The Ontario Court of Appeal had the opportunity to consider the basis for setting aside an arbitral award under sections 45 or 46 of the Arbitration Act, 1991[1] in the greatly anticipated decision of Tall Ships Landing Development Inc. v. The Corporation of the City of Brockville.[2]
Background
The litigation between the parties arose out of a public-private partnership between The Corporation of the City of Brockville (“Brockville”) and Tall Ships Landing Development Inc. (“Tall Ships”).
Tall Ships and Brockville entered into a series of agreements in which Tall Ships undertook to remediate and develop a waterfront project on property acquired by Tall Ships. The project, which continued for over a decade from conception until completion, included a mixed residential/commercial condominium tower and an attraction known as the Maritime Discovery Centre (“MDC”). Tall Ships also agreed to assume various roles with respect to the construction of the MDC.
The parties had agreed that the property would be conveyed to Brockville, and that Tall Ships would qualify for multi-year tax credits and would receive a fee for its work as construction manager. Once the MDC was substantially complete, Tall Ships would sell it to Brockville and Brockville would pay a purchase price equivalent to the construction budget for the building pursuant to an agreed-upon formula.
Three major issues in the appeal related to: (1) whether Brockville was liable for the difference of roughly $1.8 million between the estimate and the actual cost of construction of the MDC; (2) Brockville’s refusal to pay invoices in the amount of $929,893 for remediation costs on the basis that they were out of time; and (3) Tall Ships’ claim for interest paid one year after the final award.
The court’s decision
The appeal was allowed with costs to Brockville. The order of the application judge setting aside three arbitral awards and appointing a new arbitrator to preside over the matters upon reconsideration was set aside.
The appeal turned on whether the arbitrator fell into any errors of law in the course of determining Brockville’s liability and, in particular, whether the application judge incorrectly categorized questions of mixed fact and law as extricable questions of law. Harvison Young J.A., for a unanimous Court of Appeal, found that the application judge erred in so doing, and that the alleged breaches of procedural fairness depended on the substantive questions of whether the arbitrator fell into errors of law, which he did not.
“[T]he parties selected an arbitrator to deal with a number of issues arising out of a large project with a number of interrelated contracts and agreements. Moreover, they specifically chose to agree that only questions of law would be subject to appeal. As a matter of policy, and as the Supreme Court of Canada has stated repeatedly, judges exercising their appellate powers under section 45 of the Arbitration Act should be cautious about extricating questions of law from the interpretation process”.[3] “Failing to exercise such caution will result in the very inefficiencies, delays and added expense that choosing an arbitral process seeks to avoid. None of the alleged errors made by the arbitrator could properly be considered extricable errors of law. Nor were there any breaches of procedural fairness that could attract review pursuant to s. 46 of the Arbitration Act.”[4]
Conclusion
This case reaffirmed the narrow basis upon which the courts will set aside an arbitral award under s. 45 or s. 46 of the Arbitration Act.
The Supreme Court of Canada subsequently denied leave to appeal from the Ontario Court of Appeal decision in this matter.[5]
[1] Arbitration Act, 1991, S.O 1991, c. 17 (the “Arbitration Act”); available online at https://www.canlii.org/en/on/laws/stat/so-1991-c-17/latest/so-1991-c-17.html.
[2] 2022 ONCA 861; available online at https://www.canlii.org/en/on/onca/doc/2022/2022onca861/2022onca861.html.
[3] Ibid., para. 3.
[4] Ibid.
[5] See https://www.scc-csc.ca/case-dossier/info/dock-regi-eng.aspx?cas=40611&pedisable=true.