Court File and Parties

COURT FILE NO.: 507/20 DATE: 20220411 SUPERIOR COURT OF JUSTICE – ONTARIO COMMERCIAL LIST

RE: BAFFINLAND IRON MINES LP AND BAFFINLAND IRON MINES CORPORATION, Applicants AND: TOWER-EBC G.P./S.E.N.C., Respondent

BEFORE: L. A. Pattillo J.

COUNSEL: Kent E. Thomson, Maureen Littlejohn, Anisah Hasan, Sean R. Campbell, for the Applicants Ira Nishisato, Hugh Meighen, Erin Peters, and Richard H. Shaban, for the Respondent

HEARD by Videoconference: September 20, 21, 22 and 23, 2021

Endorsement

Introduction

[1] On December 10, 2020, the Majority of an arbitral tribunal (the “Tribunal”), awarded the respondent, Tower-EBC G.P./S.E.N.C. (“TEBC”) damages of slightly more than $70 million as a result of breach of contract by the applicants, Baffinland Iron Mines LP’s (“BIM LP”), and Baffinland Iron Mines Corporation’s (“BIM Corp.”) (collectively “BIM”) (the “Majority Award”). On May 19, 2021, the Tribunal issued a further award granting TEBC costs of the arbitration (the “Costs Award”).

[2] In this application, BIM seeks, among other things, an order setting aside the Award pursuant to s. 46 of the Arbitration Act, 1991, S.O. 1991, c.17 (the “Act”); an order granting BIM leave to appeal the Majority Award and Costs Award under s. 45(1) of the Act; and, if leave to appeal is granted, an order granting the appeal and setting aside or varying the Majority Award as necessary. The notice of application was subsequently amended on May 10 and June 17, 2021, to allege additional grounds and encompass the Cost Award.

[3] For the reasons that follow, I dismiss BIM’s application. In my view, there are no grounds upon which to set aside the Majority Award pursuant to s. 46 of the Act, either with respect to lack of jurisdiction or failure to be treated equally and fairly. Nor can BIM rely on s. 45(1) to obtain leave to appeal as the arbitration agreement between the parties precludes an appeal from any decision of the Tribunal.

Background

a) BIM

[4] BIM owns and operates an iron ore mine, the Mary River mine (the “Mine”), in the Qikiqtani region of North Baffin in Nunavut. BIM has invested over US$3.5 billion in the Mine. The Mine which operates 12 months a year, includes open pit mining, crushing and transportation of ore overland on a 100 km long Tote Road to the port at Milne Inlet where it is shipped during the short open-water season to international markets. In 2020, the Mine generated revenues in excess of C$1 billion.

[5] In 2014, in order to expand the output capacity of the Mine, BIM introduced a proposal which involved the construction of a rail line to transport ore from the Mine to Milne Inlet together with related infrastructure (the “Project”).

[6] On December 15, 2016, BIM issued invitations to bid for two contracts to perform the earthworks required for the rail line and additional Phase 2 infrastructure (collectively the “Works”). Each of the contracts dealt with the Works over a different geographic area of the rail line.

b) TEBC

[7] TEBC is a general partnership formed between EBC Inc. and Tower Arctic Limited for the purpose of performing work on the Project.

[8] In May 2017, BIM issued letters of acceptance to TEBC in respect of the Works following which the Parties entered into two contracts to carry out the Works for the Project (the “Contracts”).

c) The Contracts

[9] The Contracts, which are virtually identical, evolved from the FIDIC (Federation Internationale des Ingenieurs-conseils) standard form for construction projects initially adopted by the Parties in May 2017 followed by what the Tribunal referred to as “bespoke provisions” subsequently adopted by the Parties in September 2017. Each Contract contained a section entitled “Claims, Disputes and Arbitration”.

d) CRS

[10] Concassés de la Rive-Sud inc. and Forage et Dynamitage de la Rive-Sud inc. (collectively “CRS”), is a privately owned drilling, blasting, and crushing corporation headquartered in Lévis, Quebec.

[11] On June 1, 2017, TEBC entered into a sub-contract with CRS for drilling, crushing, and blasting services in connection with the Contracts.

[12] In order to meet the schedule which required CRS to drill, blast, and crush approximately 235,000 metric tonnes of crushed stone beginning in the fall of 2017, in September and October 2017, CRS sent specialized equipment to Baffin Island in order to meet the schedule.

e) The Dispute

[13] The Project experienced lengthy and unanticipated delays in obtaining the permits required under applicable Nunavut law. In the absence of the permits, on September 25, 2018, BIM sent notices of termination to TEBC pursuant to the Contracts.

f) The Arbitration

[14] On July 9, 2019, TEBC, in accordance with Clauses 20.6 and 20.8 of the Contracts, commenced the arbitration challenging BIM’s right to terminate the Contracts and claiming damages arising from the termination. Among its claims, TEBC sought recovery of amounts that would be owed to CRS for “outstanding standby charges, the cost of spare parts, and the lost profit”. CRS’ President, and sole owner, Francois Morissette, swore an affidavit in support of TEBC’s claim.

[15] The arbitration proceeded over two years in accordance with the International Chamber of Commerce (“ICC”) Rules before a three-member Tribunal composed of co-arbitrators, Mr. John Keefe, an experienced Toronto litigator, turned arbitrator (nominated by TEBC) and the Honourable Ian Binnie, a former Supreme Court of Canada judge (nominated by BIM). The President of the Tribunal was Mr. Marc Goldstein, an experienced arbitrator based in New York City (appointed by the ICC in the absence of agreement by the parties).

[16] In early May 2019, the Parties and the Tribunal agreed to the Terms of Reference for the arbitration. The Terms of Reference governed the claims, defences and procedures to be followed in the arbitration. Among other things, it sets out a summary of TEBC’s claims together with the relief sought and BIM’s response.

