COURT FILE NO.: 14-60108

DATE: 2014/09/09

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

CITY OF OTTAWA

Applicant

– and –

THE COLISEUM INC.

Respondent

Ronald F. Caza, Anne M. Tardif for the Applicant

Keith A. MacLaren, Owen Bourns for the Respondent

HEARD: June 17, 2014, with further submissions August 22, 2014

REASONS FOR JUDGMENT

j. mackinnon j.

[1] On November 8, 2000 Coliseum Inc. (“Coliseum”) entered into a lease agreement with the City of Ottawa (“the City”). The lease provided Coliseum would have the use of Frank Clair Stadium to operate sports fields under a dome. In 2004 a dispute arose between the parties which became the subject of court action. It was resolved by Minutes of Settlement signed in June 2004 (the “Minutes”).

[2] One aspect of those Minutes allowed the City to terminate the Stadium lease in the event of bona fide redevelopment plans for Frank Clair Stadium. The City did terminate the lease for that reason. The Minutes provided that in this event, and if other prerequisites were met, the City would grant Coliseum an option to lease Ben Franklin Park if available, or if not, another City owned property. Coliseum says the City did not honour this obligation, entitling it to damages. The City says it did satisfy its obligations under the Minutes such that Coliseum is not entitled to damages.

[3] This dispute was arbitrated by J. Stephen Cavanagh (the “Arbitrator”) in September 2013. In his award dated February 3, 2014 he concluded the City had breached the Minutes of Settlement and awarded Coliseum damages for breach of contract in the amount of $2,240,000.

[4] This is an appeal by the City from that arbitration award. Section 45(1) of the Arbitration Act, 1991, S.O. 1991 (the “Arbitration Act”) at s. 45(1), applies such that leave to appeal is required. That section states:

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.

[5] The City seeks leave on what it says are questions of law that will significantly affect the rights of the parties. Coliseum submits that the grounds for appeal advanced are either with respect to questions of fact or of mixed fact and law, and even if of a pure question of law, they will not significantly affect the rights of the parties. Both parties agree that the requirement of s. 45(1) (a) is met.

The Minutes of Settlement

[6] In 2004, the City advised Coliseum it could not have possession of the stadium by the start date specified in the lease agreement because the City had agreed to hold the Grey Cup football game there. Coliseum commenced an application in Superior Court. It was settled by the June 2004 Minutes of Settlement. Key provisions of the Minutes were described by the Arbitrator as follows (Arbitrator’s award, para. 42):

(a) The term of the Stadium Agreement was extended by five years, terminating on May 31, 2015. All other terms of the Stadium Agreement were to continue during that period.

(b) The term of the Stadium Agreement could be extended by a further term of three years, “upon the mutual agreement of the parties”.

(c) The parties agreed to enter into a lease agreement for another building at Lansdowne Park, known as “the Coliseum Building”. That agreement (referred to in the Minutes of Settlement as the “Coliseum Agreement”) was to be for a term of eleven years “commencing approximately October 15, 2004 to March 15, 2015”.

(d) Paragraphs 5 (under the heading “Future Development/ Needs”), 6 and 7 (“Relocation if Termination Exercised”) of the Minutes of Settlement provided as follows:

(i) They made both the extension of the Stadium Agreement and the optional renewal provision referred to earlier in this paragraph and “the duration of the Coliseum Agreement” conditional upon the City of Ottawa’s “bona fide redevelopment plans” for Frank Clair Stadium.

(ii) In the event of such redevelopment, the Minutes of Settlement contemplated that the Stadium Agreement and/or the Coliseum Agreement would be terminated.

(iii) Should termination occur, para. 5 of the Minutes of Settlement contemplated that “the parties will enter into good faith negotiations in an effort to find alternative site(s) appropriate to Coliseum Inc.’s operations.”

(iv) The City of Ottawa was to grant to Coliseum an option to lease a portion of Ben Franklin Park at 180 Knoxdale Road.

(v) In the event that the latter was, itself, the subject of any bona fide redevelopment plan that would preclude the installation of the sort of inflatable dome structure owned by Coliseum, the City of Ottawa agreed to grant to Coliseum “an option to lease…for a similar City-owned property within a 10 kilometer radius of Frank Clair Stadium…or such other property as the parties may otherwise agree.”

(vi) The Minutes of Settlement contained provisions dealing with how the terms and conditions of the lease that would come into existence in the circumstances set out in the previous paragraphs would be determined.

(e) There were provisions dealing with the scheduling of use of Frank Clair Stadium.

(f) Coliseum expressly reserved “its right to claim damages or losses caused by its inability to occupy Frank Clair Stadium by November 15 in accordance with the Stadium Agreement for the four seasons beginning 2002-2003. It was provided that such claims would “be submitted to arbitration in accordance with the Stadium Agreement only after the losses or damages are actually incurred.”

(g) There were provisions with respect to Coliseum’s entitlement to parking for the eleven seasons from 2004-2005 to 2014-2015 and the cost to Coliseum of that parking.

(h) The Stadium Agreement continued in force, subject to the amendments contemplated by the Minutes of Settlement.

(i) The application was to be dismissed on consent, without costs.

Notice of Termination

[7] On or about November 1, 2010, the City delivered a Notice of Termination of the lease to Coliseum. It was delivered by hand by the City’s lawyer, Ms. Filion. At the same time she also delivered a Notice of Option to Lease Ledbury Park. Ben Franklin Park was not available because it had been redeveloped by the City.

[8] The Notice of termination required vacant possession of Frank Clair Stadium by October 31, 2011. But, on March 31, 2011 the City revoked the notice as a result of delays in the redevelopment of Lansdowne Park. Coliseum continued to operate there for the 2011-2012 season.

[9] By agreement the Notice of Termination became effective in 2012.

[10] Despite the revocation and the postponement of the vacant possession date, and because Coliseum had voiced objections to Ledbury Park, the parties explored other alternatives to that site in late 2010 and early 2011. They explored the possibility of Coliseum relocating to some of the lands owned by Rideau High School. Later in 2011 negotiations began with respect to Coliseum moving its operations to a facility on Lees Avenue owned by the University of Ottawa. These negotiations continued throughout most of 2012.

[11] Ultimately neither of these negotiations concluded in an agreement. In about early September, 2013, Coliseum entered into an agreement with the RA Centre to begin operating at its location on Riverside Drive, in Ottawa.

[12] For ease of reference, paras. 5-7 of the Minutes are set out here in full:

5. Coliseum Inc. acknowledges and agrees that the extension and optional renewal of the Stadium Agreement and the duration of the Coliseum Agreement are all conditional upon and subject to any bona fide redevelopment plans that the City, acting in good faith, may have in relation to Frank Clair Stadium and/or the Coliseum Building, that would prevent Coliseum Inc.’s use of these two facilities for its operations. In such circumstances, the parties will enter into good faith negotiations in an effort to find alternative site(s) appropriate to Coliseum Inc.’s operations. The City shall give Coliseum Inc. twelve months’ Notice of Termination of the Stadium Agreement and/or Coliseum Agreement. In the case of the Coliseum Building, such Notice of Termination shall not be given prior to January 1, 2007 and in the case of Frank Clair Stadium, not before January 1, 2010.

6. In the event that the Coliseum Agreement and/or Stadium Agreement is terminated in accordance with paragraph 5 above, and provided that Coliseum Inc. performs the terms, covenants and conditions to be observed in those Agreements, then the City agrees at that time to grant Coliseum Inc. an option to lease (“option to lease”) a portion of Ben Franklin Park at 180 Knoxdale Road in the City of Ottawa. If Ben Franklin Park is, at the time of exercise of the option to lease, the subject of any bona fide redevelopment plan which precludes the installation of an inflatable dome structure of the kind currently operated by Coliseum Inc., then the City agrees to grant an option to lease to Coliseum Inc. for a similar City-owned property within a 10 kilometer radius of Frank Clair Stadium, as shown on Schedule “A” attached, or such other property as the parties may otherwise agree. The option to lease shall be delivered to Coliseum Inc. on or before delivery of the Notice of Termination referred to in paragraph 5 above. The period of the option to lease shall commence from the date of the delivery of the option to lease. The terms and conditions of the new lease shall be determined by the parties within six months of the exercise of the option by Coliseum Inc. with the parties using their best efforts to negotiate a new lease in accordance with the then current market rates and conditions applicable to the leasing and operation of similar types of recreational uses in the City of Ottawa. Failing an Agreement being reached by the parties within this six-month period, either party may apply to have the “current market rates and conditions applicable to the leasing and operation of similar types of recreational uses in the City of Ottawa” determined and fixed by arbitration in accordance with the provisions regarding arbitration set out in the Stadium Agreement. The parties agree to co-operate in order to have such arbitration completed as quickly as possible and in any event no later than six months following delivery of a request for arbitration by either party.

7. The option to lease, referred to paragraph [sic] 6 above, shall be exercised in writing by Coliseum Inc., and the option shall be incorporated into a new lease between the parties. Coliseum Inc. would be responsible for applying for and obtaining any required municipal, governmental or agency approvals, consents, permits that may be required, including but not limited to, any site plan approval and building permits for the installation of any dome structure. The City agrees to co-operate with Coliseum Inc. to expedite any permits or approvals within its control or jurisdiction in order to facilitate the installation of a new artificial turf field and dome structure, including parking and installation of site services within the twelve month period following Notice of Termination under paragraph 5 herein.

The Arbitrator’s Award

[13] The Arbitrator conducted a detailed analysis of the Minutes of Settlement. He reviewed the evidence of the two principal actors for the City (in house lawyer Ms. Filion and the City’s Manager of Property, Mr. Souchen) as to what obligations they thought the Minutes imposed upon the City. He noted that the views of these two witnesses were different. The Arbitrator also reviewed the testimony on behalf of Coliseum with respect to its view of the obligations of the City. The Arbitrator’s conclusion as to the proper interpretation of the Minutes did not coincide with that of either party. His determination was that by reason of para. 6 of the Minutes the parties had agreed that an option to lease Ben Franklin Park was an acceptable replacement for Frank Clair Stadium and that “a similar City-owned property” referred to the Ben Franklin Park site, not to Frank Clair Stadium.

[14] At para. 90(d) the Arbitrator found that by virtue of paragraph 6 of the Minutes, the parties had agreed, in advance, that Ben Franklin Park would meet the “appropriateness” requirement of paragraph 5.

[15] He also found that the acceptability of Ben Franklin Park was tied in to the actual terms of the ensuing lease to be negotiated by the parties. At para. 83 he stated: “In my opinion, the most reasonable interpretation of that sentence would be that the City would have to replace Ben Franklin Park with something “similar” to that site, on the same basis (i.e., with the terms and conditions left largely to be negotiated).”

[16] The Arbitrator interpreted para. 6 in light of the “more general provisions of para. 5, in particular the words, to “enter into good faith negotiations in an effort to find alternative site(s) appropriate to Coliseum Inc.’s operations.” On this basis he concluded the City would have had to provide a site similar to Ben Franklin Park as it had been in 2004, provided it was “appropriate” to Coliseum Inc.’s operations, and then to have negotiated (or submitted to arbitration), what the terms of the lease of those premises were to be. His opinion stated at para. 86 was this was the only commercially reasonable interpretation of paras. 5 and 6, because: “It seems highly unlikely that Coliseum Inc. would have negotiated an arrangement for a replacement site that was little more than vacant land, without any provision that would see it receiving something approximating what it had lost by termination of the Stadium Agreement.”

[17] In reaching this conclusion, he interpreted the Minutes as having an “overarching objective” to find an alternative site appropriate to Coliseum’s operations. He drew support for this interpretation not only from para. 5 of the Minutes; in addition, he found that the Ben Franklin site was “pretty undeveloped” at the time of 2004 Minutes. He referred to the language in para. 6 specifying that the terms of the new lease would be determined by the parties in accordance with the then current market rates and conditions applicable to the leasing and operation of similar types of recreational uses in the City as being of “some significance”. He noted that para. 6 went on to provide that the terms would be fixed by arbitration on application by either party in the event an agreement had not been reached within six months.

[18] At p. 47 he stated: “I believe that what the parties contemplated, in choosing Ben Franklin Park as an acceptable alternative site for Coliseum Inc., was that the selection of the site was merely the first step. The extent of development and the concomitant cost would all be dealt with in the ensuing negotiation of the terms of the new lease between the parties that was contemplated in paragraph 7.” At p. 54 the Arbitrator also referred to the part of para. 7 that contemplated the new site could require the installation of a new artificial turf field, and dome structure, including parking and installation of site services. In other words, he found Ben Franklin Park which the parties obviously agreed to, or a site similar to it, would have been capable of becoming suitable for Coliseum’s business.

[19] This finding becomes important with respect to the City owned property known as Ledbury Park. The Arbitrator found that Ledbury Park was a similar site to Ben Franklin Park. He found at para. 234 that both were largely undeveloped properties, and both would have required significant capital expenditures to be made ready for use by Coliseum. It is important to note the Arbitrator’s comments at para. 238 of his award:

238. In my view, if Ledbury Park was similar to Ben Franklin Park, as I have found it to be, the City of Ottawa could have adopted a much tougher position than it did. It would have remained for the City to identify what it was prepared to do to make the site an “appropriate” one, but it was, in fact, prepared to make significant efforts on that score.

[20] There are other places in the award where the Arbitrator also refers to this obligation he found the City to have had in relation to the “similar site”. In para. 85 he states: “In my view, paragraph 6 must be read in light of the more general provisions of paragraph 5, such that the City of Ottawa would have had to provide a site similar to Ben Franklin Park in 2004, provided that it was “appropriate” to Coliseum Inc.’s operations …” In para. 90(f) the Arbitrator said: with reference to the similar site of Ledbury Park, “But to discharge its obligations under the Minutes of Settlement, the City of Ottawa would have had to negotiate a lease of a site that was or could be made “appropriate to Coliseum Inc.’s operations.”

[21] The Arbitrator found at para. 199 that the evidence was generally in agreement that there was very little discussion about Ledbury Park as a site after it was first proposed in March 2010 because Coliseum was unenthusiastic and negotiations proceeded on the basis of Rideau High School. Coliseum advised that it wished to pursue the Rideau High School option as it did not regard Ledbury Park as fitting its needs. At para. 239 the Arbitrator found that the City “more or less accepted Coliseum Inc.’s refusal to accept its selection of Ledbury Park”.

[22] The Arbitrator found at para. 239 that when the Rideau High School negotiations fell apart in early 2011, the discussion then focused on a University of Ottawa site, not on Ledbury Park.

[23] He also found that upon delivering the Notice of Option to Lease Ledbury Park, Ms. Filion had in fact stated to Coliseum words to the effect, ‘you will not be going to Ledbury Park’. Mr. Souchen corroborated the testimony of Coliseum’s principals to this effect. Mr. Souchen explained this by testifying the City was engaged in finding them another site, but there were legal terms and conditions that had to be met, and Ledbury Park was the only site the City had control over and could deliver. (Award at para. 244).

[24] Based on this finding, the Arbitrator also found at para. 251 that Coliseum would “reasonably conclude Ledbury was technically an option but not one the City was pursuing seriously.” He also found that in the face of the actions taken by the City, Coliseum would not have expected the City to later take the position that, by providing the Notice of Option to Lease Ledbury Park in October 2010, it had done all it was required to do under the Minutes of Settlement.

[25] On May 30, 2011 Ms. Filion wrote to Coliseum saying the Ledbury site remained available should Coliseum wish to explore it. The Arbitrator found that Coliseum would not conclude from this letter that the City was going to insist that it had met its obligations under the Minutes by giving an option to lease Ledbury Park.

[26] Although Coliseum dealt with both Ms. Filion and Mr. Souchen, the Arbitrator found that Coliseum’s dealings were predominantly with Mr. Souchen. At para. 111 he wrote: “Mr. Souchen was the “face” of the City of Ottawa in these negotiations and … even though Coliseum Inc. knew that Ms. Filion’s view of the negotiations was somewhat at odds with his, it was reasonable for Coliseum Inc.’s principals to conclude that the representations that Mr. Souchen made were ones on which Coliseum Inc. could rely. Accordingly … I think that Coliseum Inc. reasonably relied on what it was being told by Souchen …”

[27] The Arbitrator further found at para. 259:

However, by its subsequent dealings with Coliseum Inc., the City of Ottawa led the principals of Coliseum Inc. to believe that Ledbury Park would not be insisted on by the City of Ottawa as a relocation site. I recognize that Ms. Filion did make it clear that Ledbury Park remained “on the table” and even gave some signals that it remained the City’s formal position. But there were much stronger signals coming from Mr. Souchen and even, as I have found, from Ms. Filion herself that Ledbury Park would not be insisted upon by the City of Ottawa.

[28] He went on to find the reason the City did not discuss with Coliseum how its requirements could have been met at Ledbury Park or communicate to Coliseum the funding the City would have made available for the Ledbury site was because the City did not seriously intend at that time to take the position it subsequently did, namely that its obligation to Coliseum was fulfilled by simply offering the Option to Lease Ledbury Park. The Arbitrator stated at para. 261:

Instead, it became involved, together with Coliseum Inc., in very considerable efforts to find a site other than Ledbury Park, that would be acceptable to Coliseum Inc. But in my opinion, it was not open to the City of Ottawa (no matter how well-intentioned it might have been at the time) to explore alternative sites with such energy and zeal in 2010 to 2012, take no steps to advance the Ledbury Park option, but then rely on Ledbury Park as a basis for defeating Coliseum Inc.’s claim.

[29] By way of summary conclusion on liability the Arbitrator found that (para. 291):

In my view, Coliseum Inc. has established that the City of Ottawa breached the 2004 Minutes of Settlement. The breach was the City’s failure to provide Coliseum Inc. with an option to lease a property which complied with the requirements of both paragraphs 5 and 6 of the Minutes of Settlement. The Ledbury Park site did comply with the requirements of paragraph 6 (in that it was City-owned, within 10 kilometres of Frank Clair Stadium and, as I have found, “similar to” Ben Franklin Park). But I have concluded, as discussed above, that the City of Ottawa did not take meaningful steps to determine that Ledbury Park was “appropriate to the operations of Coliseum Inc.”, as required by paragraph 6.

[30] The Arbitrator awarded Coliseum $2,240,000 in damages. Both parties presented expert evidence as to quantum of damages. Coliseum’s expert held the opinion that $2,240,000 was the low end of Coliseum’s loss for a three year period assuming no summer season. The issue on appeal was that according to the City and confirmed by both experts, about 40 per cent of Coliseum’s revenue for 2010 and 2011 was actually that of a separate company called the Soccer7s. According to the Arbitrator, this entity came to light in a draft agreement delivered by Coliseum near the end of negotiations for relocation to the University of Ottawa site. In this document, Coliseum stated: “…Coliseum (which includes Ottawa Soccer7s Inc.…).” The City argued that it had no contract with the Soccer7s and no award of damages ought to be made in relation to it.

[31] After noting that he had very little evidence about the Soccer7s, the Arbitrator held that the only basis on which it might be arguable that Coliseum’s damages should be reduced because of the past involvement of the Soccer7s is if some portion of the future stream of revenue that would have flowed from the use of Coliseum’s dome would have gone to the Soccer7s. The Arbitrator seems to have accepted that Coliseum was in control of whether or not the Soccer7s received any of the revenue derived from the use of their dome and found that to be a sufficient basis upon which to make the award of damages that he did make. Finally, the Arbitrator noted that the City had not pleaded any privity of contract issue, as required by the Rules of Civil Procedure, R. 25.07(4).

[32] On the issue of mitigation he referred to the lease at the RA Centre and stated he did not have enough information to conclude that it affected Coliseum’s damages in any particular way. He held at para. 367, “I have no basis in the evidence for reducing its damages on that account.”

Should Leave to Appeal be Granted?

Question of law versus question of mixed fact and law

[33] The City submits that the Arbitrator committed errors of law in his interpretation of:

• the Minutes of Settlement;

• the legal test for waiver and estoppel;

• the legal test for determining if a plaintiff has failed to take reasonable steps to mitigate its damages; and

• the legal test for awarding compensatory damages.

[34] Leave to appeal can only be given if an alleged error is one of law, and not of mixed fact and law. On August 1, 2014 the Supreme Court of Canada released its decision in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (“Sattva”). The two central issues identified in para. 1 of Sattva are also engaged here: “When is contractual interpretation to be treated as a question of mixed fact and law and when should it be treated as a question of law? How is the balance between reviewability and finality of commercial arbitration awards under the Commercial Arbitration Act, R.S.B.C. 1996, and c. 55 to be determined?” Counsel for both parties assisted me with written submissions on the application of Sattva to this appeal.

[35] In Sattva leave to appeal from an arbitration award was required. The threshold question was whether an issue decided by the Arbitrator was a question of law. The Supreme Court noted that historically determining the rights and obligations of the parties under a written contract was considered a question of law. The Court was of the view that the historical approach should be abandoned, holding at para. 50 that “contractual interpretation involves issues of mixed fact and law as it is an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix.”

[36] While the Supreme Court urged caution in identifying extricable questions of law in disputes over contractual interpretation, it nonetheless identified that legal errors made in the course of contractual interpretation do exist and include “the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor.” At para. 55 the Court noted, “the circumstances in which a question of law can be extricated from the interpretation process will be rare. In the absence of a legal error of the type described above, no appeal lies under the AA from an Arbitrator’s interpretation of a contract.”

[37] The basic principles of contractual interpretation have been summarized recently by the Court of Appeal for Ontario in Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673 at para. 16:

• When interpreting a contract, the court aims to determine the intentions of the parties in accordance with the language used in the written document and presumes that the parties have intended what they have said.

• The court construes the contract as a whole, in a manner that gives meaning to all of its terms, and avoids an interpretation that would render one or more of its terms ineffective.

• In interpreting the contract, the court must have regard to the objective evidence of the “factual matrix” or context underlying the negotiation of the contract, but not the subjective evidence of the intention of the parties.

• The court should interpret the contract so as to accord with sound commercial principles and good business sense, and avoid commercial absurdity.

• If the court finds that the contract is ambiguous, it may then resort to extrinsic evidence to clear up the ambiguity.

• Where a transaction involves the execution of several documents that form parts of a larger composite whole – like a complex commercial transaction – and each agreement is entered into on the faith of the others being executed, and then assistance in the interpretation of one agreement may be drawn from the related agreements.

Error of law in interpretation of Minutes of Settlement?

[38] The City alleges three legal errors made by the Arbitrator in the present case in his interpretation of the Minutes:

• the Arbitrator ignored the principle according to which an agreement to agree is unenforceable. In relation to this error, he failed to consider the import of the words, “the parties will enter into good faith negotiations in an effort to find alternative site (s) appropriate to Coliseum Inc.’s operations,” as they appear in para. 5 of the Minutes of Settlement.

• The Arbitrator held that the more general words in para. 5 of the Minutes, “appropriate to Coliseum Inc.’s needs” over rode the more specific language in para. 6 which required the City to grant Coliseum an option to lease a City owned property similar to Ben Franklin Park. In so doing, the Arbitrator failed to have regard to the principle of contractual interpretation according to which general language must yield to specific language. He imposed an obligation on the City not contained in the written contract and gave no import to the requirement that Coliseum exercise the option.

• The Arbitrator erred in speculating on what Coliseum’s intentions must have been in entering into the Minutes, rather than determining the mutual and objective intentions of the parties as expressed in the words of the contract.

[39] In my view these alleged grounds raise extricable legal errors in the interpretation of the Minutes of Settlement. The other three alleged errors on which leave to appeal is sought also raise questions of law.

Will determination of the question of law significantly affect the rights of the parties?

[40] The parties disagree on the meaning of this requirement in s. 45(1) (b) of the Arbitration Act. There is currently conflicting case law in Ontario as to whether or not the affected rights of the parties must be “future or ongoing rights”. Coliseum argues in favour of the future or ongoing nature of the test, and relies on Denison Mines Ltd. v. Ontario Hydro, 61 O.R. (3d) 291 (S.C.J.) (“Denison”), to this effect. Denison has been followed in York Condominium Corp. No. 359 v. Solmica Chemical International Inc., 2005 CarswellOnt 9973 (S.C.J.), and Calabrese v. Weekes, 2003 CarswellOnt 4058 (S.C.J.). The City submits that the s. 45(1) (b) requirement merely eliminates grounds of appeal that are less than decisive to the outcome. They rely on Aronowicz v. Aronowicz, 2007 CarswellOnt 437 (SCJ) (“Aronowicz”) and McAsphalt Marine Transport Ltd. v. Liberty International Canada, 2005 CarswellOnt 1425 (S.C.J.) (“McAsphalt”).

[41] With respect to those holding the contrary view, I am persuaded by the reasoning in Aronowicz and McAsphalt, summarized in the former decision at paras. 28 to 30:

28. In Denison Mines, from a review of the case law, Ground J. concluded that for leave to be granted, it was necessary that the resolution of the question of law have some future or ongoing impact on the rights of the parties. However, in McAsphalt Marine, Dambrot J. stated at para. 36:

With respect, I cannot accept this analysis. I see no basis to read into s. 45(1) (b) a requirement that the significant effect of the determination of the question of law must have on the rights of the parties must be a future or ongoing impact. It seems to me that it is enough if the determination will have a significant impact on the rights of the parties in the matter under review. To adopt the reasoning in Denison Mines would preclude an appeal in a case where the relationship between the parties has come to an end no matter how dramatic the significance of the question of law may be in the matter at hand. In my opinion, the importance of the issues at stake in the arbitration is dealt with in s. 45(1) (a). Section 45(1) (b) deals with the significance of the issue in determining whether the Arbitrator's award can stand. It is meant to eliminate grounds of appeal that are less than decisive to the outcome of the matter.

29. I agree with Dambrot J. In particular, I agree that whether the determination of the issue of law has an impact on the future rights of the parties is a matter to consider when considering the first prerequisite for granting leave to appeal; that is, the requirement that the resolution of the question of law is important to the parties. I regard Ground J.'s helpful analysis of the case law as indicating that a future or ongoing significant impact would be a sufficient factor for deciding that the first prerequisite is satisfied. Future impact, however, is not a necessary factor.

30. I also agree with Dambrot J. that the purpose of the second prerequisite is to eliminate grounds of appeal that are less than decisive to the outcome of the arbitration. In other words, there may be an error of law, but if it caused no miscarriage of justice or if the error of law would not provide a reason for overturning the award, then leave to appeal should not be granted. This means that some errors of law join errors of fact and errors of mixed fact and law as not being the subject of appeal under s. 45(1) of the Act. I do not regard the alleged errors of law in the immediate case as falling within the class of precluded grounds for appeal.

[42] All of the alleged errors set out above are potentially decisive to the outcome of the arbitration. For reasons which will follow on the appeal itself, I have also found that there is arguable merit to the position taken by the City that the Arbitrator’s decision is at least unreasonable. Leave to appeal is granted on those issues.

Standard of Review

[43] The Supreme Court in Sattva also addresses standard of review in an appeal from an arbitration award. The Court states at para. 106:

…In the context of commercial arbitration, where appeals are restricted to questions of law, the standard of review will be reasonableness unless the question is one that would attract the correctness standard, such as constitutional questions or questions of law of central importance to the legal system as a whole and outside the adjudicator’s expertise (Alberta Teachers’ Association, at para. 30). The question at issue here, whether the Arbitrator interpreted the Agreement as a whole, does not fall into one of those categories. The relevant portions of the Dunsmuir analysis point to a standard of review of reasonableness in this case.

[44] The City argues that the standard of review is correctness. It says that certainty of contract is the foundation of contract law and that the issues raised are not specific to the facts of this case rather are of central importance to the legal system as a whole. Be that as it may, the Supreme Court has also required that the issue be outside the adjudicator’s area of expertise. The Court states at para. 105: “Additionally, as expertise is a factor in judicial review, it is a factor in commercial arbitrations: where parties choose their own decision-maker, it may be presumed that such decision-makers are chosen either based on their expertise in the area which is the subject of dispute or are otherwise qualified in manner that is acceptable to the parties.”

[45] Accordingly, following the Supreme Court of Canada ruling in Sattva, I find that the standard of review applicable to this appeal is reasonableness.

[46] Reasonableness is a deferential standard. The Supreme Court of Canada in Dunsmuir establishes at para. 47: “A court conducting a review for reasonableness inquires into the qualities that make a decision reasonable, referring both to the process of articulating the reasons and to outcomes. In judicial review, reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concerned with the whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.”

Merits of the Appeal

Interpretation of the Minutes of Settlement

[47] I have reached the conclusion that the Arbitrator erred in law by conflating paras. 5 and 6 of the Minutes of Settlement, and by imposing an overarching objective that an alternative site must be similar to Ben Franklin Park and appropriate to Coliseum’s operations. He overlooked the precise wording of para. 6 that required best effort negotiations of a new lease in accordance with market rates and conditions within 6 months after the exercise of the option by Coliseum. Coliseum did not exercise the option, yet the Arbitrator found that the City was nonetheless obliged to have identified to Coliseum what it was prepared to do to make the site an appropriate one for it. Even though he found that the parties had agreed in the Minutes that Ben Franklin Park was appropriate, he nonetheless held that giving an option to lease Ben Franklin Park would not have been enough to satisfy the requirements of the Minutes, because of the overarching requirement that the replacement site had to be appropriate to Coliseum’s operations.

[48] In my view he erred in this way by overlooking the import of the requirement in para. 6 that Coliseum exercise the option before the site negotiations began, and by finding that the general language of para. 5 overrode the specific language of para 6. This led him to the error the City describes as enforcing an agreement to agree. Whereas in para. 5 the parties agree to good faith negotiations to try to find an appropriate alternative site, they did not agree in that paragraph or in paragraph 6 to actually find one or that the option to lease the City was required to provide would meet that criteria. The criteria required for the option to lease was that it would be for a portion of Ben Franklin Park or a site similar to it. Once the Arbitrator found that Ledbury Park was similar to Ben Franklin Park, Coliseum had to have exercised the option before the Minutes required the City to indicate through negotiations what it was prepared to do to improve the site for use by Coliseum.

[49] The Arbitrator found as a fact that the City did act in good faith and that the parties were engaged in lengthy negotiations as to possible alternative sites. The Arbitrator also found that Ben Franklin Park was an agreed upon appropriate alternative site, and that Ledbury Park was similar to it within the meaning of para. 6 of the Minutes. He found that in 2004 Ben Franklin Park was undeveloped land as was Ledbury Park and that both would have required significant expenditure to be made ready for use by Coliseum. Whereas Ben Franklin Park was preapproved, Ledbury Park was not. But para. 6 applied to both in requiring Coliseum to exercise the option to lease before the “best efforts to negotiate a new lease” obligation arose.

[50] Third, the Arbitrator speculated as to Coliseum’s intention in entering into the Minutes and used that as a basis for his interpretation of the contract. He says at para. 86: “It is highly unlikely that Coliseum Inc. would have negotiated an arrangement for a replacement site that was little more than vacant land, without any provision that would see it receiving something approximating what it had lost by termination of the Stadium Agreement.”

[51] Yet that is exactly what Coliseum did in accepting Ben Franklin Park as an alternative site to Frank Clair Stadium. There was nothing in the Minutes that guaranteed them a new lease of approximately similar value, only the opportunity to exercise the option to Ben Franklin Park or a similar site, and having done so, to use best efforts to negotiate a lease, failing which either party could require arbitration of the terms of a new lease.

[52] In this way the Arbitrator did not adhere to the (as of then yet to be written) following passages in Sattva: (paras. 57-58)

While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement (Hayes Forest Services, at para. 14; and Hall, at p. 30). The goal of examining such evidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract (Hall, at pp. 15 and 30-32). While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement (Glaswegian Enterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), 101 B.C.A.C. 62).

The nature of the evidence that can be relied upon under the rubric of “surrounding circumstances” will necessarily vary from case to case. It does, however, have its limits. It should consist only of objective evidence of the background facts at the time of the execution of the contract (King, at paras. 66 and 70), that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting. Subject to these requirements and the parol evidence rule discussed below, this includes, in the words of Lord Hoffmann, “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man” (Investors Compensation Scheme, at p. 114). Whether something was or reasonably ought to have been within the common knowledge of the parties at the time of execution of the contract is a question of fact.

[53] For these reasons I find the Arbitrator erred in law in his interpretation of the Minutes. I also find his interpretation was unreasonable having regard to the inconsistent conclusions the errors led him to. For example, he found that by the Minutes the parties had agreed in advance that Ben Franklin Park was an acceptable replacement for Frank Clair Stadium, meeting the “appropriateness” requirement of para, 5 and he found that providing Coliseum an option to lease Ben Franklin Park would not have met the City’s obligations under the Minutes. He correctly identified that selection of the site was the first step, and that the remaining terms would be the subject of negotiation. In overlooking the requirement for Coliseum to exercise the option to lease, he went farther and found at para. 90(g) that the Minutes contemplated that the parties would agree on the lease of replacement site and then negotiate the terms of the lease. But the Minutes equally contemplated that the parties may not agree on a replacement site, because the obligation to negotiate and possibly to submit the terms of a new lease to arbitration did not arise unless an option to lease was exercised by Coliseum.

Error of Law with respect to the Test for Waiver and Estoppel

[54] On appeal Coliseum submitted the Notice of Option to lease was not a proper option to lease. The Arbitrator noted at paras. 38 to 39 that this issue was not raised before him. Accordingly, I decline to entertain it on appeal.

[55] In the alternative, Coliseum submitted the City had waived its entitlement to rely on the Notice of Option to lease Ledbury Park, or was estopped from relying on it, by reason of Ms. Filion’s statement on delivery of the Notice and the City’s actions in endeavouring to negotiate for other sites that it did not own but that were preferable to Coliseum.

[56] Despite the fact that Coliseum did not exercise the option to lease Ledbury Park; the Arbitrator found the City was precluded from relying on it in defence of Coliseum’s claim. He stated at paras. 260 and 261 of the award:

260. Even if I am wrong in the conclusion that I have drawn in the preceding paragraph, I also find that the City of Ottawa did not take steps (or adequate ones, at least) to ensure that Ledbury Park would be an appropriate site for Coliseum Inc.’s operations. I think it was bound to do that if it was going to take the position that in giving the option to lease Ledbury Park, it had met its obligations under the Minutes of Settlement. Specifically, I find that the City of Ottawa did not take sufficient measures to ascertain what Coliseum Inc.’s requirements would have been for relocation to Ledbury Park and how those requirements could be met. Nor, on the evidence, did it communicate to Coliseum Inc. the funding that would have been available from the City for the Ledbury Park site.

261. Now, I want to make it clear that what I have said in the preceding paragraph, about steps that should have been taken by the City of Ottawa, would only be applicable if the City were going to argue (as it has done on this arbitration) that it had complied with the requirements of the Minutes of Settlement by providing Coliseum Inc. with the option to lease Ledbury Park. Minutes of Settlement by delivering a Notice of Option to Lease Ledbury Park. In my view, the City did not take those steps because it did not seriously intend to take that position. Instead, it became involved, together with Coliseum Inc., in very considerable efforts to find a site other than Ledbury Park, that would be acceptable to Coliseum Inc. but in my opinion, it was not open to the City of Ottawa (no matter how well-intentioned it might have been at the time) to explore alternative sites with such energy and zeal in 2010 to 2012, take no steps to advance the Ledbury Park option, but then rely on Ledbury Park as a basis for defeating Coliseum Inc.’s claim.

[57] Other relevant portions of the Arbitration award are at paragraphs 240,242, 244,245, 249, and 259:

240. For instance, in her letter of May 30, 2011, addressed to Mr. MacLaren, Ms. Filion said that “the City continues to be willing to reach a mutually acceptable negotiated settlement of the issues between the parties and to explore alternative sites as they become available.” She also said, “please note that the Ledbury site remains available, should your client wish to explore this matter.” In my view, Coliseum Inc. would not conclude from that letter, that the City of Ottawa was going to insist that I had met its obligations under the Minutes of Settlement by giving an option to lease Ledbury Park.

241. The Coliseum Inc. evidence stopped just short of saying that Coliseum Inc., at any point, believed that Ledbury Park was no longer an option. And with good reason, Ms. Filion, in both her testimony and in the documents, made it clear that throughout the negotiations about other sites, Ledbury Park was “still on the table”, that it was “the City’s fallback position.

242. Mr. Souchen also said, “I told them that we had to leave Ledbury Park on the table, that it was part of the legal process to provide an option for Coliseum Inc. to have a place to go. It was my intent to re-direct funds…I told them that we would make an effort to deliver what we needed at Ledbury Park, construct a field and try to move their business to that location. But Ledbury Park was not our prime focus and there was no desire by Coliseum Inc. to go there. It remained an option that was out there.”

243. I therefore conclude that Coliseum Inc. cannot have failed to understand that Ledbury Park never came “off the table”, from the City’s perspective, as a relocation option. Even if Messrs. Martin and Lauter preferred to listen to Mr. [Souchen] rather than to Ms. Filion, he was telling them the same thing (on this point) as she was, that Ledbury Park remained available.

244. Robin Souchen broadly corroborated this evidence. He said that at the meeting of October 28, 2010, when the principals of Coliseum Inc. were given the City of Ottawa’s Notice of Termination, Mary Lynn Filion said “words to the effect that ‘you will not be going to Ledbury Park’. We were so engaged in find them another site, according to the Minutes of Settlement, but from a legal context, there were terms and conditions that had to be met and Ledbury Park was the only one we had command and control of and we could deliver.”

245. However, by its subsequent dealing with Coliseum Inc., the City of Ottawa led the principals of Coliseum Inc. to believe that Ledbury Park would not be insisted on by the City of Ottawa as a relocation site. I recognize that Ms. Filion did make it clear that Ledbury Park remained “on the table” and even game some signals that it remained the City’s formal position. But there were much stronger signals coming from Mr. Souchen and even, as I have found, from Ms. Filion herself, that Ledbury Park would not be insisted upon by the City of Ottawa.

[58] The City submits the Arbitrator failed to identify and apply the correct legal test for estoppel. That test is set out in Maracle v. Travellers Indemnity Co. Of Canada, [1991] 2 S.C.R. 50 at para. 57:

Issue 1: Promissory Estoppel

The principles of promissory estoppel are well settled. The party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on. Furthermore, the representee must establish that, in reliance on the representation, he acted on it or in some way changed his position. In John Burrows Ltd. v. Subsurface Surveys Ltd., [1968] S.C.R. 607, Ritchie J. stated, at p. 615:

It seems clear to me that this type of equitable defence cannot be invoked unless there is some evidence that one of the parties entered into a course of negotiation which had the effect of leading the other to suppose that the strict rights under the contract would not be enforced, and I think that this implies that there must be evidence from which it can be inferred that the first party intended that the legal relations created by the contract would be altered as a result of the negotiations.

[59] In my view the Arbitrator did not apply this test in considering whether the City was precluded from relying on its delivery of the Notice of Option to Lease Ledbury Park. He did not find that the City intended to affect the legal relations created by the contract.

[60] Even when the Arbitrator found that Ms. Filion made a statement along the lines of “you will not be going to Ledbury Park” he also stated (at para. 250): “However, while she might not have intended that it be understood as a firm commitment by the City (and, as I have said, she was also making it clear that Ledbury Park “remained on the table”)…”

[61] Nor did the Arbitrator consider whether Coliseum, in reliance on the representation, acted on it or in some way changed its position. The evidence the Arbitrator accepted was that very early on, even before the Notice of Option to Lease was delivered, Ledbury Park had come up for discussion and had been rejected by Coliseum. From para. 162 it appears Coliseum reached this conclusion in Spring 2010. The parties turned their focus to Rideau High School after that, because Ledbury Park was not attractive to Coliseum (para. 177). In December 2010, Coliseum said Ledbury Park did not match its business plan (para. 166). The Arbitrator found as a fact that the City “more or less accepted Coliseum’s refusal to accept its selection of Ledbury Park” (para. 239).

[62] The evidence and the findings made do not support a conclusion that Coliseum acted in reliance on a representation by the City, or changed its position on account of it. To the contrary, Coliseum had made it clear before the Stadium Lease was terminated and before the Notice of Option to Lease Ledbury Park was delivered that it did not want to relocate to Ledbury Park.

[63] To establish waiver the evidence must demonstrate that the party waiving had a full knowledge of its rights, and an unequivocal and conscious intention to abandon them. Waiver can also be retracted if reasonable notice is given to the party in whose favour it operates: see Maritime Life Assurance Co. v. Saskatchewan River Bungalows Ltd., [1994] 2 S.C.R. 490 at 500, 502 (“Maritime Life Assurance Co.”). I have already referred to findings by the Arbitrator that the City made it clear Ledbury Park remained on the table as an option for Coliseum. At its highest what was said was equivocal.

[64] The reason why the test for waiver is onerous is set out in Maritime Life Assurance Co. at para. 500:

The creation of such a stringent test is justified since no consideration moves from the party in whose favour a waiver operates. An overly broad interpretation of waiver would undermine the requirements of contractual consideration.

[65] Other findings the Arbitrator did make in support of his conclusion that the City could not rely upon its delivery of the Notice of Option to Lease Ledbury Park do not engage either the defence of promissory estoppel or waiver. At para. 261 he said it was not “open to the City to explore the options of Rideau High School and the University of Ottawa locations with such zeal and then to rely on its Notice of Option to Lease Ledbury Park.” But so doing was part of the City’s obligation under para. 5 of the Minutes of Settlement.

[66] At para. 388 the Arbitrator states the City gave Coliseum reason to believe it would not insist that Ledbury Park constituted a ‘similar’ site for the purposes of para. 6 of the Minutes of Settlement. Yet, the Arbitrator made his key finding that Ledbury Park was a similar site to Ben Franklin Park, stating at para. 258:

In my view, the City of Ottawa met its obligations under paragraph 6 of the Minutes of Settlement. It provided to Coliseum Inc. an option to lease Ledbury Park, which was sufficiently “similar” to Ben Franklin Park, in my view, as to satisfy the requirement in paragraph 6.

[67] The conclusion the Arbitrator reached was that given what Ms. Filion had said and the subsequent steps taken to negotiate other sites, the City was bound to take adequate steps to ensure Ledbury Park would be appropriate for Coliseum’s purposes. Specifically, he held that the City had to ascertain what Coliseum’s requirements would have been for relocation to Ledbury Park and how they could be met. This conclusion is not supported by the Minutes or the law with respect to estoppel or waiver.

[68] It also ignores the context in which the statement and other site negotiations were made and considered. Ledbury Park was the only site the City had control over and could deliver. It was similar to Ben Franklin Park and within the prescribed radius. The City already knew Coliseum did not want to relocate to Ledbury Park when it delivered its Notice of Option to Lease. The extensive negotiations to find an alternate acceptable site, not owned by the City, demonstrated the City’s good faith efforts to accommodate Coliseum and did not preclude it from relying on the Notice of Option to Lease.

[69] In April 2011, Coliseum advised the City in writing that it did not believe the City was sincerely trying to negotiate other sites and would not attend any further meetings with the City unless the site under discussion was not Ledbury Park. Ms. Filion replied in her May 2011 letter to say the City was agreeable to exploring alternative sites as they became available, and Ledbury is still available should Coliseum wish to explore it. In my view this exchange is very important. Coliseum was firmly against Ledbury Park. The City knew this and, at the same time as trying to explore alternative sites, invited Coliseum to let it know if it wished to “explore” Ledbury Park. In my view the City did not need to go farther to provide Coliseum with further information about what it might do to make Ledbury Park attractive to Coliseum, in the absence of any indication of interest from Coliseum.

[70] For these reasons I find the Arbitrator erred in law in finding the City precluded from relying on its delivery of the Notice of Option to Lease. This conclusion was also unreasonable. He founded the preclusion in part on the City’s good faith efforts to comply with paragraph 5 of the Minutes. And his conclusion was also inconsistent with the facts as he set them out as to whether the City was unequivocal or had the intention to affect legal relations.

Disposition

[71] The appeal is allowed and the Arbitrator’s award is set aside with costs to the City. I have identified a number of errors of law made by the Arbitrator and I have concluded the outcome he reached was unreasonable having regard to the test in Dunsmuir. His finding of fact that Ledbury Park was similar to Ben Franklin Park was fatal to Coliseum. The Minutes permitted the City to terminate the Stadium Lease in order to re-develop Lansdowne Park. This was not an unexpected event. The Minutes did not guarantee an alternate location for Coliseum in the event the Stadium Lease was terminated lawfully by the City, as it was. The City met its separate obligations under paras. 5 and 6 of the Minutes. Coliseum was unwilling to exercise the option to negotiate Ledbury Park and regrettably despite their best efforts and good faith the parties were unable to negotiate another location suitable for Coliseum.

[72] Although it is unnecessary to address the City’s appeal from the damages awarded I would have reduced the award by the 40 percent of revenue derived from the Stadium Lease by the Soccer7s. The onus was on Coliseum to establish its damages. The Arbitrator had a paucity of evidence as to the relationship between the corporate entities and the extent of Coliseum’s ability to control the flow of revenue to one or other entity. His conclusion in favour of Coliseum on this point was speculative. I would have dismissed the appeal as it related to mitigation. The Arbitrator had evidence from Coliseum that he accepted as to how long it would likely take for the lease at the RA Centre to become profitable and he did not err in not reducing the damages awarded on that account.

[73] The parties are invited to agree on the issue of costs. In the event they are unable to do so, I will receive written submissions. These should be brief and supported by necessary attachments including Bills of Costs and any Offers to Settle that may have been exchanged. Counsel shall establish a timetable for the delivery and completion of their submissions, not to postdate October 31, 2014.

Madam Justice J. Mackinnon

Released: September 9, 2014

COURT FILE NO.: 14-60108

DATE: 2014/09/09

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

CITY OF OTTAWA

Applicant

– and –

THE COLISEUM INC.

Respondent

REASONS FOR JUDGMENT

J. Mackinnon J.

Released: September 9, 2014