Mensula Bancorp Inc. v. Halton Condominium Corporation No. 137, 2022 ONCA 769

citation: "Mensula Bancorp Inc. v. Halton Condominium Corporation No. 137, 2022 ONCA 769" parties: "Mensula Bancorp Inc. v. Halton Condominium Corporation No. 137" party_moving: "Halton Condominium Corporation No. 137" party_responding: "Mensula Bancorp Inc." court: "Court of Appeal for Ontario" court_abbreviation: "ONCA" jurisdiction: "Ontario" case_type: "appeal" date_judgement: "2022-11-10" date_heard: "2022-05-11" applicant:

• "Halton Condominium Corporation No. 137" applicant_counsel:
• "Megan Mackey"
• "Patrick Nelson" respondent:
• "Mensula Bancorp Inc." respondent_counsel:
• "Jason Squire"
• "Lucy Sun" judge:
• "Benotto"
• "Zarnett"
• "Copeland" summary: > The appellant, Halton Condominium Corporation No. 137 (HCC 137), appealed an order setting aside an arbitration award concerning Mensula Bancorp Inc.'s (Mensula) access to parking units through the condominium's common elements. The arbitrator had interpreted the condominium declaration to limit Mensula's access. The application judge set aside the award, finding the arbitrator exceeded jurisdiction by effectively amending the declaration. The Court of Appeal allowed the appeal, holding that the application judge erred by reviewing the substance of the arbitrator's interpretation under the guise of jurisdictional error, contrary to the narrow scope of review under s. 46(1)3 of the Arbitration Act, 1991. The Court affirmed that the arbitrator's decision was an interpretation, not an amendment, and its correctness or reasonableness was irrelevant for jurisdictional review. interesting_citations_summary: > This case clarifies the narrow scope of judicial intervention under s. 46(1)3 of the Arbitration Act, 1991, reiterating that it is not an appeal route for reviewing the correctness or reasonableness of an arbitrator's decision. Citing Alectra Utilities Corporation v. Solar Power Network Inc., the court emphasized that an arbitrator's authority to interpret an agreement does not result in a loss of jurisdiction even if the interpretation is mistaken or unreasonable. The decision distinguishes between an arbitrator interpreting a document (which is within jurisdiction) and amending it (which is not), asserting that a court cannot re-characterize an interpretation as an amendment simply because it disagrees with the interpretive outcome or the application of interpretive principles like the use of surrounding circumstances (Sattva Capital Corp v. Creston Moly Corp.). final_judgement: The appeal was allowed, and the arbitrator's award was restored. Costs of $20,000 were awarded to Halton Condominium Corporation No. 137. winning_degree_applicant: 1 winning_degree_respondent: 5 judge_bias_applicant: 0 judge_bias_respondent: 0 year: 2022 decision_number: 769 file_number: "C70042" source: "https://www.canlii.org/en/on/onca/doc/2022/2022onca769/2022onca769.html" cited_cases: legislation:
  • title: "Arbitration Act, 1991, S.O. 1991, c. 17" url: "https://www.ontario.ca/laws/statute/91a17"
  • title: "Condominium Act, 1998, S.O. 1998, c. 19" url: "https://www.ontario.ca/laws/statute/98c19" case_law:
  • title: "Mensula Bancorp Inc. v. Halton Condominium Corporation No. 137, 2021 ONSC 2575" url: "https://www.canlii.org/en/on/onsc/doc/2021/2021onsc2575/2021onsc2575.html"
  • title: "Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254" url: "https://www.canlii.org/en/on/onca/doc/2019/2019onca254/2019onca254.html"
  • title: "Sattva Capital Corp v. Creston Moly Corp., 2014 SCC 53" url: "https://www.canlii.org/en/ca/scc/doc/2014/2014scc53/2014scc53.html"
  • title: "Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205" url: "https://www.canlii.org/en/on/onca/doc/2007/2007onca205/2007onca205.html" areas_of_law:
• Arbitration Law
• Condominium Law
• Contract Law
• Civil Procedure keywords:
• Arbitration award
• Judicial review
• Jurisdictional error
• Contractual interpretation
• Condominium declaration
• Common elements access
• Arbitration Act, 1991
• Condominium Act, 1998