[17] On May 31, 2019, Procedural Order No. 1 was entered by the Tribunal. It was based on a draft approved by the Parties and set out certain procedural rules for the arbitration, including a procedural timetable.

[18] The Parties participated in two full rounds of pleadings (TEBC’s initial request for arbitration, subsequently amended, BIM’s answer, the request for joinder, and the answer to the request for joinder, and subsequently a statement of claim, statement of defence, objection to jurisdiction, reply and response to objection to jurisdiction), produced thousands of documents, 13 detailed witness statements together with 593 exhibits, as well as five expert reports and three reply reports.

[19] On April 7, 2020, on the consent of the Parties, the Tribunal issued Procedural Order No. 3, which provided, in part, that counsel for CRS could represent CRS witnesses during their testimony at the merits hearing for the purposes of advancing the CRS claim component of TEBC’s claim. CRS’ counsel’s participation was limited to examination-in-chief of CRS’ witnesses, cross-examination and leading re-examination or reply evidence of CRS’ witnesses and cross-examination of BIM’s expert witnesses on evidence relating only to the CRS component of TEBC’s claim.

[20] Procedural Order 3 further provided that CRS, its witnesses, and counsel would be bound by the same confidentiality obligations of the Parties; that its counsel’s participation would not alter the equal allocation of time at the hearing and that CRS’ counsel would be permitted to attend the hearing when not leading evidence from the CRS’ witnesses. Finally, it confirmed expressly that, “BIM’s consent to the MT Participation [CRS’ counsel] on the terms above is without prejudice to its position that CRS is not a party to the Arbitration.”

[21] The merits hearing took place over 13 days in May and June 2020. Each party filed lengthy written opening statements and made oral openings. At the outset, BIM brought a motion challenging the Tribunal’s jurisdiction to hear or decide a claim against BIM Corp.

[22] Following the motion, seven fact witnesses, and five experts testified at the hearing and a joint expert report was filed. Hundreds of exhibits were filed, both as part of the witness statements and at the hearing. Prior to closing submissions, the Tribunal provided the Parties with a list of 52 questions they required the Parties to address in closings. The closings lasted two days, followed by a further half day to address issues that arose during closings. TEBC’s written closing submissions were 369 pages in length and BIM’s 211. The transcript of the proceedings is in excess of 8,300 pages.

g) The Awards

[23] On December 9, 2020, the Tribunal issued a Partial Final Award on Liability and Remedy, unanimously dismissing BIM’s objection to the jurisdiction of the Tribunal with respect to BIM Corp., and finding that BIM had wrongfully terminated the Contracts. The Tribunal split, however, in respect of the award of damages. The Majority Award (Messrs. Goldstein and Keefe) awarded TEBC damages of either $70,340,292 or $66,763,347, made up as follows:

a) $27,299,534 in consideration of TEBC’s Contractor’s Equipment upon the condition that TEBC, if requested by BIM to do so, would deliver full and effective legal title to BIM for all of the Equipment within 30 days of the Final Award. In the alternative, if BIM notified TEBC within 30 days of the Final Award that BIM elected not to take title to the Equipment, its liability for damages in regard to the Equipment were deemed to be satisfied by payment of $23,722,589 and the full return of the Equipment to TEBC on the 2021 sealift (the “Standby Claim”);

b) $58,372,496 for TEBC’s lost profit (the “Lost Profit Claim”);

c) $12,982,803 as compensation in respect of CRS claims (the “CRS Claims”);

d) $17,800,000 as compensation for Contractor-supplied Materials;

e) $2,034,463 as compensation pursuant to the Parties’ stipulation on smaller claims.

[24] The Tribunal unanimously dismissed TEBC’s claim for indirect costs billings and awarded interest on the money for damages at six percent per annum, compounded monthly, with an accrual date of October 25, 2018. By agreement of the Parties and the consent of the Tribunal, the issue of costs was adjourned for further submissions.

[25] In a Partial Dissent dated December 7, 2020, Mr. Binnie agreed with the Majority in respect of liability and BIM’s jurisdictional motion but took issue with portions of the Majority’s damage award. Specifically, Mr. Binnie found that TEBC was entitled to $38,266,141 on account of lost profit. Mr. Binnie also disagreed with the Majority Award in respect of the Standby Claim and the CRS Claim. In total, Mr. Binnie would have deducted $54,155,680 from the Majority Award.

[26] On May 19, 2021, the Tribunal issued its Final Award on Costs, awarding TEBC 80% of its solicitors and experts fees; 90% of its share of the ICC administrative costs and fees and expenses of the Tribunal and 100% of the hearing costs.

The Issues

[27] The issues as framed by the Parties are as follows:

1. Should the Award be set aside pursuant to s. 46 of the Act;

2. Does BIM have a right of appeal under s. 45 of the Act; and, if so,

3. Should leave to appeal be granted under s. 45 of the Act.

Section 46 of the Act

[28] Section 46 of the Act gives the court the power to set aside an arbitration award on one or more of the 10 grounds set out in s. 46(1). As stated in Alectra Utilities Corp. v. Solar Power Network Inc., 2019 ONCA 254; 145 O.R. (3d) 481 (Ont. C.A.) at para. 24, the grounds in s. 46(1), in general, are not concerned with the substance of the Parties’ dispute. Rather they concern issues such as the establishment and composition of the arbitration tribunal, compliance with Ontario law and the requirements of procedural fairness.

[29] In this application, BIM relies on s. 46(1)3 and s. 46(1)6 or 7 as well as s. 19 of the Act.

Section 46(1)3

[30] Section 46(1)3 provides as follows:

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

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

[31] BIM submits the Majority exceeded its jurisdiction:

a) In awarding TEBC standby fees in respect of equipment TEBC sent to Baffin Island or otherwise dedicated to the Contracts (the Standby Claim);

b) In awarding $13 million in compensation in respect of CRS’ pre-termination stand-by fees and lost profit (the “CRS Claims”); and

c) In awarding non-contractual damages for TEBC’s loss of profits in respect of additional quantities (the “Additional Quantities”).

(Collectively the “Disputed Claims”)

Standard of Review

[32] In Smyth v. Perth & Smith Falls District Hospital, 2008 ONCA 794 at para. 17, the court held that the standard of review on a question of the jurisdiction of an arbitrator is correctness.

[33] As Koehen J. points out in Parc-IX Limited v. The Manufacturers’ Life Insurance Company, 2021 ONSC 1252 at paras. 39-40, since the Supreme Court’s decision in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, there has been some conflict as to whether the proper standard of review from an arbitrator’s decision on jurisdiction is correctness or reasonableness. See: Freedman v. Freedman Holdings Inc., 2020 ONSC 2692 at paras. 102 – 104.

[34] The Parties are at issue. BIM submits its correctness; TEBC reasonableness.

[35] As there is no decision by the Tribunal that deals with jurisdiction specifically (apart from the unanimous decision dismissing BIM’s jurisdiction motion concerning BIM Corp. which is not being contested), given the requirements of s. 46(1)3, in my view, the standard of review in respect of the Disputed Claims, if applicable, is correctness. Simply put, did any aspect of the Majority Award exceed the Tribunal’s jurisdiction as granted by the arbitration agreement?

Failure to Object

[36] TEBC submits BIM’s application to set aside the Majority Award pursuant to s. 46(1)3 cannot succeed on the ground that BIM never raised any objection before the Tribunal concerning its jurisdiction in respect of the Disputed Claims. Not only did it not object, TEBC submits BIM agreed to inclusion of the Disputed Claims in the arbitration and defended them on the merits. In support, TEBC relies on ss. 4, 17(5) and 46(3) of the Act as well as Article 40 of the ICC Rules which the Parties agreed governed the arbitration.

[37] Sections 4 and 17(5) of the Act, together with Article 40 of the ICC Rules provide that a party shall make a timely objection to any excess of jurisdiction and if it fails to do so, it shall be deemed to have waived its rights to object.

[38] Section 46(3) of the Act provides:

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

[39] The three grounds set out in s. 46(3) are disjunctive, not conjunctive. The establishment of any one is sufficient to prevent the court from setting aside an award based on jurisdiction. TEBC submits all three grounds apply in this case.

[40] I am satisfied from the evidence that BIM agreed to the inclusion of the Disputed Claims in the arbitration. Apart from the extensive pleadings, as noted, in early May 2019, the Parties and the Tribunal agreed to the Terms of Reference for the arbitration which set out in detail, among other things, a summary of TEBC’s claims together with the relief sought and BIM’s responses to the claims.

[41] Paragraph 22 of the Terms of Reference set out TEBC’s claim for damages which included the Disputed Claims - specifically, claims for stand-by charges for both its property (the Standby Claim) and the property of its subcontractors (the CRS Claim); lost profits based on TEBC having been allowed to continue to perform the full scope of the anticipated works under the Contracts (including the Additional Quantities) and full recovery of any amounts paid or required to be paid by TEBC to its subcontractors due to BIM’s unlawful termination of the Contracts.

[42] In response, BIM disputed the entirety of TEBC’s claims and submitted that TEBC had suffered no damages from the termination, the Contracts expressly excluded claims for lost profits and limit liability flowing from the termination, payments by BIM LP to TEBC covered any costs TEBC has allegedly incurred for materials and equipment acquired in connection with the Works and TEBC has failed to mitigate any damages arising from alleged breaches of its subcontracts because the Contracts require TEBC to assign any subcontracts to BIM LP upon termination and TEBC has failed or refused to do so.

[43] Notably, BIM also raised a jurisdictional objection to BIM Corp. being a party to the arbitration on the ground that BIM Corp. was not a party to the arbitration agreement.

[44] There is no dispute that BIM failed to raise an objection to the Tribunal’s jurisdiction to deal with the Disputed Claims at any time. Not only did BIM fail to make a timely objection to the Tribunal’s jurisdiction in respect of the Disputed Claims, it made no objection. Accordingly, pursuant to ss. 4 and 17(5) of the Act and Article 40 of the ICC Rules, BIM is deemed to have waived its right to object to the Tribunal’s alleged excess of jurisdiction in respect of the Disputed Claims.

[45] In response to TEBC’s submission that it never objected to the excess of jurisdiction it now alleges, BIM submits that it had no opportunity to object because the jurisdictional errors only became apparent upon the release of the Award. I do not accept that response. BIM joined issue with TEBC’s claims and specifically the Disputed Claims and raised defences to them on the merits. It did not raise lack of jurisdiction. I agree with TEBC. BIM cannot wait until release of the Majority Award to raise issues of jurisdiction it should have raised with the Tribunal from the very outset of the arbitration.

[46] Based on the above, therefore, I find that all three grounds of s. 46(3) of the Act apply in respect of the Disputed Claims such that the Majority Award cannot be set aside in respect of the Disputed Claims.

[47] Even if I’m wrong that s. 46(3) of the Act applies, I am further of the view, based on the arbitration agreement between the Parties and the Disputed Claims, that the Tribunal had jurisdiction to determine the Disputed Claims.

[48] Section 46(1)3 deals with jurisdiction in its narrow sense, i.e., whether the arbitrator had the authority under the arbitration agreement to make the decision complained of.

