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BINDING ARBITRATION - Jurisdiction of the court to review

Friday, May 03, 2019 @ 8:39 AM  


Lexis Advance® Quicklaw®
Appeal by Solar Power from a decision setting aside an arbitration award. The parties agreed to arbitrate a contractual dispute. The arbitrator found that the respondent unlawfully terminated its contract with the appellant and awarded damages. The parties chose not to establish a right of appeal on any basis from the arbitrator’s award. The respondent brought an application to set aside the arbitrator’s award under s. 46(1)3 of the Arbitration Act, arguing that it was made in excess of the arbitrator’s jurisdiction. The application judge accepted this argument and set aside the award. The application judge found that the arbitrator did not exceed his jurisdiction in concluding that the agreement imposed a duty of good faith on the respondent’s exercise of its discretion but concluded that the arbitrator’s determination that he could award damages for loss of profits was unreasonable.

HELD: Appeal allowed. The parties were sophisticated commercial parties represented by counsel and chose to preclude appeals to the court. The only basis for the respondent to challenge the award was thus under s. 46(1) of the Arbitration Act which authorized the court to set aside an arbitration award on the limited and specific grounds it enumerated. To set aside the arbitrator’s award under s. 46(1)3, the application judge was required to find either that the award dealt with a matter not covered by the arbitration agreement or included a decision on a matter beyond the scope of the agreement. The application judge’s conclusion that the arbitration award must be set aside because the arbitrator had only the jurisdiction to make an award that was reasonable or correct was a mistake. This mistake rendered the application judge’s decision interpreting and applying s. 46(1)3 indistinguishable from the sort of decision that might have been made if the arbitrator’s decision had been subject to a right of appeal. It failed to recognize the distinction between having jurisdiction to award damages and making an error in the exercise of that jurisdiction. The arbitrator did exactly what he was authorized to do by the terms of the arbitration agreement. Once the application judge concluded that the arbitrator acted within the authority conferred upon him by the arbitration agreement, his task was at an end. The application judge’s conclusion that the arbitrator’s interpretation of the agreement was both unreasonable and incorrect had the effect of converting s. 46(1)3 into an appeal on a mixed question of fact and law, an appeal the parties deliberately chose not to establish.

Alectra Utilities Corp. v. Solar Power Network Inc., [2019] O.J. No. 1643, Ontario Court of Appeal, C.W. Hourigan, M.L. Benotto and G. Huscroft JJ.A., April 2, 2019. Digest No. TLD-April292019013