# Court of Appeal for Ontario

**Date:** 2022-11-10
**Docket:** C70042

**Before:** Benotto, Zarnett and Copeland JJ.A.

**Between:** Mensula Bancorp Inc., Applicant (Respondent)
**And:** Halton Condominium Corporation No. 137, Respondent (Appellant)

**Counsel:**
Megan Mackey and Patrick Nelson, for the appellant
Jason Squire and Lucy Sun, for the respondent

**Heard:** May 11, 2022

On appeal from the order of Justice Marie-Andrée Vermette of the Superior Court of Justice, dated April 7, 2021, with reasons reported at [2021 ONSC 2575](https://www.canlii.org/en/on/onsc/doc/2021/2021onsc2575/2021onsc2575.html).

Zarnett J.A.:

# Introduction

[1] The appellant, Halton Condominium Corporation No. 137 (“HCC 137”), and the respondent, Mensula Bancorp Inc. (“Mensula”), disagreed about access to Mensula’s 43 parking units that are located on one of the levels of the condominium’s parking garage. Specifically, they disagreed about whether Mensula’s employees and other invitees were entitled to access the parking units by walking through the lobby and hallways of the residential condominium building (as Mensula contended), or only through an external staircase (as HCC 137 contended).

[2] The parties proceeded to arbitration. The arbitrator found in favour of HCC 137. There was no right of appeal from the arbitrator’s decision.

[3] Mensula successfully applied to set aside the arbitrator’s award under s. 46(1) 3 of the [Arbitration Act, 1991, S.O. 1991, c. 17](https://www.ontario.ca/laws/statute/91a17). That provision allows the court to set aside an arbitral award where the arbitrator has decided a dispute not covered by the parties’ arbitration agreement or a matter beyond its scope. The application judge considered that although the issue of Mensula’s access to the parking units was properly before the arbitrator, he could only decide that issue by interpreting the condominium’s declaration, not by amending it. She held that the arbitrator had “in effect” amended the declaration by coming to a conclusion that was not based on the text of the declaration and which used surrounding circumstances beyond their proper limits in the interpretive process.

[4] For the reasons that follow, I would allow HCC 137’s appeal and restore the arbitrator’s award.

[5] As explained in [Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254](https://www.canlii.org/en/on/onca/doc/2019/2019onca254/2019onca254.html), 145 O.R. (3d) 481, leave to appeal refused, [2019] S.C.C.A. No. 202, s. 46(1) 3 of the [Arbitration Act, 1991](https://www.ontario.ca/laws/statute/91a17) provides a narrow basis upon which a court may interfere with an arbitration award. It does not create a right of appeal, nor contemplate a review of the correctness or reasonableness of the arbitrator’s decision. It requires that the court not interfere with the arbitrator’s award as long as the issue decided was properly before the arbitrator.

[6] The application judge proceeded in a manner that s. 46(1)3 does not permit. The arbitrator said he decided the parties’ dispute by interpreting the condominium’s declaration. Whether he interpreted the declaration correctly or reasonably was irrelevant. Yet the application judge relabelled his decision as a purported interpretation that was “in effect” an amendment, because of her view that the result he arrived at could not be reached through a proper interpretive analysis. Under this approach, and contrary to that mandated by [Alectra](https://www.canlii.org/en/on/onca/doc/2019/2019onca254/2019onca254.html), only an award that resulted from an interpretation of the declaration that the court considered reasonable or correct would be immune from judicial intervention; anything else would “in effect” be an amendment beyond the jurisdiction of the arbitrator, and able to be set aside.

# Background

[7] In light of the nature of the issues, only a brief description of the facts is required.

[8] The HCC 137 condominium is located in Oakville, Ontario. It has 82 residential dwelling units located in the condominium building, 166 parking units located in its parking garage, and common elements.