[49] In Alectra Utilities Corp. v. Solar Power Network Inc., 2019 ONCA 254 at para. 25, the court stated, in part: “… the court’s authority to set aside an arbitration award under [s. 46(1)3] depends on the mandate the arbitration agreement confers on the arbitrator to resolve a particular dispute. In order to succeed on an application to set aside an arbitration award, an applicant must establish either that the award deals with a dispute that the arbitration agreement does not cover or contains a decision on a matter that is beyond the scope of the arbitration agreement.”

[50] The arbitration agreement between the Parties is contained in Clauses 20.4 and 20.6 of the Contracts and provides as follows:

20.4 If a dispute (of any kind whatsoever) arises between the Parties in connection with, or arising out of, the Contract or the execution of the Works, including any dispute As [sic] to any Certificate, determination, instruction, opinion or valuation of the Engineer, either Party may refer the dispute in writing to the DAB [Dispute Adjudication Board] for its decision, with copies to the other Party and the Engineer. Such reference shall state that it is given under this Sub-Clause.

20.6 Unless settled amicably, any dispute in respect of which the DAB’s decision (if any) has not become final and binding shall be finally settled by international arbitration. Unless otherwise agreed by both Parties:

(a) the dispute shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce,

(b) the dispute shall be settled by three arbitrators appointed in accordance with these Rules, and

(c) the arbitration shall be conducted in the language for communications defined in Sub-Clause 1.4 [Law and Language].

The arbitrator(s) shall have full power to open up, review and revise any Certificate, determination, instruction, opinion or valuation of the Engineer, and any decision of the DAB, relevant to the dispute. Nothing shall disqualify the Engineer from being called as a witness and giving evidence before the arbitrator(s) on any matter whatsoever relevant to the dispute.

Neither Party shall be limited in the proceedings before the arbitrators to the evidence or arguments previously put before the DAB to obtains [sic] its decision, or to the reasons for dissatisfaction given in its notice of dissatisfaction. Any decision of the DAB shall be admissible in evidence in the arbitration.

Arbitration may be commenced prior to or after completion of the Works. The obligations of the Parties, the Engineer and the DAB shall not be altered by reason of any arbitration being conducted during the process of the Works.

[51] Based on the above provisions, and specifically Clause 20.4, the jurisdiction of the Tribunal to determine disputes between the Parties arising from the Contracts is very broad and general. It extends to “a dispute (of any kind whatsoever) arising between the Parties in connection with or arising out of the Contracts or the execution of the Works”. TEBC’s claims in respect of the termination of the Contracts and any damages arising therefrom are clearly within the jurisdiction of the Tribunal.

[52] As Huscroft J.A. noted at paras. 43 and 44 of Alectra Utilities Corp. v. Solar Power Network Inc., 2019 ONCA 254:

43. It is important to emphasize that s. 46(1)3 allows for only limited review for jurisdictional error. As this court said in Smyth v. Perth & Smith Falls District Hospital, 2008 ONCA 794, 92 O.R. (3d) 656 (Ont. C.A.), at para. 17, s. 46(1)3 sets out a jurisdictional question that must be answered correctly. It neither requires nor authorizes review of the substance of an arbitrator’s award.

44. For greater certainty, I would add this: once the jurisdictional question is answered, in the absence of a right of appeal pursuant to s. 45 the court has no authority to go on to review the arbitrator’s award for reasonableness. Smyth is not to be read as authority to the contrary. The basis for the court’s decision is not set out and its comments must be regarded as obiter.

i. The Standby Claim

[53] From the outset of the arbitration, TEBC claimed that it was entitled to standby fees pursuant to the Contracts arising from a suspension of the Works. In particular, it relied on Clause 3.1.2.6 of the Contracts which provides:

The Contractor must at all times remain responsible for the efficiency and productivity of its Personnel, Plant, and Equipment. Where the Engineer directs a suspension (in whole or in part) and gives the Contractor an instruction to standby, then (a) the Contractor’s claim for costs incurred by the Contractor that is attributable to such standby will be limited to the Standby Rates set out in this Schedule, and (b) the Contractor must not demobilize or remove any Personnel or Plant & Equipment on standby. Standby will only be applicable for Equipment delivered to the Site or if the Contractor’s Equipment is not loaded on the sealift (either Mobilization or Demobilization sealift) before the end of the sealift season by the Employer (but where such Standby was not caused by the Contractor). Standby will be limited to the quantity in accordance with Clause 3.1.2(o) and will be paid only in accordance with the Contract Agreement (reasonable sealift window end July to mid-October).

[54] The Majority viewed the issue as a question of fact. After an extensive review of the documents, the Majority concluded, as a matter of fact, that the Engineer had directed a standby pursuant to Clause 3.1.2.6.

[55] In his dissent, Mr. Binnie analyzed the provisions in the Contracts dealing with suspension of the Works and concluded that the Works were suspended unless and until the permits were approved by the Parties in the Contracts and not by the Engineer. As a result, he concluded as a matter of law the Contracts were prohibited ab initio and unenforceable. He further disagreed with the Majority’s analysis of the communications to establish their finding of fact that the Engineer directed a standby.

[56] BIM argues that the Majority purported to exercise extra-contractual equitable jurisdiction in concluding TEBC was entitled to standby fees. That is a mischaracterization of the comment or that the Majority relied on equitable jurisdiction to reach its decision.

[57] The comment, which appears at footnote 22 of the Majority Award and refers to the wording in Clause 20.6 of the Contracts which provides: “the arbitrator(s) shall have full power to open up, review and revise any Certificate, determination, instruction, opinion or valuation of the Engineer, and any decision of the DAB, relevant to the dispute.” The Majority observed in the footnote that power was “in the nature of equitable relief”. That statement, however, was clearly obiter, as the Majority’s decision was based on its findings of fact, not the power in Clause 20.6.

[58] TEBC’s Standby Claim involved matters of Contract interpretation and the application of the facts to the Contracts. In addressing those questions, the Tribunal did not exceed its jurisdiction.

ii. The CRS Claim

[59] BIM submits that in awarding $13 million “for the sole benefit of CRS in circumstances where CRS was not a party to the Contracts and, more importantly, was not a party to and asserted no claim in the arbitration”, constitutes an excess of jurisdiction such that the Majority Award cannot stand in respect of CRS.

[60] I do not agree with BIM’s characterization of the Majority Award regarding CRS claims as an award to or for the exclusive benefit of CRS, a non-party.

[61] From the outset of the arbitration, TEBC asserted a claim against BIM under the Contracts for all amounts paid or required to be paid to subcontractors arising from BIM’s wrongful termination. The issue before the Tribunal therefore was whether the Contracts permitted TEBC to recover damages in respect of CRS’ pre-termination standby fees and lost profits arising from BIM’s breach of contract.

[62] Before the Tribunal, TEBC claimed it was entitled to an amount in respect of CRS’ standby charges and lost profits as “costs incurred” under Clause 19.6(c) of the Contracts, including reference to the definitions of “Cost” in Clause 1.1.4.3 that embraces “expenditure reasonably … to be incurred.” because of its potential liability to CRS under the subcontract.

[63] With respect to the claim for CRS’ lost profits, TEBC submitted that they fell within the “loss of profits” in Clause 16.4 and that Clause 4.4 providing subcontractors are not third-party beneficiaries of the Contracts and that BIM has no duty “to pay or to see to the payment of any moneys due to any subcontractors” should be interpreted to mean that BIM has a duty to pay such moneys due to TEBC.

[64] In response, BIM submitted it had no liability for such sums claimed by TEBC because BIM had no contract with CRS and Clause 4.4 of the Contracts. It further submitted that any potential liability it may have to TEBC for CRS’ losses, whether under Clause 19.6 or Clause 1.23 of the Contracts can only be based on a cost or liability actually incurred by TEBC and there was none.

[65] In reaching the conclusion that BIM was liable to TEBC for CRS’ pre-termination standby charges and loss of profits, the Majority engaged in an analysis of the Contracts’ provisions including that CRS equipment was included in the definition of “Contractor’s Equipment” in the Contracts, as are standby rates for CRS equipment. Having found that the Engineer ordered a suspension and standby under the Contracts, CRS’ equipment attracted the same standby charges as the other Contractor’s Equipment.

[66] In respect of BIM’s argument that Clause 4.4 shields it from liability for subcontractors, the Majority interpreted Clause 4.4 as not limiting BIM’s potential liability to TEBC generally or in relation to subcontractor matters. The Majority stated, in part, at para. 293 of their Award:

….. If there are barricades in the Contracts that wall off TEBC from liability for CRS injuries caused by BIM breaches of the Contracts, they are not in Clause 4.4 and they are not in the arbitration provisions of Clause 20, which do not exclude arbitration of claims asserted by TEBC arising from BIM breaches that cause subcontractor injury. (Thus BIM raises no objection that we lack jurisdiction over TEBC’s claims for CRS losses). The logical corollary of the declaration in Clause 4.4 that BIM will have no liability to subcontractors and that subcontractors are not third-party beneficiaries cannot reasonably be that TEBC as the Contractor bears the economic risk of injury to the subcontractor resulting from a BIM breach of the Contracts. A Contractor cannot reasonable be expected to bear that risk, and so this would be a commercially unreasonable interpretation. Instead, the logical corollary of those declarations in Clause 4.4 is that the proper party to seek and obtain payment from BIM for monies due to the subcontractor under the Contracts is TEBC. ….

[67] Mr. Binnie held that as TEBC had no contract with CRS and as the President of CRS testified that it had not made and would not make a claim against TEBC for its losses, TEBC has no liability to CRS. Mr. Binnie disagreed with the Majority’s interpretation of Clause 4.4. In his opinion the Clause was clear and unambiguous and expressly excluded BIM’s liability to subcontractors.

[68] The issue as to whether TEBC could recover damages in respect of CRS’ standby fees and lost profit involved a dispute arising out of the Contracts. The Majority and Dissent decisions were based on an analysis and interpretation of the Contracts. In so doing, the Majority did not exceed its jurisdiction.

iii. Additional Quantities Claim

[69] TEBC’s claim for lost profits included a claim for additional quantities of earthworks based on BIM’s determination that additional quantities of earthworks were required for the Project.

[70] BIM’s response was that the Contracts did not extend to the additional quantities and, in any event, the Contracts provided that TEBC’s entitlement was limited to a maximum of 110% of the sums in the original Bill of Quantities in Clause 12.3.

[71] The Majority concluded, based on its review of the provisions of the Contracts dealing with payment and scope of work, that the Contracts required the Contractor to provide all required resources and accordingly the lost profits on the additional quantities was part of TEBC’s reasonable economic expectancy as at September 25, 2018. It further concluded that Clause 12.3 was not applicable.

[72] Mr. Binnie agreed that the additional quantities fell within the scope of the Works set out in the Contracts, but there was no agreement on the price. He referred to the Majority’s interpretation of Clause 12.3 as “commercially absurd.”

[73] The issue of whether TEBC was entitled to lost profits on the additional quantities is a dispute arising out of the Contracts. The Tribunal had jurisdiction to deal with it pursuant to the arbitration agreement.

[74] BIM’s arguments that the Majority exceeded its jurisdiction in reaching its decisions in respect of the Disputed Claims are based on the legal errors made by the Majority. But that is not the test. The question is whether the Majority determined a dispute not covered by the arbitration agreement or on a matter beyond the scope of the arbitration agreement. In neither case did that occur in respect of the Disputed Claims.

