ONTARIO – Arbitration – An appeal from a judge, who stayed an action under s. 7(1) of the Ontario Arbitration Act, 1991 in favour of arbitration and determination of jurisdiction by the arbitrator, applied the mandatory provisions of the Act correctly. There were no exceptional circumstances requiring the arbitrator’s jurisdiction to be determined by the court.
Irwin v. Protiviti, 2022 ONCA 533 (CanLII)
July 18, 2022
ONCA (Benotto, Miller & Copeland JJ.A )
This is an appeal from an order staying an action, pursuant to s.7(1) of the Arbitration Act, 1991. The dispute was between an employee and an employer about the employee’s termination. The employment contract contained an arbitration clause that referred any claims related to the termination of the appellant’s employment to arbitration.
The Appellant (employee) argued that the arbitration agreement was invalid because it was unconscionable as it did not allow for costs or punitive damages to be awarded and because it was inconsistent with the Employment Standards Act 2000, S.O. 2000 c.41 (“ESA”) and the Human Rights Code R.S.O. 1990,c H19 (“HRC”) (para.2)
The Court of Appeal considered two issues:
- Was the appellant denied procedural fairness because she was unaware the judge would consider the validity of the arbitration clause?
- Did the motion judge fail to determine the validity of the arbitration agreement?
The appellant was not denied procedural fairness because the respondent’s factum on the motion argued that the court should defer to the arbitrator to determine jurisdiction, accordingly, the appellant was aware of that issue. (para.5)
The motion judge granted the stay on the basis of the mandatory language of section 7(1). Further the motion judge relied on the test set out by the ONCA in Haas v. Gunasekaram, 2016 ONCA 744, at para. 12, that the Act’s language is directive and further bolstered by section 17(1), which provides that “[a]n arbitral tribunal may rule on its own jurisdiction to conduct the arbitration and may in that connection rule on objections with respect to the existence or validity of the arbitration agreement. (para. 7).
The Court referred to the general rule that in any case involving an arbitration clause, a challenge to the arbitrator’s jurisdiction must be resolved by the arbitrator first as set out in Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34 at para. 84 and in Uber Technologies Inc. v. Heller, 2020 SCC 16 at para. 32
There are exceptions to the general rule, that allow a court to exercise its discretion and determine the arbitrator’s jurisdiction, before the arbitrator. The exceptions are, if the challenge raises a pure question of law or if the challenge raises questions of mixed fact and law requiring only a superficial review of the evidence or if the court is convinced that the challenge is a delay tactic. (para.10)
In this case the ONCA (para.12) was of the view that the process to determine if the arbitration clause was unconscionable would involve more than a superficial consideration of the evidence and would be like a “mini-trial”. The assessment would involve a “probing factual inquiry” into the facts and assessing the sophistication of the parties, their bargaining power and other aspects of the factual matrix as set out in Rogers Wireless Inc. v. Muroff, 2007 SCC 35,(para.15)
The ONCA also noted that the access to justice issue present in the Uber v Heller case because of the standard form contact, was not present in this case, as appellant was a professional earning a very high salary and she was represented by counsel when the contract was negotiated.
The ONCA noted that s.7(2)(2) of the Act grants the court the discretion to refuse to stay a proceeding where “ the arbitration agreement in invalid”. The motion judge did not refuse to stay the proceeding, holding that “ the statute and the jurisprudence establish that the determination of the validity of the arbitration clause is within the jurisdiction of the arbitral tribunal. (para.8)
Therefore, the motion judge was permitted to leave the issue of determining the validity of the arbitration agreement with the arbitrator pursuant to s 17(1) of the Act. (para.10)
The ONCA held “The rule, then, is that questions of jurisdiction are to be arbitrated. A court has the discretion to decide otherwise, but only when the jurisdictional question is based on a pure question of law, or of mixed fact and law requiring not more than a superficial consideration of the evidence. (para. 11)
In this case the question of whether or not the arbitration clause was invalid due to unconscionability could not be determined upon a superficial review of the evidence. Similarly whether or not the arbitration clause was consistent with the ESA or Human Rights Code where mixed questions of fact and law and the motions judge was of the view that a superficial review would not answer the question and it needed to resolved by arbitration. (para.13) The appeal was quashed because the appellant was not denied procedural fairness and the motion’s judge was not required to determine the validity of the arbitration clause and by virtue of s. 7(6) of the Act no appeal of the motion judge’s decision was available.(para.15)