ONTARIO – Arbitration – Arbitration Act, 1991, S.O. 1991, c. 17, ss. 45(1) and (2)– Where an arbitration agreement provides that the arbitration “finally settles” all issues, there is no basis for the Court to grant leave to appeal from the arbitral award, even on questions of law.

ONTARIO – Appeals – An appeal lies to the Court of Appeal as to whether an application judge misinterpreted the arbitration agreement as precluding appeals and therefore, mistakenly declined jurisdiction to consider whether leave to appeal should be granted under s. 45(1) of the Arbitration Act, 1991, S.O. 1991, c. 17.

Baffinland Iron Mines LP v. Tower-EBC G.P./S.E.N.C.
2023 ONCA 245 (CanLII) (April 13, 2023)
Ontario Court of Appeal (Zarnett, Thorburn and Copeland JJ.A.)

In this appeal, Zarnett J.A., writing the unanimous decision of the Court of Appeal, dismissed an appeal from the decision of Pattillo J. that concluded that the arbitration agreement between the appellants (collectively “BIM”) and the respondent (“TEBC”) denied BIM the opportunity to seek leave to appeal on errors of law. (paras. 3, 48)

Background

There were two 2017 contracts between BIM and TEBC for TEBC to perform earthworks for BIM’s construction of a railway to transport ore from its mine on Baffin Island, Nunavut, to a nearby port. (para. 10) The parties disagreed about the interpretation of certain contract provisions following BIM’s termination of the contracts for delays in 2018. (para. 14) They were unable to resolve their differences and participated in an arbitration before a three-panel tribunal, which resulted in an award of $100 million against the Appellants. One of the arbitrators dissented in part. (para. 15)

The dispute resolution provisions of the contracts provided three pathways to resolution of a dispute. For the purposes of the appeal, the relevant pathway was that the dispute was to be “finally settled” by ICC arbitration by three arbitrators. (para. 12)

The Appellants applied under s. 45(1) of the Act to set aside the arbitral awards on the basis of errors of law. Pattillo J. held that the parties had contracted out of all rights of appeal by s. 20.6 of the contracts, given its reference to disputes being finally settled by arbitration, as well as by virtue of the incorporation of ICC Rule 35(6) into the contracts. (para. 17) In relation to arbitration, the parties used the phrase “finally settled”, which Justice Pattillo interpreted to mean appeals were precluded. (para. 18)

ICC Arbitration Rule 35(6) states: “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.” (para. 13)

As a result, the application judge refused to address whether the appellants were entitled to leave to appeal the majority award, on the basis of the alleged legal errors. (para. 19)

Motion to Quash the Appeal

Zarnett J.A. explained that the Act contemplates three different scenarios regarding appeals to the court on questions of law:

• If the arbitration agreement provides for an appeal, there is an appeal to the Court as of right;
• If the arbitration agreement is silent on the right of appeal, a party may seek leave to appeal from the Court; and
• If the arbitration agreement precludes appeals, there is no appeal or right to seek leave to appeal at all. (para. 2)

TEBC sought to quash BIM’s appeal to the ONCA from Pattillo J.’s decision on the basis that there was no right to appeal from the application judge’s denial of leave to appeal on the basis that there is no such provision permitting an appeal in the Act and the general rule is that there is no appeal to the ONCA from a refusal of leave to appeal. (para. 20)

Relying on Denison Mines Ltd. v. Ontario Hydro (2001), 2001 CanLII 5681 (ONCA), the Court of Appeal dismissed the motion to quash the appeal. Justice Zarnett held that the application judge did not consider whether the grounds raised by BIM were deserving of leave and therefore, declined to exercise any jurisdiction to consider whether leave to appeal should be granted. BIM was entitled to appeal to ONCA whether or not the application judge misinterpreted the arbitration agreement as precluding appeals and thus mistakenly declined jurisdiction to consider whether leave to appeal should be granted under s. 45(1). (paras. 27, 30)

The Appeal

Zarnett J.A. held that Pattillo J.’s interpretation of the contracts was correct by reference to the following matters:

• The Presumption of Consistent Expression

Although the presumption of consistent expression may in some cases be helpful in illuminating the parties’ intention, it is important not to treat the presumption as a dominating technical rule of construction that overwhelms the interpretation of a contract based on the ordinary and grammatical meaning of its text. The presumption should not be seen as a bar to the use of differently worded but mutually reinforcing phrases that can only be understood to have the same meaning. (paras. 37-38) Therefore, in the context of this case, Pattillo J. did not err in law by ascribing the same meaning to “final and binding” and “finally settled”. (paras. 39-43)

•  The Priority of Terms

Zarnett J.A. also rejected BIM’s argument that Pattillo J. erred in not applying the principle that apparently inconsistent terms in a contract are to be reconciled in accordance with the priority of terms to which the parties have expressly agreed. (paras. 45-46)

Referring to Fuller v. Aphria Inc., 2020 ONCA 403, at para.58, Justice Zarnett noted that “before the interpretive principles concerning reconciling apparently inconsistent terms are to be applied, the terms must be apparently inconsistent in the sense, for example, of one appearing to say ‘yes’ while the other appears to say ‘no’ to the same question”. (para. 47)