[75] As stated in para. 41 of Alectra Utilities Corp. v. Solar Power Network Inc., 2019 ONCA 254, once the application judge determines the arbitrator acted within his authority, “It was for the arbitrator, not the court, to interpret and apply the substantive provisions of the [agreement between the parties] and it is of no moment whether the arbitrator did so reasonably or unreasonably, correctly or incorrectly.”

Sections 46(1) 6 or 7 and 19 of the Act

[76] Section (1)6 or 7 and s. 19 of the Act provide:

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

6. The applicant was not treated equally and fairly, was not given an opportunity to present a case or to respond to another party’s case or was not given proper notice of the arbitration or of the appointment of an arbitrator.

7. The procedures followed in the arbitration did not comply with this Act.

S.19 (1) In an arbitration, the parties shall be treated equally and fairly.

(2) Each party shall be given an opportunity to present a case and to respond to the other parties’ cases.

[77] The obligation to treat parties “equally and fairly” in both ss.19(1) and 46(1) 6 and 9 of the Act incorporates the requirements of natural justice and procedural fairness. Those sections, at a most general level, refer to procedural fairness as the right to be heard and the right to an independent and impartial hearing. Nasjjec Investments Ltd. v. Nuyork Investments Ltd., 2015 ONSC 4978 at paras 38 to 40; Highbury Estates Inc. v. Bre-Ex Ltd., 2015 ONSC 4966 at para. 21.

[78] In support of its allegation it was treated unfairly, BIM makes two submissions, first that the conduct of the President of the Tribunal during the hearing interfered with the proceedings and was improper, and second that the Majority relied upon “highly dubious legal argument” in respect of the CRS Claim that neither Party had advanced.

Standard of Review

[79] Prior to Vavilov, 2019 SCC 65, it was not necessary in the administrative context, to engage in a standard of review analysis concerning an issue of procedural fairness. Rather it is for the court to determine whether the requisite level of procedural fairness has been accorded, considering the factors in Baker v. Canada (Minister of Citizenship and Immigration, [1999] 2 S.C.R. 817.

[80] Vavilov, 2019 SCC 65 did not address standard of review concerning procedural fairness. In my view, therefore, the standard of review remains whether the requisite level of procedural fairness has been afforded BIM, having regard to the proceeding is an arbitration agreed to by the Parties where both Parties are sophisticated and had legal representation throughout.

The President’s Conduct

[81] BIM submits that in questioning the witnesses during the hearing, as well as counsel during argument, the President “descended into the arena” and excessively interfered with the Parties’ presentation of their respective cases resulting in a sufficient appearance of unfairness such that the Award must be set aside under s. 46(1) 6 &7 of the Act.

[82] In support of its submission, BIM has advised that I need only review 233 pages of excerpts from the hearing transcripts (CaseLines A16246 – A16479) detailing some but not all the President’s alleged improper interjections. I assume the excerpts are the most egregious examples giving rise to the appearance of unfairness.

[83] The transcript excerpts deal with questioning of both fact witnesses and the experts as well as counsel during final submissions. Some of the questions occur during the evidence of the witness and some after the witness’ evidence is completed and all members of the Tribunal are asking questions, not just the President.

[84] Having read the excerpts in their entirety, I am satisfied and so find that in the context of the arbitration, there was nothing improper with the President’s questions for the following reasons:

1. As noted, Procedural Order No. 1, which was agreed to by the parties, set out the procedural rules for the arbitration. Specifically, it provides in respect of the Merits Hearing that non-expert witnesses who provide a witness statement and are examined in chief and cross-examined, “may also be questioned at any time during the presentation by members of the Tribunal” (para.62(f)). Paragraph 64(e) contains a similar direction with respect to experts who have provided a report and appear for cross-examination or questioning by the Tribunal. [My emphasis.]

2. The President’s questions, whether during testimony or at the conclusion of the evidence were mainly for clarification of points raised by both the fact and expert witnesses in their evidence. Both the fact evidence concerning the Contracts and the regulatory regimes governing the Mine as well as the expert evidence in respect of damages was complex and detailed. Further, the evidence extended beyond the oral testimony to the affidavits and reports, resulting in evidence not addressed by counsel during oral testimony.

3. In all cases, the President was courteous and respectful to the witnesses. He apologized for interrupting, if he did, and always thanked the witness for their answer, giving no indication to his response to it. In respect of questions asked by the Tribunal after the witness had concluded, the President always gave counsel for both parties the opportunity to ask follow-up questions arising from the Tribunal’s questions.

4. BIM submits that the President’s numerous questions were of such a character to amount to “unwarranted interference” with counsel’s conduct of the proceedings. I do not consider they came close to that level. Further, at no point during the hearing did counsel for BIM object to the President’s questioning. BIM submits that it cannot be faulted for failing to complain in circumstances where it is the cumulative conduct of the President which gives rise to procedural unfairness. Given the severity of the conduct alleged, I do not accept counsel would have been unaware of the extent of the President’s alleged conduct until it received the transcript of the hearing.

5. The last 27 pages of the excerpts concern the closing submissions on July 22, 23 and 30, 2020. I do not consider questions by the President during submissions to be in any way improper. Rather they reflect concerns that the President had with respect to some of the positions being taken by the parties and should signal to counsel areas to be addressed.

6. Finally, over the course of the hearing, all members of the Tribunal asked questions of the witnesses as they were entitled to do. In my view, it is unfair to single out the Chair.

Legal Positions not Advanced by Counsel

[85] BIM further submits that the Majority treated it unfairly by “formulating unilaterally a highly dubious legal argument” that no party had advanced in respect of its award of CRS’ standby fees.

[86] BIM takes issue with the Majority’s decision to award damages for CRS’ standby fees based on what it submits was a unilaterally formulated, “highly dubious legal argument” that no party advanced to the effect that BIM was “plainly a third party beneficiary of [TEBC’s] subcontracts.”

[87] In response, TEBC relies on the transcript of BIM’s last day of argument to show that the Tribunal directly asked BIM to consider the issue of whether BIM was a third-party beneficiary.

[88] BIM further submits that in awarding TEBC damages in respect of CRS’ lost profits, the Majority relied on a legal theory not raised by TEBC, specifically that the lost profits fell under Clause 16.4 of the Contracts.

[89] Given the extensive and thorough procedure engaged in by the Parties and the Tribunal and particularly the Tribunal’s questions to counsel in advance of oral argument, the extensive oral argument, equal to both sides, and the subsequent adjournment following oral argument to enable counsel to address issues raised during closing submissions, I am satisfied that BIM had an opportunity to address all issues raised by the Tribunal during argument. I would not give effect to BIM’s complaint that it had no opportunity to address the issues they now complain about.

[90] I note as well that BIM raises the Majority’s alleged improper reliance on legal theories as part of its submissions concerning legal errors under s.45. In my view, that is where it more properly belongs.

[91] Accordingly, I do not agree that the Majority’s legal theories concerning CRS were unfair to BIM or that there was any violation of s. 46(1) 6 or 9 of the Act.

Section 45(1) of the Act

[92] Section 45(1) of the Act provides as follows:

45(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 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.

[93] Section 3 of the Act provides, among other things, that in respect of arbitration agreements other than a family arbitration agreement, the parties to an arbitration agreement may agree, “expressly or by implication” to vary or exclude any provision of the Act except for six specific sections of the Act. Section 45(1) is not listed.

[94] Section 45(1) imposes four tests that must be satisfied in order to obtain leave to appeal: 1) the arbitration agreement does not deal with [i.e., does not preclude] appeals of questions of law (s. 45(1)); 2) the importance to the parties of the matters at stake in the arbitration justifies an appeal (s. 45(1)(a)); 3) determination of the questions of law at issue will significantly affect the rights of the parties (s.45(1)(b)); and 4) a party may appeal an award to the court on a question of law (s. 45(1)).

[95] BIM submits that it meets all four tests: nothing in the arbitration agreement precludes its proposed appeal on a question of law; the issues raised are important to the Parties given the amount of money involved; the issues involved will significantly affect the rights of the Parties given both the size of the award and that they will determine whether the Tribunal’s award can stand; and the issues raised involve questions of law.

[96] In response, TEBC submits that BIM meets none of the required tests: the arbitration agreement precludes appeals on questions of law; the “reversible errors” raised by BIM do not involve questions of law; the issues raised are not of sufficient importance to the Parties notwithstanding the amount in dispute; and a determination of the issues will not significantly affect the rights of the Parties.

Does the Arbitration Agreement preclude an Appeal?

[97] The preliminary issue to determine is whether the arbitration agreement, expressly or by implication, precludes appeals on questions of law: LIUNA, Loc. 183 v. CAAW, Loc. 27, 2001 ONCA 4868, [2001] O.J. No. 4725 (C.A.).

[98] As noted above, Clause 20.6 of the General Conditions of the Contracts provides, in part,

20.6 Unless settled amicably, any dispute in respect of which the DAB’s decision (if any) has not become final and binding shall be finally settled by international arbitration. Unless otherwise agreed by both Parties:

(a) the dispute shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce,

(b) the dispute shall be settled by three arbitrators appointed in accordance with these Rules, and

(c) the arbitration shall be conducted in the language for communications defined in Sub-Clause 1.4 [Law and Language].

[99] Article 35(6) of the ICC Rules provides:

Every award shall be binding on the parties. By submitting the dispute to arbitration under the Rules, the parties undertake to carry out any award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.

The Fry Affidavit

[100] Part of TEBC’s responding materials includes an affidavit from Mr. Jason Fry Q.C., a partner at Clifford Chance Europe LLP and co-head of the firm’s International Arbitration Group expressing an expert opinion (the “Fry Report”).

[101] The Fry Report sets out Mr. Fry’s opinion with respect to the following matters:

1. The defining features and characteristics of the ICC model of arbitration generally and with respect to the right of appeal (or other recourses) in particular;

2. How the ICC Rules of Arbitration have developed to reflect the right of appeal in the 2017 version of the Rules; and

3. How the ICC Rules of Arbitration generally, and Article 36(5) in the 2017 version, in particular, have been treated by courts in the UK and elsewhere?

[102] In response, BIM has brought a motion for an order striking out or otherwise declaring inadmissible all or significant portions of the Fry Report. In support of its motion, BIM submits, among other things, that the Fry Report purports to opine on the ultimate legal issue before the court; does not meet the key threshold tests for admissibility of expert evidence; and is not legally relevant to the matters in issue in the application.

[103] In reply, TEBC submits that the Fry Report satisfies the threshold requirements for the admissibility of expert evidence. Further, it submits that it is relevant to the issue of whether BIM has a right to appeal the Award on a question of law and the benefits of its admission outweigh any potential risks.

[104] While the Fry Report is interesting reading, its ultimate purpose in my view is to demonstrate that Article 36(5) of the ICC Rules prohibits appeals from an ICC arbitration. As the ICC Rules are incorporated into the Contracts, I consider it is my job to interpret Article 36(5). Accordingly, I consider the Fry Report and Mr. Fry’s affidavit to be inadmissible.

[105] TEBC submits that the Parties expressly contracted out of all rights of appeal in Clause 20.6 of the Contracts which provides that the dispute would be “finally settled” by international arbitration in accordance with the ICC Rules which in turn provide in Article 35(6) that every arbitration award is binding, and the Parties are deemed to waive “their right to any form of recourse”.

[106] BIM, on the other hand, submits that Clause 20.6 does not preclude a right of appeal on a question of law. While Clause 20.6 uses what BIM submits is the “universally recognized” term “final and binding” in respect of a DAB decision, it uses the words “finally settled” in respect of arbitration. As a result, it submits that both this pattern of drafting and the applicable factual matrix provide a clear and objective indication that the Parties had no intention of prohibiting a future appeal being brought under s. 45(1) of the Act on questions of law.

[107] Further, BIM submits that in light of the clear conflict between the phrase “finally settled” and the preclusive language contained in Article 35(6) of the ICC Rules, the wording of the Contracts takes precedence over the provisions of the ICC Rules which are incorporated by reference. See: Fuller v. Aphria Inc., 2020 ONCA 401 at paras. 63-65.

[108] The issue of whether the Contracts excluded, either expressly or by implication, any right of appeal from the Award of the Tribunal is a question of contract interpretation.

[109] In that regard, in Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, [2014] 2 S.C.R 633, at para. 47, Rothstein J., on behalf of the court, stated, in part:

…. The interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine “the intent of the parties and the scope of their understanding” [citations omitted]. To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of the formation of the contract. ….

[110] As noted, the Contracts are primarily FIDIC standard form construction contracts which the Parties modified in respect of certain matters. They are voluminous and deal in detail with many items concerning the construction of the Project. In particular, the dispute resolution provisions of the Contracts are set out in Clause 20 of the General Conditions of the Contracts (which was not modified by the Parties from the FIDIC form), entitled: “Claims, Disputes and Arbitration.”

[111] Clause 20 sets out a comprehensive dispute resolution process which provides for claims by the Contractor to the Engineer in respect of extensions of time for completion and/or any additional payment (Clause 20.1); appointment of a Dispute Adjudication Board (“DAB”) to deal with a dispute “of any kind between the parties in connection with or arising out of the Contract” (Clause 20.2); Appointment of the DAB where there is failure to agree (Clause 20.3); The timing of the DAB decision and any party’s dissatisfaction with the decision (Clause 20.4); Amicable settlement of any DAB decision (Clause 20.5); Arbitration (Clause 20.6); The remedies in the event either party fails to comply with a DAB decision (Clause 20.7) and the provision for arbitration in circumstances where DAB’s appointment has expired “or otherwise” (Clause 20.8).

[112] The DAB is deemed not to be acting as arbitrator(s). Its decision becomes “final and binding” in the absence of either a settlement or either party providing a notice of dissatisfaction within 28 days of the decision, which notice is a prerequisite to arbitration.

[113] In my view, there is no substantive difference in respect of the ordinary and grammatical meaning of the terms “final and binding” and “finally settled” in Article 20.6. Both use the term “final” (as a noun and an adverb). Similarly, there is no difference in the meaning of “binding” and “settled” in the context of the resolution of a dispute. Both terms, in my view, express the clear intent of the Parties with respect to finality of the process, either in respect of a DAB decision or in respect of an arbitral decision.

[114] I also consider the context of the terms “final and binding” and “finally settled” within Clause 20 supports their similar meaning. DAB is an internal dispute resolution process which once resolved is “final and binding”. If not resolved, however, the unsatisfied party can take the issue to arbitration in accordance with the ICC Rules, following which, the dispute is “finally settled”. In either case, the dispute is at an end.

[115] Finally, Clause 20.6 incorporates the ICC Rules which include Article 35(6) which provides, among other things that the award is binding and the parties are deemed to have waived their right to “any form of recourse”. In my view, the meaning of Article 35(6) is clear from its wording. There is no further recourse from an arbitration award pursuant the ICC Rules.

[116] BIM submits that in interpreting Clause 20.6, the principle of interpretation concerning the presumption of consistent language should be applied. That presumption was explained by Perell J. at para. 79 of Healy v. Gregory, 2009 ONSC 31609, [2009] O.J. No. 2562; 2009 ONSC 31609 as follows:

79. …. The presumption of consistent language entails that: (a) a draftsperson will use language consistently; (b) a draftperson’s use of different words indicates an intention to refer to different things; (c) a draftsperson will not use different words to refer to the same thing; and (d) different words should not be interpreted to mean the same thing. See: Prestcold (Central) Ltd. v. Minister of Labour, [1969] 1 W.L.R. 89 (C.A.) at p. 97; Jarvis (John) Ltd. v. Rockdale Housing Association Ltd., [1986] 3 Const. L. J. 24 (C.A.) at p. 30. K Lewison, Interpretation of Contracts (London: Sweet & Maxwell, 1989) at para. 6.02.

[117] In my view, based on my conclusion that the words “final and binding” and “finally settled” mean the same thing based on their ordinary grammatical meaning and context, the presumption does not apply in respect of the words in Article 20.6.

[118] In its reply submissions, BIM effectively concedes that Article 35(6) of the ICC Rules precludes an appeal from an ICC arbitration award and is therefore inconsistent with the words “finally settled” in Clause 20.6. Accordingly, the wording of the Contracts takes precedence over the extrinsic provisions, per Fuller, supra. In my view, Article 35(6) of the ICC Rules is not inconsistent with the wording of Clause 20.6 of the Contracts.

[119] Accordingly, I am satisfied that the arbitration agreement between the Parties in Clause 20.6 of the Contracts precludes an appeal on a question of law or otherwise from the Majority Award.

Conclusion

[120] Based upon my finding that the arbitration agreement between the Parties precludes an appeal on a question of law or otherwise, I do not intend to address BIM’s submission in respect of its request for leave and, in particular, the alleged legal errors it has raised in respect of the Majority Award.

[121] The application is dismissed.

[122] The Parties are directed to discuss and resolve costs within 30 days failing which counsel should arrange a Case Conference on the Commercial List to deal with costs.

L.A. Pattillo J. Released: April 11, 2022