative context it reflects, s. 17(1) of the Arbitration Act, 1991, which provides that the "arbitral tribunal may rule on its own jurisdiction", is a permissive, rather than an exclusive, grant of jurisdiction. Since the Arbitration Act, 1991 does not in and of itself grant an arbitrator exclusive authority to decide questions of jurisdiction in the first instance, I conclude that the application judge had the authority to draft the order as he did.
ii. Should the application judge have done more than appoint the arbitrator?
25OFNLP contends that even if the application judge had the jurisdiction to make the order he did, he should have declined [page447] to do so. I agree that even if the arbitral tribunal does not possess exclusive authority, it will generally still be the most appropriate body to decide questions of jurisdiction in the first instance. Where the parties have agreed to have an arbitrator rather than the courts determine their dispute, judges should be careful to respect their autonomy. Indeed, it is an overarching principle of the Arbitration Act, 1991 that a party who is unhappy with the arbitral process and attempts to resort to the courts should be held to the agreement it has made. This is reflected in s. 3 of the Arbitration Act, 1991, which provides that the parties to an arbitration agreement "... may agree, expressly or by implication, to vary or exclude" any provision of the Act except six specified sections.
26Section 6, while allowing more scope for judicial intervention than does the Model Law, directs the court not to intervene except for the specified purposes. The purposes listed should be construed narrowly in accordance with the objective of the section to restrain judicial intervention. Under the rubric of assisting the conduct of the arbitration, ensuring the arbitration is conducted in accordance with the agreement, or preventing unequal or unfair treatment, the court should not decide a question in the first instance simply because it expects that, if the question is left to the arbitrator, the unsuccessful party will appeal. This is not only because the court should give effect to the parties' prior agreement to settle their disputes through arbitration, but also because on an appeal, the arbitrator's decision in the first instance may be of assistance to the court, and as well arbitration may provide a cheaper and more flexible process for making any findings of fact that might be nece ssary to decide the question. Rather, in exercising its discretion under s. 6, the court should take a pragmatic approach and intervene only when there are undoubted practical reasons for doing so. For example, in Unifund, Binnie J. commented that there was no practical reason to compel the parties to go through a "doomed arbitration" [at para. 45] and observed that in that case"... issues of cost, delay and inconvenience all argue for judicial euthanasia at the outset" [at para. 46].
27In this case, in his second endorsement dated December 29, 2003, the application judge remarked that his decision reduced the risk that a second arbitration would be required following the one he had just ordered. More importantly, by deciding a question they jointly placed before him, the application judge assisted the parties. This was entirely consistent with s. 6 of the Act, and with the principle that the parties should be free to fashion a dispute resolution process that best meets their needs. [page448]
28In his first endorsement dated May 26, 2003, the application judge was scrupulous in respecting the parties' arbitration agreement. He confined his intervention to a strict and narrow exercise of the court's jurisdiction under s. 10(1) of the Act and art. 9.3 of the CRRA by simply appointing Mr. Cory as the arbitrator. An order taken out in the form of the application judge's endorsement would have left it to the arbitrator to characterize the precise nature of Ontario's concern, and to define the scope of the dispute. It is worth noting that there is no substantial difference between the application judge's original endorsement and the order that OFNLP now seeks as relief in this appeal.
29Rather than taking out an order that reflected the application judge's careful endorsement, the parties sought and were granted leave to make submissions about their competing versions of a more extensive order. In its submissions, OFNLP did not argue that the court had no jurisdiction to determine which of the two competing drafts was appropriate. Instead, OFNLP's submissions began with an expression of appreciation for the court's willingness to receive them, thus confirming that the dispute had been placed before the court on a consensual basis. OFNLP took the position that the only proper issue for arbitration was the use of funds by OFNLP itself, but it did put the question to the application judge to decide.
30I conclude that the application judge did not err by intervening in the arbitration process beyond appointing the arbitrator.
iii. Did the application judge decide the issue correctly?
31OFNLP argues that the application judge erred in referring to arbitration matters involving the use of funds by the Chiefs of Ontario and the individual First Nations, who, OFNLP says, were not parties to the arbitration agreement.
32It seems to me that OFNLP misunderstands the import of the order. For convenience I reproduce the text of the order made:
THIS COURT ORDERS that the Honourable Peter Cory, Q.C. is appointed as an Arbitrator pursuant to the Casino Rama Revenue Agreement and the Arbitrations [sic] Act, 1991, to resolve the dispute between the parties relating to the use of Casino Rama Revenues to fund the conduct of the litigation by the Chiefs of Ontario and Ontario First Nations Limited Partnership together suing in a representative capacity on behalf of 133 First Nations in Ontario, the Mnjikaning First Nations Limited Partnership, and the Chippewas of Mnjikaning First Nation in Court File No.: 98-CV-152417CM and Court File No.: 01-CV-219345CM. [page449]
33OFNLP incorrectly assumes that merely because the Chiefs of Ontario and the 133 First Nations are referred to in the text of the order, the effect of the order is necessarily to broaden the scope of the arbitration to include their use of funds. I do not agree. Grammatically, the phrase "by the Chiefs of Ontario and Ontario First Nations Limited Partnership together suing in a representative capacity on behalf of 133 First Nations in Ontario ..." serves simply to identify the "litigation" referred to in the order, leaving it to the arbitrator to decide the scope of the arbitration. This is clearly what the application judge intended in his order, as he wrote: "The only difference between the OFNLP and Ontario draft orders is that the latter contains 20 additional words describing accurately the nature of the litigation" (emphasis added).
34Properly understood, the order characterizes the dispute between the parties as "relating to the use of Casino Rama revenues to fund the conduct of the litigation". This wording leaves it to the parties to contest before the arbitrator the scope of the arbitration and the ambit of the phrase "the use of Casino Rama revenues".
35On the other hand, the form of order proposed by OFNLP invites the court to determine the scope of the arbitration by narrowing it:
THIS COURT ORDERS that the Honourable Peter Cory, Q.C. is appointed as an Arbitrator pursuant to the Casino Rama Revenue Agreement and the Arbitration Act, 1991, to resolve the dispute between the parties relating to the use of Casino Rama revenues by the Ontario First Nations Limited Partnership and the Mnjikaning First Nations Limited Partnership to fund the conduct of Court File No. 98-CV- 152417CM and Court File No. 01-CV-219345CM.
36In OFNLP's draft order, the phrase "by the Ontario First Nations Limited Partnership" does not serve to identify the litigation but clearly relates to "the use of Casino Rama revenues", thus limiting the arbitration to the use of funds by OFNLP and MFNLP.
37The application judge was correct in deciding that the order should go in the form proposed by Ontario, as that order leaves it open to the arbitrator to hear submissions from the parties and to decide the scope of the arbitration. By contrast, the order proposed by OFNLP called for the court to decide the scope of the arbitration by limiting it to the use of funds by OFNLP and MFNLP, and would have created the prospect of a second arbitration if an arbitrator were to accept Ontario's position on the scope of what is arbitrable. [page450]
C. Disposition
38The appeal is dismissed. Costs in favour of Ontario to be paid by OFNLP are fixed on a partial indemnity scale in the amount of $5,000. I would make no order respecting costs either to or against MFNLP.
Appeal dismissed.
Notes
Note 1: L. Yves Fortier"Delimiting the Spheres of Justicial and Arbitral Power: "Beware, My Lord, of Jealousy" (2001) 80 Can. Bar Rev. 143 at p. 144.
Note 2: Randy A. Pepper"Why Arbitrate? Ontario's Recent Experience with Commercial Arbitration" (1998) 36 Osgoode Hall L.J. 807 at p. 814.