[9] Parking units of condominium residents are located on Levels A and B of the condominium’s parking garage. After parking on Level A or B, a resident may enter the condominium building by stairs and a hallway and/or by elevator.

[10] Mensula does not own any residential units. It owns 43 parking units, which are used by Mensula’s employees who work at its nearby business (located outside of the condominium property) or are leased out to others. Mensula’s parking units are located on a different level of the parking garage, Level 1.

[11] There are two stairwells that access Level 1. One stairwell is located on the east end of the garage and does not lead into the condominium building. The other stairwell is located on the west end of the garage and leads through a hallway into the main lobby of the condominium building. The hallway and main lobby are part of the condominium’s common elements.

[12] The access dispute arose because HCC 137 keeps the west end stairwell to Level 1 locked. After Mensula acquired the parking units, it asked for 43 keys or their equivalent that could be given to users of each parking unit. HCC 137 refused. As a result, Mensula, and users of its parking units, cannot access them by foot through the condominium building, but can only do so from the east end stairwell, which Mensula considers a more circuitous route given where its business premises are located.

[13] The parties’ dispute was governed by the condominium’s declaration, and by the [Condominium Act, 1998, S.O. 1998, c. 19](https://www.ontario.ca/laws/statute/98c19).

[14] The declaration provides that the condominium is made up of dwelling units, parking units, and common elements. The term “Units” was said to mean both dwelling units and parking units, unless otherwise specified. “Owner” was said to mean the owner of a Unit. The declaration provided that every Owner owns its Unit(s) and an undivided interest in the common elements as a tenant in common. Section 1 of Part III of the Declaration provides that “each Owner has the full use, occupancy and enjoyment of the whole or any part of the Common Elements”, subject to certain exceptions. One exception is for defined “Recreational Facilities”, which only Owners and tenants of a dwelling unit may use and enjoy.

[15] Section 116 of the [Condominium Act, 1998](https://www.ontario.ca/laws/statute/98c19) provides that “an owner may make reasonable use of the common elements … subject to this Act, the declaration, the by-laws and the rules.”

# The Arbitration

[16] The parties were required to take their dispute to arbitration. Section 132(4) of the [Condominium Act, 1998](https://www.ontario.ca/laws/statute/98c19) deems a declaration to contain a provision that the corporation and the owners agree to submit a disagreement with respect to the declaration to arbitration.

[17] The condominium’s By-law No. 6 established procedures for mediation and arbitration of disputes.

[18] On March 23, 2020, Mensula served a Notice to Arbitrate pursuant to By-law No. 6 and s. 132 of the [Condominium Act, 1998](https://www.ontario.ca/laws/statute/98c19). Mensula described the dispute as one over access to the common elements under the declaration, and sought an order that HCC 137 provide access to the common elements for the purpose of accessing and using Mensula’s parking units.

[19] In May 2020, the parties entered into an Agreement to Arbitrate, appointing L. Leslie Dizgun as sole arbitrator “for all issues in dispute between them”.

[20] There were three issues before the arbitrator, but only one – the access dispute – remains relevant to the appeal. The arbitrator described the access dispute to be whether Mensula ought to have access to the common elements of the condominium and, if so, the scope of that access.

[21] The arbitrator described the parties’ positions as involving the interpretation of the declaration. He described Mensula’s position to be that, as an owner of parking units, it is entitled to access to the common elements in accordance with the declaration, which includes pedestrian ingress and egress to the parking units through the residential hallways and lobby. He described HCC 137’s position to be that (i) the hallways and lobby were for recreational purposes and thus only for use by residential unit owners, and (ii) in any event, a proper interpretation of the declaration was that the current access (the east end stairwell without access to the hallway and lobby) was reasonable and always intended.

[22] The arbitrator rejected HCC 137’s argument that the hallways and lobby were for recreational purposes. But he concluded that Mensula was not entitled to the access it claimed.

[23] The arbitrator found that s. 116 of the [Condominium Act, 1998](https://www.ontario.ca/laws/statute/98c19) places two limits on an owner’s use of common elements. First, the use must be reasonable, and second, the use may be further restricted by the declaration, by-laws, or rules of the condominium. Those restrictions must also be reasonable.

