ONTARIO – Failure to raise an objection to an arbitrator’s jurisdiction at the outset of an arbitration precludes raising the objection after the arbitrator has decided the matter. An interlocutory order refusing a stay but suggesting there are serious issues to be tried is preliminary and not binding on the judge hearing the application to set aside or grant leave to appeal from the award. Arbitration Act, 1991, S.O. 1991, c. 17 ss. 45 or 46.
Kingston Automation Technology Inc. v. Montebello Packaging
2021 ONSC 5924 (CanLII)
Gomery J., September 7, 2021
The Court considered an application by Kingston under the Arbitration Act, 1991, S.O. 1991, c. 17 (the “Act”) for leave to appeal, under s. 45, or alternative to set aside, under s. 46, two arbitration awards arising from breach of contracts for manufacturing of packaging machines under five contracts arising from purchase orders by Montebello.
The first arbitration award held that only two of the purchase orders were governed by the agreement to meet milestones. The arbitrator held that Kingston breached those contracts and was required to reimburse Montebello $308,000 under the terms of the agreement.
As to the purchase orders that were not governed by the agreement, the arbitrator held that Kingston was in breach but there was insufficient evidence to determine how much of the money advanced by Montebello should be refunded. That matter was adjourned for further materials and a second hearing.
The second award held that some of Kingston’s productions exceeded the arbitrator’s order and concluded that Kingston should reimburse Montebello $400,000.
The parties proceeded to arbitration pursuant to an arbitration agreement, which provided that “any dispute or disagreement … with respect to the interpretation of any provision hereof, the performance of either Party hereunder, or any other matter that is in dispute between the Parties arising from or in connection with or related to this Agreement”. (para. 13).
After the arbitrator decided the liability issue, Kingston objected to the arbitrator’s jurisdiction to deal with the claims relating to three of the purchase orders. The arbitrator rejected the objection: para. 14.
Gomery J. held that Kingston’s failure to raise the jurisdictional issue earlier precluded it from raising it in Court and that the arbitrator made no error in rejecting it. Also, Kingston had consented to referring the entire dispute to arbitration. The Court also referred to Section 46(3) of the Act, which restricts the court’s power to set aside an award where a party has agreed to inclusion of the dispute or waived the matter: para. 20-23.
The Court refused leave to appeal on two grounds. First s. 45(3) limits appeals on mixed questions of fact and law to cases where the agreement so provides. In the present case, the appeal was on a mixed question of fact and law (paras. 38-40) but the agreement contained no such provision.
In fact, the agreement provided for no appeal at all: paras. 27-30. The Court relied on 108 Media Corporation v. BGOI Films Inc., 2019 ONSC 880 as authority for the proposition that the parties may agree to make the arbitration final and binding without a right of appeal and that such a provision is not contrary to the Act, as the right of appeal is not one of the six mandatory provisions referred to in s. 3. (para. 28 and 32).
Gomery J. then reviewed the award in great detail and then concluded that the arbitrator did not make any of the errors alleged by Kingston: (paras. 52-77).
The decision is instructive as to the arguments which a party can raise to challenge an award and the detailed analysis a court will make to address each point as to: