Orgaworld Canada Limited v. The Corporation of the City of Ottawa, 2015 ONSC 318
COURT FILE NO.: 3733-14
DATE: 2015/01/30
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Orgaworld Canada Limited
Paul Hendrikx, for the applicant
Applicant
- and -
The Corporation of the City of Ottawa
Ronald F. Caza and Katie Black, for the respondent
Respondent
HEARD: December 31, 2014
APPLICATION UNDER THE ARBITRATION ACT, 1991
LEITCH J.:
[1] The respondent’s motion and the applicant’s cross-motion were heard together.
[2] The parties filed voluminous materials, several volumes of case authorities and multiple factums on the motion and cross-motion which raised the issue of whether the respondent’s motion should be dismissed for delay; whether the respondent’s motion should be dismissed for failure to comply with Rule 2.02; whether the court has jurisdiction in relation to part of the application; whether the question of jurisdiction should be deferred to the application judge; whether the respondent is entitled to cross-examine on the affidavit sworn in support of the application; whether such cross-examination ought to be denied because of litigation privilege; whether the affidavit should be struck for failure to attend for cross-examination; and, whether the applicant is entitled to an examination pursuant to Rule 39.03.
[3] Before turning to the issues raised on the motions, it is necessary to briefly set out some relevant background.
Background
[4] The applicant and the respondent are parties to an agreement which contained an arbitration clause.
[5] The parties proceeded to arbitration in 2014 and after 72 days of hearing, the arbitrator rendered a decision and made an award on June 26, 2014.
[6] The applicant has brought an application impugning the award of the arbitrator.
[7] The applicant takes the position that “the central disposition of the award” ought to be set aside pursuant to s. 46 of the Arbitration Act, 1991 S.C. 1991 c. 17 (the “Act”) because of an egregious breach of the applicant’s statutory right to be treated equally and fairly and because the award is patently unreasonable.
[8] As summarized at para. 27 of the applicant’s factum, according to the applicant:
The parties agreed to change the usual order of argument and agreed that, instead, both would simultaneously exchange full and final written submissions in respect of all outstanding issues and motions. Then, each would have a written reply, also simultaneously exchanged. Finally, each would have a short and time-limited, subsequent, oral reply. This is the “argument agreement” referred to in the notice of application.”
[9] It is the position of the applicant, as set out in paras. 5 to 7 of its factum, that it complied in good faith with this argument agreement but the respondent did not and “egregiously split its argument on many, many matters and made, in written reply, the argument that the arbitrator implemented as the basis for the impugned disposition.”
[10] Further, the applicant asserts that it “emphatically alerted the arbitrator to the multiple” abuses of process by the respondent “associated with the improper reply and split argument” including breach of the argument agreement which was “apparently ignored” by the arbitrator. The applicant goes further and submits that because its argument was ignored by the arbitrator, the arbitrator did not have the benefit of the applicant’s submissions “and made a patently unreasonable decision on the central disposition of the award.”
[11] In the alternative, the applicant seeks leave to appeal the impugned parts of the award pursuant to s. 45(1) of the Act. The applicant, in its factum at para. 3, acknowledges that “sections 45 and 46 of the Act are entirely distinct challenges, although remedies overlap.”
[12] The respondent takes issue with the applicant’s assertion that there was an agreement that there would be a simultaneous exchange of full and final written submissions. The respondent also points out that the applicant made a written submission on July 11, 2014, pursuant to s. 44 of the Act asserting that the arbitrator had breached the applicant’s rights to natural justice and had exceeded his jurisdiction. The submission specifically made reference to the alleged breach of the argument agreement. The respondent submits that, as a result, the arbitrator considered these issues and rendered a decision on the s. 44 challenge, which is part of the application record. However, as the respondent accurately noted, the resolution of this issue is irrelevant to both the respondent’s motion and the applicant’s cross-motion and will go to the merits of the application.
[13] The respondent takes no issue that the applicant is entitled to pursue a claim for relief pursuant to s. 46 of the Act and could seek to introduce fresh evidence in support of that part of the application. The respondent also agreed that the extent to which the applicant is entitled to utilize fresh evidence in relation to that issue should not be considered on this motion. Therefore, its argument on this motion was confined to the relief sought by the applicant pursuant to s. 45(1) of the Act.
[14] In addition, the respondent’s motion raises the issue of its right to cross-examine Mr. Hendrikx who swore an affidavit on July 25, 2014, in support of the applicant’s claim for relief pursuant to s. 46 of the Act.
[15] The respondent’s position is that the applicant, through Mr. Hendrikx’s affidavit has put forth evidence which it wishes to cross-examine prior to the hearing of the application. It raised the potential of cross-examination on August 14, 2014. The respondent submits that paras. 10 – 12 and 23 of Mr. Hendrikx’s affidavit in particular contain “substantive testimony that lies at the very heart of” the applicant’s claim for relief under s. 46.
[16] Cross-examination of Mr. Hendrikx’s affidavit was scheduled for October 28, 2014, and a notice of cross-examination was served in London, Ontario. Thereafter, the applicant’s right to cross-examine Mr. Hendrikx was contested and Mr. Hendrikx did not attend resulting in the respondent attaining a certificate of non-attendance and incurring fees of $527.80.
[17] The respondent has filed an affidavit of a law clerk to provide documentation. It has not introduced evidence in response to the application. The applicant’s position is that if Mr. Hendrikx is cross-examined then Ms. Black, counsel for the respondent, should be examined.
The Respondent’s Motion
Issue 1: The Jurisdiction Issue.
[18] The respondent seeks an order striking certain sub-paragraphs of the applicant’s notice of application on the basis that it is “plain and obvious” that these paragraphs disclose no legal right to appeal. The particular sub-paragraphs in issue request certain relief on the application as follows:
(c) for directions about the continued conduct of the arbitration, including that the court make the necessary findings to address the impugned parts of the award;
(f) for an order granting leave to appeal and, on appeal, varying or setting aside, or alternatively remitting, the Award set out above; and,
(g) for an order that, upon variation or setting aside of the Award, or upon remitting of the Award, that the court provide its opinion on a question of law and give directions about the further conduct of the arbitration.
[19] The respondent’s notice of motion originally referenced only Rule 21.01(1)(b). However, the respondent’s factum and argument focused on Rule 21.01(3), which permits a defendant to move to have an action stayed or dismissed on the ground that the court has no jurisdiction over the subject matter of the action.
[20] The applicant concedes that although the notice of application is not a “pleading” under Rule 21.01(b), Rule 21 does apply to a notice of application.
Relevant Rules
[21] As noted the respondent moves under Rule 21.01 which states:
- A party may move before a judge,
(a) for the determination, before trial, of a question of law raised by
a pleading in an action where the determination of the question
may dispose of all or part of the action, substantially shorten the
trial or result in a substantial saving of costs; or
(b) to strike out a pleading on the ground that it discloses no
reasonable cause of action or defence,
and the judge may make an order or grant judgment accordingly.
(2) No evidence is admissible on a motion,
(a) under clause (1)(a), except with leave of a judge or on consent
of the parties;
(b) under clause (1)(b).
(3) A defendant may move before a judge to have an action stayed or
dismissed on the ground that,
Jurisdiction
(a) the court has no jurisdiction over the subject matter of the
action; …
[22] The applicant relies on Rule 2.02 which provides as follows:
A motion to attack a proceeding or a step, document or order in a proceeding for irregularity shall not be made, except with leave of the court,
(a) after the expiry of a reasonable time after the moving party knows or ought reasonably to have known of the irregularity; or
(b) if the moving party has taken any further step in the proceeding after obtaining knowledge of the irregularity.
Relevant statutory provisions of the Arbitration Act
[23] Section 3 of the Act provides that parties to an arbitration agreement may agree, expressly or by implication, to vary or exclude any provisions of the Act except for certain delineated sections. Section 45 is not one of the sections delineated in s. 3 in relation to arbitration agreements, which are not family arbitration agreements. Therefore, it was open to the parties to expressly, or by implication, agree to exclude from their agreement the terms of s. 45.
[24] Section 45 of the Act provides as follows:
(1) If the arbitration agreement does not deal with appeals on questions of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it satisfied that:
a) the importance to the parties of the matters at stake in the arbitration justifies an appeal; and
b) the determination of the question of law at issue will significantly affect the rights of the parties.
(2) If the arbitration agreement so provides, a party may appeal an award to the court on a question of law.
(3) If the arbitration agreement so provides, a party may appeal an award to the court on a question of fact or on a question of mixed fact and law.
[25] The court has jurisdiction to set aside an arbitration award pursuant to s. 46 of the Act, on a number of grounds which include:
The applicant was not treated equally and fairly, was not given an opportunity to present a case or respond to another party’s case …
The procedures followed in the arbitration did not comply with this Act.
The Relevant Provisions of the Arbitration Agreement
[26] The agreement the parties entered into dated March 27, 2008 included the following provision in article 25.1(d):
The decision, including as to costs, of the arbitrator shall be final and binding on the parties and there shall be no appeal therefrom.
The Position of the Respondent Moving Party
[27] The respondent’s position is that the parties agreed that there would be no appeals. Therefore, any right of appeal on either a question of law, or a question of mixed fact and law is precluded under s. 45 of the Act. As a result, the paragraphs of the application referencing an appeal or leave to pursue an appeal ought to be struck pursuant to Rule 21.01(1)(b) and Rule 21.01(3) on the basis that:
(a) the court does not have jurisdiction to hear the appeal;
(b) it is plain and obvious that paragraphs in the application relating to an appeal disclose no legal right or entitlement to appeal the arbitrator’s decision and it is plain and obvious there is no right of appeal; and
(c) even if the court had jurisdiction to hear an appeal, the applicant has failed to articulate an error of law on which to appeal.
[28] According to the respondent, as set out in paragraphs 9, 54 and 55 of its factum,
The Ontario Arbitration Act, 1991 sets up two different regimes for appeals under s. 45. On questions of law, the parties may withdraw the court’s jurisdiction to hear an appeal by their terms of reference, but silence in the arbitral terms of reference would have the court with jurisdiction. In questions of mixed fact and law, the arbitral terms of reference must expressly provide for such an appeal in order for the court to assume jurisdiction. In the present case, the arbitral terms of reference under Art. 25.1(d) provide that there shall be no appeal.
A right of appeal on a question of fact or mixed fact and law can only exist if specifically provided for in the arbitration agreement, per s. 45(3) of the Act. An appeal as of right on a question of law can only exist if specifically provided for under the arbitration agreement, per s. 45(2). Silence in the arbitration agreement on a right of appeal is a condition precedent to an appeal with leave on questions of law, per s. 45(1).
It necessarily follows, then an arbitration agreement that prohibits a right of appeal fails to meet the condition precedent of silence required by s. 45(1) of the Act.
[29] The respondent’s position is that the issue of whether the court has jurisdiction, in relation to the alternative relief sought by the applicant (that is, leave to appeal the impugned award) should be determined on this motion at this time. The respondent’s counsel noted at the hearing of the motion that although the motion was originally grounded on Rule 21.01(1), Rule 21.01(3), which raises the issue of the jurisdiction of the court, is the real basis for the motion.
[30] The respondent takes the position that there has been no delay in raising this issue and notes that the issue of the court’s jurisdiction for an appeal has been in issue since July 19, 2014. The respondent further takes the position that jurisdiction is a discrete issue, a preliminary matter and it is an appropriate use of judicial resources and will ultimately reduce the length and complication of the application if this issue is determined now. The respondent’s position is that the scope of preparation of counsel and the application judge should be properly defined before the hearing of the application which will be facilitated by a decision on this motion.
[31] Furthermore, the respondent’s position is that there is no question of law or error of law articulated in the application and if the issue on this motion is not dealt with, it will be necessary to prepare for an ambiguous issue which will involve a review of the entire voluminous record and create the expenditure of unnecessary time and resources.
The Position of the Applicant
[32] The applicant submits that the motion should be dismissed for delay pursuant to Rule 21.02 and Rule 2.02 noting also that Rule 2.02 required the respondent to seek leave to bring the motion now that it has taken a further step in the proceeding and it has not done so. In addition, the applicant also takes the position that, at this stage of the application with the parties having agreed to a timetable, this motion should be deferred to the hearing of the application.
[33] Further, the applicant takes the position that the motion is a waste of judicial time and resources. It also asserts that the motion amounts to “splitting” the application so that there will be a decision made on this motion and another decision on the application with both the motion and the application having different routes of appeal, all of which the applicant found to be undesirable. The applicant’s position is that the “best procedural approach” is to order that the motion be heard at the application in the manner determined by the application judge.
[34] The applicant emphasizes that it does not rely on s. 45(2) or (3) of the Act and only relies on s. 45(1) of the Act recognizing that it must seek leave of the court to appeal on a question of law. The applicant’s substantive position on the motion is that the application raises a novel point of law that should not be resolved on this Rule 21 motion. According to the applicant, the novel point of law is whether “leave to appeal” is included within the party’s stated intentions in their agreement that there was right “to appeal”. In other words the applicant’s position is that there is an unresolved question as to whether seeking leave to appeal on a question of law is excluded by the final and binding language in the arbitration agreement and the agreement that there shall be no appeal.
[35] Paragraph 90, 91 and 92 of the applicant’s factum succinctly set out its position as follows:
The SSO Contract does not exclude a right to seek “leave to appeal”. Instead, it provides that the Award “shall be final and binding … and there shall be no appeal therefrom”. It is conceded by Orgaworld that provision excludes consideration of appeal under sections 45(2) and (3) of the Act.
However, Section 45 (1) of the Act provides that “if the arbitration agreement does not deal with appeals on questions of law”, leave to appeal may be granted if the Court is satisfied of the importance and that the appeal will significantly affect the rights of the parties. Clearly, the SSO Contract does not expressly provide for “appeals on questions of law” nor does it specifically exclude any “leave to appeal” motion.
The issue is whether the right to seek leave to appeal is excluded, by implication. There is limited and conflicting authority.
[36] Finally the applicant submits that the only subparagraph of the application which ought to be attacked is subparagraph (f) which specifically requests an order granting leave to appeal. The applicant takes the position that subparagraph (c) relates to relief under s. 46 and subparagraph (g) relates to relief under both s. 45 and s. 46 of the Act and because of that overlap ought not to be struck.
[37] Furthermore, the applicant disagrees with the respondent’s position that a resolution of this motion will reduce the time required for the application. Indeed, as set out at para. 101 of its factum, the applicant takes the position that “making this motion flies in the face of Rule 1.04 requiring just, expeditious and least expensive determinations of disputes.” The applicant points out that its argument on “implied terms” will be made not only as part of its argument that it is entitled to leave to appeal the arbitrator’s decision, but also, as elaborated in para. 102 of its factum as “a central part of its s. 46 challenge.” Therefore, because the law associated with “implied terms” will be argued on the application even if it has no right of appeal, there will be no judicial economy from determining the right to appeal issue on this motion.
Disposition on Issue 1
[38] One of the applicant’s positions on this motion was that the respondent’s motion should be dismissed summarily for delay because the respondent had not brought the motion under Rule 21.01(b) promptly as required by Rule 21.02. The applicant also took the position that the respondent was also obliged to move promptly and was required to seek leave under Rule 2.02 to bring this motion because it is attacking an irregularity in the proceeding after taking a step and having failed to do so, the motion should be dismissed.
[39] In Fleet Street Financial Corp. v. Levinson, [2003] O.J. No. 441, at para. 16, Roleau J., as he then was, noted that the obligation to bring a Rule 21.01 motion promptly is clear. He expressed the view that in the appropriate circumstances a motion judge may exercise his discretion not to grant the relief sought. He indicated he would have considered it appropriate to dismiss the motion for delay when it was brought on the eve of discoveries; the delay would disrupt the case management schedule; and, the motion if successful would not have resulted in obviating the need to hold any discoveries and would only have resulted in part of the claim against the defendant being struck. He noted, however, at para. 15 that there was another line of cases that was to the effect that “delay is not a bar to the bringing of a Rule 21.01 motion but only a factor to be considered in the awarding of costs.”
[40] I note that in Schulz v. Johns, [2014] ONSC 387 at para. 9, Perrell J. pointed out that he could have dismissed the defendants’ motion pursuant to Rule 21.01(1)(b) because they took the fresh step of delivering a pleading rather than bringing a motion to have the original statement of claim struck out. He referred to observations of Brown J., as he then was, in Bell v. Booth Centennial Health Care Linen Services, 2006 O.J. No. 4646 (S.C.) at paras. 5-6 that a motion to attack a statement of claim for failing to disclose a cause of action is an attack on an irregularity and cannot be made without leave of the court, pursuant to Rule 2.02, if the moving party has taken a further step in the proceeding which would include pleading to the statement of claim in issue.
[41] However, I note that in Bell, as Brown J. outlined, the timeliness of the defendant’s motion had not been raised by the plaintiff who took no objection to the timeliness of the motion and responded to the motion on its merits. As a result, Brown J. also considered the motion on its merits. Similarly, in Schulz, Perrell J. proceeded to deal with the defendants’ motion on its merits while expressing agreement with Brown J., as he then was, that the practice of delivering a statement of defence and then a Rule 21.1(1) motion should be discouraged.
[42] More important, however, is the fact that this motion raises a question of law. As I noted at the hearing, this motion is more properly characterized by the respondent in its factum as being a motion pursuant to Rule 21.01(3) because it raises the question of whether the court has jurisdiction to address the alternative relief in the application. I am not prepared to accede to the applicant’s request that this motion be dismissed for delay alone, regardless of merit, as a result of Rule 21.02 and Rule 2.02.
[43] I also am not prepared to defer the issue on this motion to the application judge. The parties made extensive argument on the motion and referenced considerable jurisprudence. It is appropriate to render a decision on the motion which the respondent is entitled to make and which in my view will result in judicial economy. The fact that there is the potential for an appeal from a decision on the motion, which would impact on the agreed upon timetable, does not oust the respondent’s right to have the motion heard.
[44] In reaching this conclusion, I am guided by the Court of Appeal decision in TeleZone Inc. v. The Attorney General (Canada), 2008 ONCA 892, where the court considered the jurisdiction of this court to adjudicate claims pleaded in four statements of claim. The court noted at para. 92 that:
The proper approach is to determine whether the Superior Court has jurisdiction to adjudicate the plaintiff’s claim. If it does, that ends the matter unless there is legislation, or there is an arbitral agreement, that clearly and unequivocally removes that jurisdiction.
[45] In two of the cases under appeal, the motions’ judges had utilized Rule 21.01(1)(b) to deal with the issue. The court stated further at para. 92:
Both [the motions’ judges] were incorrect in applying the plain and obvious test, suitable for a Rule 21.01(1)(b) motion dealing with whether a statement of claim discloses a reasonable cause of action. Either the Superior Court has jurisdiction, or it doesn’t have jurisdiction.
[46] Further at para. 108, the Court of Appeal commented that the issue of whether the court has jurisdiction to adjudicate a claim should be decided “without the consideration and application of extrinsic evidence bearing upon the conduct of the parties that gave rise to their dispute.” The court is to examine the statement of claim in each case. However, “extrinsic evidence that has been explicitly referred to within the pleadings or documents referred to and relied on in the statement of claim may be considered to determine the substance and nature of the plaintiff’s claim when this is unclear from reading the statement of claim.” Finally, the court noted at para. 109:
The process to decide whether a court has subject matter jurisdiction is found in Rule 21.01(3) which permits a defendant to move to have an action stayed or dismissed on the ground that court has no jurisdiction over the subject matter of the action. This summary procedure (sic) well suited to determining the issue as a preliminary matter ...
Moreover, it is essential to decide jurisdiction motions early in the proceedings and expeditiously so that the plaintiff can get on with its case.
[47] While it was observed in TeleZone that the Crown in that case had not raised the jurisdiction issue “until well on in the proceedings” and it was noted that the Crown had been criticized for delaying applications of this nature “until the eve of the hearing”, there was no suggestion that the motion should be dismissed for delay or otherwise deferred.
[48] I turn next to review the jurisprudence relevant to the jurisdiction issue.
[49] In Superior Propane Inc. v. Valley Propane (Ottawa) Ltd., 1992 O.J. No. 2773 (Gen. Div.), where the parties had agreed that the arbitrator’s decision would be final and binding, the application for leave to appeal the award was dismissed referencing s. 3 of the Act. Section 3, as previously set out, allows parties to an arbitration agreement to vary or exclude any provision of the Act expressly or by implication except for those specifically delineated. Rights under s. 45 may be excluded by agreement.
[50] In Ontario v. Abilities Frontier Cooperative Homes Inc., [1996] O.J. No. 2586 (Gen. Div.), leave to appeal to the Court of Appeal refused, the court considered an agreement which stated that if there were disputes about the interpretation of the agreement or about the actions taken under the agreement, the parties would agree to arbitrate the dispute under the Act and the arbitration award would be final and binding and not subject to appeal.
[51] Sharpe J., as he then was, found at para.29 that the language of the clause indicated that it was “intended to perform a limited purpose” because it limited its application to certain disputes and it could only be used after attempts had been made to resolve the dispute through an internal review process. Of most particular interest on this motion, he also found as follows at para. 33:
The third element is that the clause makes the arbitration award “final and binding and not subject to appeal”. Read in conjunction with the Arbitration Act, s. 45, the clause has the effect of immunizing the arbitrator’s decision from appellate review. Standing by itself, such a provision would not limit the reach of a more expansive clause giving generous definition of the nature of disputes subject to arbitration. However, in my view, read in light of the factors I have already mentioned, this provision provides an added indicator of the limited scope of this clause. This provision is indicative of an intention to create an arbitration process designed to deal in a efficient and expeditious manner with disputes that might arise along the way to completion of the project. It indicates that the disputes contemplated have to be resolved quickly and finally so that the project is not stalled. In stark contrast to disputes of that description, the nature of the dispute that has arisen gives rise to fundamental issues of public law and the relationship of government decision-making and priority-setting to the contractual obligations of government. I find it difficult to imagine that absent more generous language, a dispute of this nature should be seen as appropriate for decision by a single adjudicator without further recourse to the courts.
[52] Therefore, Sharpe J., as he was then was, indicated that an agreement, with language comparable to the language of the agreement in issue here; could “immunize” the arbitrator’s decision from appellate review. However, he found that the arbitration agreement he was considering did not apply to the dispute in issue.