[24] He then turned to the meaning of the declaration. He stated that the interpretation of the declaration was subject to the rules governing contractual interpretation, and he cited Mensula’s own factum for the proposition that this meant reading the words in the context of the document as a whole consistent with the surrounding circumstances. He cited [Sattva Capital Corp v. Creston Moly Corp., 2014 SCC 53](https://www.canlii.org/en/ca/scc/doc/2014/2014scc53/2014scc53.html), [2014] 2 S.C.R. 633, for the principles to be applied concerning the use of surrounding circumstances in contractual interpretation.

[25] He then cited other interpretive principles. He observed that the declaration should be read in the context of it being the formational document of the condominium and therefore interpreted in a way that promoted harmonious as opposed to contested relationships in the community. And he observed that an interpretation that results in absurdity should be avoided.

[26] The arbitrator conducted a detailed review of the circumstances surrounding the making of the declaration. He found that a plain reading of one provision of the declaration – s. 1 of Part III – as providing for a broad right of use of the common elements would lead to an absurd result, because it would mean that Mensula as the owner of 43 parking units, and its employees and visitors, would be entitled to wander around the condominium building – including its hallways and lobby – for no known purpose. He held that could not have been intended as it would be antithetical to the declaration as a whole, whose purpose was to provide “sensible rules governing community living.” He noted that Mensula implicitly acknowledged this, as it had limited its request only to access for ingress and egress to its parking units. The arbitrator noted that access to common elements for ingress and egress was not mentioned in the declaration.

[27] The arbitrator ultimately found that an interpretation of the declaration that gave Mensula access only through the east end stairwell “accords with a common sense and reasonable interpretation of the [d]eclaration in its context, and given the surrounding circumstances at the formation of the [d]eclaration.” Finally, he found that even if Mensula was entitled to access through the common elements its tenants were not, given the language of the declaration.

[28] At no point did the arbitrator expressly say he was correcting or amending the declaration.

# The Application Judge’s Decision

[29] Mensula brought an application to set aside part of the arbitration award pursuant to s. 46 of the [Arbitration Act, 1991](https://www.ontario.ca/laws/statute/91a17). The only ground that was dealt with by the application judge was that the arbitrator exceeded his jurisdiction “by re-writing and introducing new terms to the [d]eclaration” and “effectively amend[ing]” it.

[30] The application judge found in favour of Mensula. She set aside the arbitrator’s award as it related to the issue of Mensula’s access to the common elements and remitted the matter to arbitration.

[31] The application judge noted the parties entered an “Agreement to Arbitrate and Terms of Appointment re: Arbitration” with the arbitrator in May 2020, which granted the arbitrator jurisdiction to resolve “all issues in dispute”. However, she was of the view that the arbitration had been commenced by Mensula’s Notice to Arbitrate, which stated that the matter was referred to arbitration pursuant to By-law No. 6 and s. 132 of the [Condominium Act, 1998](https://www.ontario.ca/laws/statute/98c19). Therefore, By-law No. 6 and s. 132 of the [Condominium Act, 1998](https://www.ontario.ca/laws/statute/98c19) represented the parties’ “arbitration agreement” and established the arbitrator’s jurisdiction.

[32] In her view, section 1.1 of By-law No. 6 excluded from its scope disputes that must be resolved in the courts or that may be resolved in the courts unless the parties agree to submit their dispute to mediation and arbitration. The application judge stated that disputes that require an amendment or correction to a declaration because of an error or inconsistency must be resolved in the courts: [Condominium Act, 1998](https://www.ontario.ca/laws/statute/98c19), s. 109. The application judge framed the issue to be determined as follows, at para. 27:

[D]id the arbitrator simply engage in an interpretation exercise within the scope of his jurisdiction, as alleged by HCC 137, or did the arbitrator go beyond a contractual interpretation exercise and in effect amend the Declaration to correct what he thought was an error or inconsistency in the Declaration, thereby exceeding his jurisdiction, as alleged by Mensula?

