Court of Appeal for Ontario

CITATION: Covanta Durham York Renewable Energy Limited Partnership v. Barton-Malow Canada, Inc., 2016 ONCA 558

DATE: 20160711

DOCKET: M46511 (C62067)

Strathy C.J.O., Brown and Huscroft JJ.A.

Parties

BETWEEN

Covanta Durham York Renewable Energy Limited Partnership

Applicant

(Respondent/Moving Party)

and

Barton-Malow Canada, Inc. and Kenaidan Contracting Ltd. O/A Courtice Power Partners, Lexsan Electrical Inc., and W.S. Nicholls Construction Inc.

Respondents

(Appellant/Responding Party)

Counsel

Julie K. Parla and Andrew Kalamut, for the moving party

Michael Tamblyn, for the responding party

Edward Lynde, for W.S. Nicholls Construction Inc.

Dan Block, for Lexsan Electrical Inc.

Heard: June 30, 2016

Motion to quash an appeal from the order of Justice James F. Diamond of the Superior Court of Justice, dated March 31, 2016, with reasons reported at 2016 ONSC 2044.

ENDORSEMENT

[1] Covanta Durham York Renewable Energy Limited Partnership (“Covanta”) moves to quash the appeal on the ground that no appeal lies from the decision of the application judge under the Arbitration Act, 1991, S.O. 1991, c. 17.

Background

[2] In 2010, the Regional Municipalities of Durham and York jointly contracted with Covanta to design, build, and operate an energy-from-waste infrastructure facility. Covanta entered into a subcontract with Barton-Malow Canada, Inc. and Kenaidan Contracting Ltd. O/A Courtice Power Partners (“CPP”) to provide construction services, and in turn, CPP entered into subcontracts with various subcontractors, including Lexsan Electrical Inc. (“Lexsan”) and W.S. Nicholls Construction Inc. (“Nicholls”).

[3] The agreement between Covanta and CPP required them to submit their disputes to final and binding arbitration governed by the Simplified Arbitration Rules of the ADR Institute of Canada, Inc., which adopt the UNCITRAL Arbitration Rules and the Model Law on International Commercial Arbitration. The subcontracting agreements between CPP and Lexsan and CPP and Nicholls also included an arbitration clause.

[4] CPP issued a notice of arbitration to Covanta on April 1, 2015. CPP brought a motion to the arbitrator seeking to add Lexsan and Nicholls as parties to its arbitration with Covanta, with their consent. Covanta opposed the motion. The arbitrator granted the motion and ordered that Lexsan and Nicholls be added to the arbitration.

[5] Covanta brought an application to review the arbitrator’s ruling, pursuant to s. 17(8) of the Arbitration Act, 1991.

The application judge’s decision

[6] In a comprehensive decision, the application judge reviewed the key provisions in the main agreement between Covanta and CPP and in the subcontracting agreements, including those clauses concerning the submission of disputes to arbitration.

[7] The application judge noted that CPP’s motion to join Lexsan and Nicholls as parties was made pursuant to Article 17(5) of the UNCITRAL Arbitration Rules, which provides as follows:

The arbitral tribunal may, at the request of any party, allow one or more third persons to be joined in the arbitration as a party provided such person is a party to the arbitration agreement, unless the tribunal finds, after giving all parties, including the person or persons to be joined, the opportunity to be heard, that joinder should not be permitted because of prejudice to any of those parties. The arbitral tribunal may make a single award or several awards in respect of all parties so involved in the arbitration.

[8] The application judge stated:

Article 17(5) mandated the arbitrator to first determine whether the persons sought to be added (Lexsan and Nicholls) were parties to the arbitration agreement. If Lexsan and Nicholls were not parties to the arbitration agreement, then the arbitrator clearly lacked jurisdiction to add them as parties to the arbitration. (para. 36)

[9] The application judge applied this court’s decision in Ontario Medical Association v. Willis Canada Inc., 2013 ONCA 745, 118 O.R. (3d) 241. He concluded that the arbitrator’s decision to add parties was jurisdictional in nature; that an application for review properly lay to the court as a result; and that the standard of review was correctness.

[10] The application judge rejected CPP’s argument that the arbitrator’s decision was procedural and interlocutory in nature, and thus not subject to judicial review. He also rejected the argument that the Lexsan and Nicholls subcontracts with CPP incorporated the arbitration agreement, and thereby made them parties to that agreement. The application judge found that the arbitrator failed to satisfy himself of the condition precedent to adding parties to the arbitration – the requirement in Article 17(5) that the persons sought to be joined to the arbitration be parties to the arbitration agreement itself.

[11] Accordingly, the application judge made an order setting aside the arbitrator’s ruling adding Lexsan and Nicholls as parties to the arbitration, restoring the arbitration to one solely between Covanta and CPP.

Stay motion

[12] CPP sought an order for an expedited hearing of its appeal from the application judge’s order and sought a stay of that order pending the appeal. Cronk J.A. ordered that the appeal be expedited but dismissed CPP’s motion for a stay, reserving the question of costs to the panel hearing the motion to quash.

The motion to quash

[13] Article 16(3) of the UNCITRAL Model Law on International Commercial Arbitration provides that there shall be no appeal from the decision of a court on a question of an arbitrator’s jurisdiction. The same prohibition is set out in s. 17(9) of the Arbitration Act, 1991.

[14] Despite these provisions, CPP argues that the application judge did not have jurisdiction to review Covanta’s application to set aside the arbitrator’s ruling in the first place, because the arbitrator’s decision was not jurisdictional in nature. As a result, the exclusion of appeals under the UNCITRAL Model Law and the Arbitration Act, 1991, do not apply, and this court has jurisdiction to hear an appeal of the application judge’s decision under s. 6(1)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[15] This argument must be rejected.

[16] This court’s decision in Ontario Medical Association v. Willis Canada Inc. makes clear that whether a person is a party to an arbitration agreement is a question of jurisdiction. This is not a surprising result. The jurisdiction of a consensual arbitrator flows from the authority granted by the parties to the agreement. As the application judge put it, “[a]n arbitral tribunal possesses jurisdiction to decide disputes between parties due to the common intention of those parties who agree to be bound by the arbitral process” (para. 37).

[17] Thus, the arbitrator’s decision to join Lexsan and Nicholls as parties to the arbitration was a decision on a question of jurisdiction that was subject to review by the application judge pursuant to s. 17(8) of the Arbitration Act, 1991. As a result, s. 17(9) applies, and no appeal lies to this court from the application judge’s decision.

[18] CPP submits, correctly, that this court will not interfere with procedural or interlocutory orders in arbitration matters: see Inforica Inc. v. CGI Information Systems and Management Consultants Inc., 2009 ONCA 642, 97 O.R. (3d) 161, at para. 16. The arbitrator’s decision was not, however, a procedural or interlocutory matter. Whether a person is a party to an arbitration agreement does not cease to be a jurisdictional question simply because it is addressed by the arbitrator as a preliminary matter.

Disposition

[19] The motion to quash the appeal is granted.

[20] The moving party is entitled to costs of the motion before Cronk J.A. and of the motion to quash in the agreed amount of $20,000, inclusive of taxes and disbursements.

“G.R. Strathy C.J.O.”

“David Brown J.A.”

“Grant Huscroft J.A.”