[53] In Labourer’s International Union of North America, Local 183 v. Carpenters and Allied Workers Local (1997), 1997 1429 (ON CA), 34 O.R. 3d 472 (C.A.) (Liuna) the court considered the question of whether the parties to an agreement had explicitly or implicitly agreed to exclude the right of appeal with leave on questions of law under s. 45 of the Act. The Court of Appeal noted that, at the time the agreement in question was entered into, the predecessor to the current legislation was applicable. That earlier legislation did not contain a statutory right of appeal although it did not preclude the parties from including a right of appeal in an agreement.
[54] As the court noted:
In contrast to the earlier Act, under the 1991 Act, a statutory right of appeal exists, subject to certain conditions, unless the parties expressly or by implication eliminate the right of appeal. Specifically, s. 45 of the Arbitration Act, 1991 provides for appeals in certain circumstances…
[55] In Liuna, the relevant agreement provided that an arbitration award would be binding upon the parties. It was argued by the respondent in that case that the words “final and binding arbitration” under the former Act should not be interpreted as removing any right of appeal.
[56] The court referred to earlier decisions of the Court of Appeal where it had been found that a “final and binding clause reflects an intention to exclude a statutory right of appeal” (see Ontario Public Service Employees Union (1985), 1985 2257 (ON CA), 52 O.R. (2d) 705 (C.A.) and Yorkville North Development Ltd. V. North York (City) (1988), 1988 4701 (ON CA), 64 O.R. (2d) 225 (C.A.)) and ultimately concluded that because the parties had used the words “final and binding” arbitration in their agreement as the basis on which they would resolve their disputes, they had indicated their intention that there would be no right of appeal.
[57] In 2009, in Inforica Inc. v. C.G.I Information Systems and Management Consultants Inc. 2009 ONCA 642, 97 O.R. 3d 161 (C.A.), Sharpe J. A. considered the jurisdiction of an arbitrator to award security for costs and whether an application to set aside such an order lied to the Superior Court. This case did not address s. 45 of the Act because the application judge had not granted leave to appeal under s. 45(1). This case considered only s. 17(8) and s. 46(1) of the Act “as possible sources for the application judge’s jurisdiction” (see para. 15).
[58] Sharpe J. A. referenced s. 6 of the Act which limits court intervention in matters governed by the Act except for certain purposes. His comments at para. 14, are important on this motion. He noted as follows:
It is clear from the structure and purpose of the Act in general, and from the wording of s. 6 in particular, that judicial intervention in the arbitral process is to be strictly limited to those situations contemplated by the Act. This is in keeping with the modern approach that sees arbitration as an autonomous, self-contained, self-sufficient process pursuant to which the parties agree to have their disputes resolved by an arbitrator, not by the courts. As Inforica states in its factum, “arbitral proceedings are presumptively immune from judicial review and oversight.” The Act encourages parties to resort to arbitration, “require[s] them to hold to that course once they have agreed to do so”, and “entrenches the primacy of arbitration over judicial proceedings ... by directing the court, generally, not to intervene”: Ontario Hydro v. Denison Mines Ltd., [1992] O.J. No. 2948 (Ont. Gen. Div.), Blair J.
[59] In Weisz v. Four Seasons Holdings Inc., 2010 ONSC 4456, Morawetz J. dealt with what he described as a “threshold issue” namely, the question of whether the agreement between the parties, which provided that an arbitrator’s decision was final and binding, permitted an appeal on a question of law. After quoting extensively from the Court of Appeal decision in Liuna, Morawetz J. concluded that the parties had turned their minds to the terms of the arbitration and agreed that the decision of the arbitrator would be final and binding. He ultimately concluded that the parties implicitly excluded the right to appeal the decision on a question of law pursuant to s. 45 of the Act.
[60] It is interesting to note that Morawetz, J., at para. 36, also considered the comments of Blair J. in Ontario Hydro, approved of by Sharpe J. A. in Inforica:
In my view, it is also worthwhile to consider the words of Blair J. (as he then was) in the motions court decision of Ontario Hydro v. Denison Mines Ltd., [1992] O.J. No. 2948 (Gen. Div.), at p. 3 (QL), as reference in Kucyi:
The Arbitration Act, 1991…enacted a new regime for the conduct of arbitrations in Ontario. This new regime is more sophisticated than that of the former Act and more consistent with international commercial arbitration practices. It is designed, in my view, to encourage parties to resort to arbitration as a method of resolving their disputes in commercial and other matters, and to require them to hold to that course once they have agreed to do so.
In this latter respect, the new Act entrenches the primacy of arbitration proceedings over judicial proceedings, once the parties have entered into an arbitration agreement, by directing the court, generally not to intervene, and by establishing a “presumptive” stay in court proceedings in favour of arbitration.
[61] In Piaza Family Trust v. Veillette 2011 ONSC 2820 (Div. Crt.), R. J. Smith J. considered the question of whether there was a right of appeal under s. 45 of the Act where the arbitration agreement stated that the decision was final and binding and was not to be appealed. In that case, the applicant sought leave to appeal on the ground of an alleged error in law by the arbitrator. Smith J. applied the Abilities Frontier decision and its reasoning was relied on in concluding that there is no right of appeal under s. 45 where the arbitration agreement states the arbitrator’s decision is final and binding with no right of appeal. That is, the applicant was not granted leave to appeal in circumstances where the agreement contained the words “final and binding” and “not subject to any appeal”, thereby excluding the application of s. 45(1) of the Act. Smith J. concluded that the arbitration agreement dealt with appeals on questions of law and appeals on questions of mixed fact and law and therefore any appeal under s. 45 of the Act was prohibited.
[62] On this motion, the applicant submits that, notwithstanding this jurisprudence, there is limited and conflicting authority on the issue of whether the right to seek leave to appeal is excluded by implication in an arbitration agreement with a provision similar to the one in issue here.
[63] The applicant references a 1995 decision of this court, Mungo v. Saverino, 1995 O.J. No. 1659 (Gen. Div.) which concluded that there was no right to apply for leave to appeal when the parties had contracted to proceed to arbitration “without right of appeal”.
[64] In addition the applicant references NRI Manufacturing Inc. v. Gross, 2000 O.J. No. 2724 (S.C.) where the court considered a provision of an agreement that provided that the decision of the arbitrator would be final and binding and there would be no appeal therefrom. The court concluded at para. 15 that the parties had agreed not to invoke the jurisdiction of the court. The applicant’s position is that although the court concluded that there was no right of appeal it did not expressly consider whether leave to appeal would have been prohibited.
[65] In addition to what the applicant asserts is a non-consideration of the leave to appeal issue, in Ontario, the applicant also relies on a case from Alberta and a case from Saskatchewan, both of which held that even though an arbitration agreement provided there would be no appeal a party could seek leave to appeal under the applicable provincial legislation.
[66] In Zaharko v. Milton 2012 ABQB 141, the applicant sought leave to appeal an arbitration award arguing an error in law. The Arbitration Act in Alberta provided that “if the arbitration agreement does not provide that the parties may appeal an award to the court on a question of law, a party may appeal on such a question and the court shall grant the appeal if satisfied that the importance to the parties of the matter at stake in the arbitration justifies an appeal and determination of the question of law will significantly affect the rights of the parties.
[67] The court held that the rules and procedures of the Real Estate Board in issue in Zaharko could not prevent the parties from exercising their rights under the Arbitration Act. The court reasoned that if it was the intention of the parties that their rights of appeal were to be precluded to the extent that they had waived their rights to appeal completely, then the parties would be obliged to have made such an agreement clearer. The court held that the parties had made no such agreement in the circumstances of that case noting at para. 5 “it is trite to say, that the waiver of a substantive right such as a right of appeal must be clearly established.”
[68] In Earth Vision Products Inc. v. Saskatchewan Wheat Pool, [1996] S.J. No. 664 (Q. B.), the court considered an application for leave to appeal the decision of a single arbitrator pursuant to an arbitration agreement that provided that the decision would be final and binding on all parties. The relevant provision of the Arbitration Act in Saskatchewan was that if the arbitration agreement did not provide that the parties may appeal an award to the court on a question of law, a party could undertake such an appeal with leave if the court is satisfied that the importance to the parties of the matters at stake in the arbitration justifies an appeal and determination of the question of law at issue will significantly affect the rights of the parties.
[69] The applicant asserts that the specific issue of exclusion of leave to appeal has not been fully addressed in Ontario Law and it is not plain and obvious that the language of this arbitration agreement excluded the right to seek leave to appeal. Because granting leave to appeal involves matters that transcend just the correctness of the impugned parts of the award, express contractual language is required to exclude the right to seek leave to appeal.
[70] In my view, the jurisprudence in Ontario is clear that an agreement that there shall be no appeal from a final and binding decision of an arbitrator includes agreement that there will be no application for leave to appeal. In relation to Earth Vision, the Saskatchewan case relied on by the applicant, I note that the arbitration agreement simply provided that the award of the arbitrator would be final and binding on all parties and the agreement was silent in relation to the issue of appeal. As noted, the relevant provision of the Saskatchewan Arbitration Act provided that if the arbitration agreement did not provide that the parties may appeal an award to the court on a question of law, then any party could appeal with leave. The court’s decision that a party could seek leave to appeal was based on the fact that the parties had not waived their right of appeal in the arbitration agreement. Therefore, to paraphrase the argument of the respondent on this motion, the arbitration agreement in issue in Earth Vision met the condition precedent of silence required in order to invoke the right to seek leave to appeal pursuant to the applicable Arbitration Act.
[71] With respect to the decision in Zaharko, the relevant provision of the Arbitration Act of Alberta is different from s. 45(1) of the Act. As noted, the Alberta statute provides that if the arbitration agreement does not provide that the parties may appeal an award to the court on a question of law, a party may appeal on such a question with leave of the court. Section 45(1) of the Act, is different in that it is applicable if the arbitration agreement does not deal with appeals on questions of law. The same can be said in relation to the Saskatchewan Arbitration Act. Here the arbitration agreement in my view, has dealt with appeals, including leave to appeal, by the parties’ agreement that there is no right of appeal.
[72] For the foregoing reasons, I am satisfied that pursuant to Rule 21.01(3), the court has no jurisdiction over the alternate relief sought in the application, namely, an appeal of the arbitrator’s decision.
[73] I note for the sake of completeness that there is a further argument made by the respondent that supports its position that the applicant has no right of appeal, which relates to the fact that even if s. 45(1) is applicable, leave to appeal can only be sought in relation to a question of law.
[74] The Supreme Court of Canada decision in Sattva Capital Corporation v. Creston Molly Corp., 2014 SCC 53, is relevant to this issue. The Supreme Court of Canada considered an appeal from the decision of the Court of Appeal that granted leave to appeal on the basis that the arbitrator’s failure to address the meaning of a provision in an agreement raised a question of law.
[75] The Supreme Court of Canada found that it was an error to conclude that contractual interpretation constituted a question of law. Rather the court concluded at para. 50 that:
Contractual interpretation involve 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.
[76] The court explained the purpose of the distinction between questions of law and those of mixed fact and law at para. 51 as follows:
One central purpose of drawing a distinction between questions of law and those of mixed fact and law is to limit the intervention of appellant courts to cases where the results can be expected to have an impact beyond the parties to the particular dispute. It reflects the role of Courts of Appeal in ensuring the consistency of the law, rather than in providing a new form for parties to continue their private litigation…
[77] The court went on to note at para. 53 that it may be possible to identify an extricable question of law from within what was initially characterized as a question of mixed fact and law noting as follows:
Legal errors made in the course of contractual interpretation 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” (King, at para. 21). Moreover, there is no question that many other issues in contract law do engage substantive rules of law: the requirements for the formation of the contract, the capacity of the parties, the requirement that certain contracts be evidenced in writing, and so on.
[78] The court went on to note however, at para. 54 that “courts should be cautious in identifying extricable questions of law in disputes over contractual interpretation”. Further noting that:
Given the statutory requirement to identify a question of law in a leave application pursuant to s. 31(2) of the AA, the applicant for leave and its counsel will seek to frame any alleged errors as questions of law. The legislature has sought to restrict such appeals, however, and courts must be careful to ensure that the proposed ground of appeal has been properly characterized.
[79] Finally, the court noted at para. 55:
The goal of contractual interpretation to ascertain the objective intentions of the parties, is inherently fact specific. The close relationship between the selection and application of principles of contractual interpretation and the construction ultimately given to the instrument means that the circumstances in which a question of law can be extricated from the interpretation process will be rare.
[80] The applicant’s position is that the threshold issue as to whether there is an inextricable question of law in the impugned part of the award cannot be analyzed on this motion given that the award is a contract interpretation case because almost by definition the result will not be plain and obvious. The applicant submits that it will argue on the application that the arbitrator’s incorrect legal approach to “implied term in a contractual interpretation case,” is inextricable as a question of law.
[81] In relation to its submission, the applicant relies on Ottawa v. Coliseum Inc., 2014 ONSC 3838, Farm Credit Canada v. National Bank of Canada 2011 SKQB 321, JEL Investments Ltd. V. Boxer Capital Corp., 2011 BCCA 142, para. 27.
[82] In Ottawa v. Coliseum Inc., the applicant city sought leave to appeal from an arbitrator’s award on what it asserted were questions of law. I note that in that case there was no arbitration agreement which addressed the issue of appeals. Rather, the parties had signed minutes of settlement. A dispute arose in relation to whether the obligations under the minutes of settlement had been satisfied and the parties arbitrated that dispute. In that case, there were specific allegations of legal errors made by the arbitrator and I agree with the respondent that it was clear that the rare circumstances existed to allow the questions of law to be extricated from the interpretation of the contract.
[83] Here, there is no contention that the arbitrator incorrectly applied a legal principle; there is no issue that wrong law was applied. The circumstances are quite unlike those before the court in Ottawa where the applicant city had asserted that the legal test for waiver and estoppel and for awarding compensatory damages was wrong, and the arbitrator did not apply the proper law.
[84] I note that the applicant also relied on the decision of the court in Farm Credit Canada v. National Bank of Canada, for the proposition that an allegation that the arbitrator erred in failing to give proper meaning and affect to certain subsections of the agreement disclosed an error in law. In that case, the arbitrator’s modification of provisions of the arbitration agreement was in conflict with the plain and ordinary meaning of other provisions of the agreement. Therefore, the inclusion of an implied term was found to constitute an error of law in that case.
[85] However, I agree with the respondent that the application does not articulate a question of law for the court’s consideration on appeal.
[86] Accordingly, had it been necessary for the respondent to rely on its secondary argument that there was no question of law in issue, I would agree with the respondent’s submission in that regard.
[87] Having reached the conclusion that the court does not have jurisdiction to hear an appeal of the arbitrator’s decision, I am not inclined to provide a detailed order striking all references in the application relevant to an appeal subject to further submission of the parties if necessary.
Issue Number 2 – Should Mr. Hendrikx’s affidavit be struck for failure to attend for cross-examination? Alternatively should Mr. Hendrikx be ordered to attend for cross-examination?
[88] The respondent’s motion seeks an order striking paragraphs 10-12, 23 and 29 from Mr. Hendrikx’s affidavit on the basis that they constitute fresh evidence that was not before the arbitrator and thus, is not properly before the court on the application, or alternatively, an order striking Mr. Hendrikx’s affidavit on the basis of his refusal to attend for cross-examination, or in the further alternative, an order that Mr. Hendrikx attend for cross-examination and other related relief.
[89] The relevant rule is Rule 39.02(1) which provides as follows:
39.02 (1) A party to a motion or application who has served every affidavit on which the party intends to rely and has completed all examinations under rule 39.03 may cross-examine the deponent of any affidavit served by a party who is adverse in interest on the motion or application. R.R.O. 1990, Reg. 194, r. 39.02 (1).
[90] The respondent submits that this rule creates a prima facie right entitling it to cross-examine Mr. Hendrikx and furthermore the principles of natural justice require that it be granted the opportunity to cross-examine him in order to respond to the applicant’s case.
[91] The Court of Appeal in Mennes v. Canada (Attorney General), 2014 ONCA 690, [2014] O.J. No. 4789 at paras. 26 and 27 observed the following:
26 When an affidavit is submitted in support of a motion or an application, the general rule is that the responding party has the right to cross-examine on that affidavit: rule 39.02(1). Perell J. has recently synthesized the case law on the scope of cross-examination on an affidavit in an application or motion in Ontario v. Rothmans Inc., 2011 ONSC 2504, 5 C.P.C. (7th) 112, at paras. 138-149.
27 However, the right to cross-examine on an affidavit is always subject to the court’s discretion to control its own process. In Confectionately Yours, Inc. (Re) (2002), 291 D.L.R. (4th 72 (Ont. C.A.), leave to appeal to S.C.C. refused, [2002] S.C.C.A. No. 460, at para. 65, Borins J.A. stated:
Although there is a prima facie right to cross-examine upon an affidavit, the court has discretion to control its own process by preventing cross-examination or limiting it, where it is in the interests of justice to do so. See e.g., Re Ferguson and Imax Systems Corp. (1984), 1984 2021 (ON SC), 47 O.R. (2d) 225, 11 D.L.R. (4th) 249 (Div. Ct.).