[33] The application judge found that the “arbitrator crossed the line between interpretation and correction/amendment”. While the issue of Mensula’s access to the common elements of HCC 137 was properly before him, she considered that the arbitrator was not satisfied by the answer provided by the plain language of the declaration and, by observing that the result of the plain language could not have been intended, he had “in effect” identified inconsistencies in the declaration that he “[purported] to correct … by reconciling them ‘in a common sense interpretation of the [d]eclaration’”. She considered that the “clear effect of the arbitrator’s ‘interpretation’ is to broaden the scope of section III of the [d]eclaration and the categories of common elements that cannot be used by all owners, but in a way that is not specified in the [d]eclaration.”

[34] She concluded that:

Instead of deciding the issue of access raised by Mensula based on the text of the Declaration and pointing the parties to other avenues if they wished to have the Declaration corrected and amended, the arbitrator purported to make unregistered corrections and amendments to the Declaration through a contractual interpretation exercise and the use of “surrounding circumstances”. However, as stated above, “surrounding circumstances” can only be used as an interpretive aid for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words: see [Sattva](https://www.canlii.org/en/ca/scc/doc/2014/2014scc53/2014scc53.html) at paras. 57, 60.

In light of the foregoing, and pursuant to s. 46(1)3 of the [Arbitration Act](https://www.ontario.ca/laws/statute/91a17), I conclude that the arbitration award in this case contains a decision on a matter that is beyond the scope of the parties’ arbitration agreement, i.e. the correction of errors or inconsistencies in the Declaration, which is a matter for the Court under section 109 of the [Condo Act](https://www.ontario.ca/laws/statute/98c19) and, therefore, a matter outside the scope of HCC 137’s By-law No. 6.

# Analysis

[35] The [Arbitration Act, 1991](https://www.ontario.ca/laws/statute/91a17) provides:

46 (1) On a party’s application, the court may set aside an award on any of the following grounds:

3. The award deals with a dispute that the arbitration agreement does not cover or contains a decision on a matter that is beyond the scope of the agreement.

[46] (3) The court shall not set aside an award on grounds referred to in paragraph 3 of subsection (1) if the party has agreed to the inclusion of the dispute or matter, waived the right to object to its inclusion or agreed that the arbitral tribunal has power to decide what disputes have been referred to it.

[36] HCC 137 submits that the application judge erred in two respects in exercising a power under s. 46(1) 3.

[37] First, it says that the parties’ agreement was to submit the dispute about whether Mensula was entitled to the access it claimed to arbitration. The arbitrator resolved that dispute. Under s. 46(3) of the [Arbitration Act, 1991](https://www.ontario.ca/laws/statute/91a17), the award could not be set aside.

[38] Second, it says that even if an amendment to the declaration was beyond the jurisdiction of the arbitrator, the arbitrator did not make any amendment. He interpreted the declaration, which was clearly within his jurisdiction to do, and whether he did so incorrectly or unreasonably is beside the point.

[39] As I agree with HCC 137’s second submission, I need not address the first.

[40] In [Alectra](https://www.canlii.org/en/on/onca/doc/2019/2019onca254/2019onca254.html), this court explained the limited scope for judicial intervention that exists under s. 46(1) 3 of the [Arbitration Act, 1991](https://www.ontario.ca/laws/statute/91a17). The provision allows only for limited review for jurisdictional error. It does not authorize review of the substance of the award. It is not an appeal route and the correctness or reasonableness of the arbitrator’s decision is irrelevant: at paras. 41-44. As the court explained:

[25] Although the court cannot apply s. 46(1) 3 without having regard to an arbitrator's decision, the court's authority to set aside an arbitration award under that subsection depends on the mandate the arbitration agreement confers on the arbitrator to resolve a particular dispute. In order to succeed on an application to set aside an arbitration award, an applicant must establish either that the award deals with a dispute that the arbitration agreement does not cover or contains a decision on a matter that is beyond the scope of the arbitration agreement.

[26] For example, if an arbitration agreement provides that an arbitrator shall resolve a particular question and the arbitrator does so, the court has no authority to set aside the award on the basis that the arbitrator's decision is unreasonable or incorrect. If, however, in the course of resolving the particular question remitted the arbitrator asks and answers an additional second question, the award may be set aside -- not because the arbitrator's answer to the second question is unreasonable or incorrect, but because the arbitrator had no authority to reach any conclusion on the second question at all.

[27] In short, s. 46(1) 3 requires that arbitrators act within the bounds of the authority granted by the arbitration agreement pursuant to which they are appointed − no less, but no more. Section 46(1)3 is not an alternate appeal route and must not be treated as such. [Emphasis added.]

[41] In [Alectra](https://www.canlii.org/en/on/onca/doc/2019/2019onca254/2019onca254.html), a Purchase and Management Agreement (“PAMA”) provided that in a claim for breach of covenant, there would be no liability for lost profits. In an arbitration under PAMA, the arbitrator awarded lost profits, construing the claim as not being one for breach of covenant as the term was used in PAMA. A judge set aside the award, on the basis that the arbitrator’s jurisdiction was limited by PAMA, and the arbitrator had unreasonably found that the limitation on damages imposed by it did not apply. In the reviewing judge’s view, the arbitrator did not have jurisdiction to go outside of what PAMA, reasonably interpreted, permitted.

[42] In restoring the arbitrator’s award, this court explained that where an arbitrator’s authority is to interpret and apply an agreement, a loss of jurisdiction does not result from any unreasonable or mistaken interpretation of the agreement. Arbitrators do not only have jurisdiction to make awards that are reasonable or correct. Where the reviewing judge finds that an arbitrator had authority to interpret an agreement, and did so, the role of the court under s. 46(1) 3 is at an end, and it is irrelevant whether the interpretation was correct or reasonable: at paras. 33-34, 41.

[43] In my view, the application judge’s approach contradicts that mandated in [Alectra](https://www.canlii.org/en/on/onca/doc/2019/2019onca254/2019onca254.html).

[44] The application judge accepted that the arbitrator had the authority to resolve the access dispute by interpreting the declaration. The arbitrator’s own characterization was that he did exactly that.

[45] The arbitrator was clear that interpretation was the only task in which he engaged. He defined the issue as one of interpretation. He framed the parties’ positions as rooted in the interpretation of the declaration. He instructed himself on the statutory limit of reasonableness on an owner’s use of common elements, which formed the backdrop to the interpretive task. He instructed himself on the interpretive principles to be applied: to look at the language of the declaration in the context of the document as a whole, in light of the surrounding circumstances, considering the purpose of the declaration to achieve harmony and avoid conflict, and with a view to avoiding absurd results. He then considered each of those matters and expressed his conclusion as one of interpretation – that he had arrived at a meaning of the declaration that avoided absurdity, that respected the purpose of the declaration, and that accorded “with a common sense and reasonable interpretation of the [d]eclaration in its context, and given the surrounding circumstances at the formation of the [d]eclaration.”

[46] Moreover, the arbitrator nowhere said that he was correcting or amending the declaration. He did not refer to any party requesting he do so, or describe that as anyone’s position. He did not cite any test for doing so. He did not say he was making an order that the declaration be corrected or amended. By his reference to a reasonable interpretation of the declaration in its context based on surrounding circumstances at the time of its formation, it is clear that he was deciding what the declaration always meant, not that it had meant something else which now had to be changed.

[47] The application judge referred to the arbitrator having expressed a “common sense interpretation of the [d]eclaration” and to his engagement in a “contractual interpretation exercise”. As the arbitrator had the jurisdiction to interpret the declaration and did so, the court’s task under s. 46(1) 3 was over. The application judge erred in proceeding to superimpose a different characterization of what the arbitrator did – calling it “in effect” an amendment – by reviewing the substance of the arbitrator’s award and considering whether a proper interpretive analysis could justify it.