[92] There is no question that the applicant seeks to rely on evidence presented by Mr. Hendrikx. According to para. 28 of the applicant’s factum:
… The evidence of the argument agreement, and its subsequent corporation into the arbitrator’s directions setting out the timing of those steps, is described in three paragraphs of Mr. Hendrikx’s affidavit [indicated in the footnotes to be paragraphs 10 to 12].
[93] In paragraph 82 of its factum, the respondent submits that Mr. Hendrikx’s affidavit contains a number of bald assertions and this evidence must be tested.
[94] Indeed, the respondent goes further, as set out in para. 83 of its factum, taking the position that Mr. Hendrikx’s evidence “goes to the heart” of the applicant’s substantive submissions on the application.
[95] The position of the respondent is that Mr. Hendrikx’s “categorical refusal” to submit to cross-examination warranted a strong response from the court pursuant to Rule 34.15(1) and his affidavit ought to be struck. However, I do not find that these circumstances justify what must be a rare order, as noted by the Divisional Court in Gomommy Software.com Inc. v. Blacmont Inc., 2014 ONSC 2478 at para. 2. I cannot conclude that the applicant’s compliance was “contumelious” or that the respondent can demonstrate actual prejudice that cannot be resolved by the alternative relief it seeks.
[96] I next turn to the respondent’s alternative position that it is entitled to an order that Mr. Hendrikx attend for cross-examination with all relevant documentation produced one week in advance.
[97] The applicant asserts in its cross-motion factum that there is no dispute with respect to the evidence in Mr. Hendrikx’s affidavit because the respondent has not led evidence to contradict or qualify Mr. Hendrikx’s affidavit.
[98] However, it is clear that the respondent contests the evidence of Mr. Hendrikx and strenuously disagrees that his evidence can be considered uncontroverted because it has not led evidence to contradict that evidence. The respondent’s clear position is that Mr. Hendrikx’s evidence is not uncontroverted and the respondent will be relying on documents in the application record in relation to that issue.
[99] I disagree with the applicant that the fact that the respondent has not led evidence disentitles it to cross-examination. These circumstances are quite distinct from Mennes where the Court of Appeal found at page 29 the affidavit on which cross-examination was sought was only providing an “uncontroversial recitation of proceedings initiated and discontinued by the appellant.”
[100] The applicant also resists cross-examination asserting litigation privilege. In Blank v. Canada (Minister of Justice), 2006 SCC 39, the court made clear that litigation privilege, which is separate and distinct from solicitor-client privilege, exists to provide a “zone of privacy” for the preparation of litigation. At para. 60, the court noted that litigation privilege should be viewed as a limited exception to the principle of disclosure and not as an equal partner of the broadly interpreted solicitor-client privilege.
[101] Here Mr. Hendrikx has sworn an affidavit to establish what the applicant describes as the argument agreement. Having chosen to swear an affidavit to be relied on in support of the application, I question how the applicant can now assert that that information is subject to a zone of privacy.
[102] I am satisfied that the respondent is entitled to cross-examine Mr. Hendrikx on his affidavit sworn in support of the application and all relevant documentation shall be produced one week in advance.
[103] Finally, I will deal with the ancillary orders sought by the respondent, namely, that its expenses in relation to Mr. Hendrikx’s non-attendance for cross-examination in the amount of $527.80 be paid. Having found that the respondent is entitled to cross-examination, I am prepared to make that ancillary order as sought by the respondent.
The Applicant’s Cross-Motion
Issue Number 3 –Should an order be made requiring Ms. Black to attend for cross-examination?
[104] The applicant brought a cross-motion pursuant to Rule 39.02 for an order that Ms. Black, counsel for the respondent, be produced for examination in the event that the court granted an order requiring that Mr. Hendrikx be cross-examined on his affidavit.
[105] The applicant takes the position that if the respondent succeeded on its motion to cross-examine Mr. Hendrikx then, the applicant is entitled to cross-examine Ms. Black, “on the intention and reasons for the City’s split argument, i.e. did the City deliberately cheat and why” as outlined in para. 9 of the applicant’s cross motion factum.
[106] The respondent strenuously resists the applicant’s cross-motion noting that the respondent has not waived privilege. Furthermore, it asserts that the applicant has not established why in any event, such examination is necessary or why it ought to be granted. The respondent also relies on the decision of GMAC Leaseco Ltd. v. 1348259 Ontario Inc. 2004 CarswellOnt 151 (Master), at paras 41-58 as support for the proposition that this request by the applicant is an abuse of process and the applicant’s cross-motion ought to be dismissed because the parties agreed cross-examination would be completed by November 30.
[107] While I am not persuaded by the respondent’s abuse of process arguments, I am satisfied that the applicant cannot compel Ms. Black to give evidence.
[108] Because there has been no waiver of privilege by the respondent, these circumstances are distinct from those in the cases relied on by the applicant (Elgner v. Freedman Estate, [2013 ONSC 2176](https://www.minicounsel.ca/scj/2013/2176 and Bearden v. Lee 2005 O.J. No. 1583 (S.C.), where privilege was waived). Ms. Black has not sworn any affidavit and in my view, it is not enough to argue, as the applicant is arguing, that if the respondent is permitted to cross-examine Mr. Hendrikx then the applicant should be permitted to examine Ms. Black.
[109] Therefore, the applicants cross motion is dismissed.
Costs
[110] If the issue of costs cannot be resolved, counsel may make brief written submissions within the next 30 days.
Justice L. C. Leitch
Released: January 30, 2015
CITATION: Orgaworld and The Corp. City of Ottawa 2015 ONSC 318
COURT FILE NO.: 3733-14
DATE: 2015/01/30
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Orgaworld Canada Limited
-and-
The Corporation of the City of Ottawa
REASONS for judgment
LEITCH J.
DATED: January 30 , 2015