[48] Issues such as whether or not the arbitrator gave effect to plain language, went beyond the text, properly reconciled inconsistencies, or used surrounding circumstances beyond their proper limits were matters that affected only the quality of his interpretation – its correctness or reasonableness – and thus the manner in which he exercised his jurisdiction. Consistently with [Alectra](https://www.canlii.org/en/on/onca/doc/2019/2019onca254/2019onca254.html), whether there were errors in these areas was irrelevant and, if they occurred, did not result in a loss of jurisdiction.

[49] As the application judge pointed out, the arbitrator considered more than the text of the declaration. Although the plain meaning of contractual language is important, the literal or plain meaning of part of a document is not the end of interpretation. Other interpretive principles may bear on the proper interpretation, which is the one that reflects the objectively derived intention of the parties. As noted in [Sattva](https://www.canlii.org/en/ca/scc/doc/2014/2014scc53/2014scc53.html), at para. 47, “[c]onsideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning.” The text must be understood in light of the surrounding circumstances including the purpose of the document. Similarly, the meaning of the language must be assessed in light of the document as a whole, and the principle that absurdity is to be avoided: [Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205](https://www.canlii.org/en/on/onca/doc/2007/2007onca205/2007onca205.html), 85 O.R. (3d) 254, at para. 24.

[50] That the arbitrator’s analysis did not stop at the text but considered and used the surrounding circumstances, the purpose and meaning of the declaration as a whole, the avoidance of absurdity, and the intention of the parties were not departures from the interpretive process; they were steps in that process. Of course, there can be right and wrong ways of applying those interpretive principles. As the application judge pointed out, there are limits on the use of surrounding circumstances. But whether the principles and factors involved in an interpretation were applied correctly, or reasonably, is beside the point of whether the decision maker has engaged in interpretation.

[51] Although the application judge instructed herself that the reasonableness or correctness of the arbitrator’s decision was not the issue, she did not, with respect, adhere to that admonition. She reviewed the substance of the decision and said that the arbitrator had not decided the matter in accordance with the text of the declaration, that he reached a decision by reference to surrounding circumstances that went beyond their proper use, and that “[t]he clear effect of the arbitrator’s ‘interpretation’ is to broaden the scope of section III of the [d]eclaration … in a way that is not specified in the [d]eclaration.” She thus concluded that a proper use of interpretive principles could not yield the result the arbitrator reached.

[52] It was not open to the application judge to proceed as she did, and find that the arbitrator must have amended the declaration, rather than interpreted it, because a proper interpretation could not justify the result he arrived at. This confuses the correctness or reasonableness of the interpretive result with whether the arbitrator answered a question that was not remitted to him or dealt with a matter beyond the scope of the arbitration agreement. It equates an incorrect or unreasonable decision on a matter properly before the arbitrator with an exceeding of jurisdiction by deciding a different matter. As Huscroft J.A. said in [Alectra](https://www.canlii.org/en/on/onca/doc/2019/2019onca254/2019onca254.html), at para. 41:

Once the application judge concluded that the arbitrator acted within the authority conferred upon him by the arbitration agreement, his task was at an end. It was for the arbitrator, not the court, to interpret and apply the substantive provisions of the PAMA, and it is of no moment whether the arbitrator did so reasonably or unreasonably, correctly or incorrectly. The decision was the arbitrator's to make. The application judge’s conclusion that the arbitrator’s interpretation of the agreement was both unreasonable and incorrect had the effect of converting s. 46(1)3 into … an appeal the parties deliberately chose not to establish.

[53] The application judge erred in setting aside the award as the arbitrator clearly engaged in interpretation of the declaration, which was within the authority conferred upon him. Whether he did so incorrectly or unreasonably, the decision as to the interpretation was for him to make.

# Conclusion

[54] I would allow the appeal and restore the award of the arbitrator.

[55] In accordance with the agreement of the parties, I would award costs of the appeal to HCC 137 in the amount of $20,000 inclusive of disbursements and applicable taxes.

Released: November 10, 2022
“M.L.B.”
“B. Zarnett J.A.”
“I agree. M.L. Benotto J.A.”
“I agree. Copeland J.A.”