ONTARIO – Arbitration – Appointment of Arbitrator – Where there is an agreement on the essential terms of an arbitrator’s appointment, it need not be incorporated into a formal executed document to be binding. Repudiation of an agreement to appoint an arbitrator is not established unless a reasonable person would conclude that a party no longer intended to be bound by that agreement.

ONTARIO – Arbitration – Jurisdiction and Mandate of Arbitrator – An arbitrator may rule on their own jurisdiction and in doing so, may rule on objections to the existence or validity of the arbitration agreement. The question of whether the matters at issue are closely connected with the agreement to arbitrate should be answered by the arbitrator. It is not appropriate for the court to limit the arbitrator’s mandate at this early stage.

Toronto Standard v. Distillery SE, 2023 ONSC 5340 (CanLII)
 2023 ONSC 5340 (September 21, 2023)
Ontario Superior Court of Justice (Shin Doi J.)

The Applicant sought an order appointing an arbitrator and confirming that the issues in its Fresh as Amended Notice of Arbitration (“Amended Notice”) were within the arbitrator’s jurisdiction. In response, the Respondent sought to quash the Amended Notice, arguing that the Applicant repudiated an agreement to appoint a specific arbitrator. The Respondent argued that the Applicant had to follow a shared facilities agreement between the parties and a third-party condominium (the “Agreement”) and that the condominium should be party to the arbitration. (paras. 1-2)

Finding there was no written agreement between the parties to appoint the arbitrator but also no objection from the Respondent to the appointment, the Court granted the application to appoint Colin L. Campbell, K.C., as arbitrator. The Court refused to quash the Amended Notice. The Court deferred to Mr. Campbell to determine his jurisdiction, mandate, and the arbitration agreement, including whether the condominium should be a party to the arbitration. (para. 3)

Appointment of Arbitrator

The Applicant’s counsel submitted that they were unaware of the parties’ previous agreement to arbitrate with Mr. Campbell. The Court reviewed the emails between the parties and noted that while it did appear that when Applicant’s counsel took over the file, they were unaware of the agreement to appoint the Arbitrator, there had been an earlier agreement between the parties to appoint Mr. Campbell. (para. 9)

The Court held that the Applicant’s counsel was incorrect in law that there was no binding agreement between the parties but found that their argument was correct that “a binding agreement is reached where there is agreement on the essential terms – it need not be incorporated in a formal executed document in order to be binding: UBS Securities Canada, Inc. v. Sands Brothers Canada Ltd., 2009 ONCA 328 at para. 47”. (paras. 10-11)

The Respondent took the position that the Applicant had repudiated the binding agreement to appoint the arbitrator. The Respondent also argued that it had accepted that repudiation. (para. 12)

The Court applied the objective test of “whether a reasonable person would conclude that the breaching party no longer intends to be bound” to determine whether repudiation was established. The Application Judge was not satisfied that a reasonable person would conclude that the Applicant no longer intended to be bound by an agreement to appoint the Arbitrator. Its conduct was “more likely confusion and lack of awareness as opposed to repudiation given that the agreement to appoint Mr. Campbell had subsisted for years and Applicant’s counsel was new.” (para. 13)

The Court also noted that appointing the Arbitrator would move the parties forward – in contrast, not appointing Mr. Campbell would push them back to a time prior to 2018. The Court found that the parties agreed in 2018 and again in 2022 that Mr. Campbell be the arbitrator and ordered that the appointment be confirmed. (para. 14)

Jurisdiction and Mandate

There parties were in dispute as to whether the Applicant raised new matters in the Amended Notice that were not raised in the 2018 Notice of Arbitration. The Court found that it was clear that the parties agreed in 2018 to proceed to arbitration. “Whether the issues set out in the Fresh as Amended Notice of Arbitration fall within the jurisdiction of the arbitrator, the arbitrator’s mandate, and the arbitration agreement are now questions for the arbitrator.” (para. 15)

In making that ruling, the Court relied on section 17(1) of the Arbitration Act, which provides that an arbitrator may rule on their own jurisdiction to conduct the arbitration and in that connection, may rule on objections with respect to the existence or validity of the arbitration agreement. Citing Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34 (CanLII), the Application Judge noted that the “court has held that arbitrators should be allowed to exercise their power to rule first on their own jurisdiction.” (para. 16)

The Court held that “whether the matters in the Fresh as Amended Notice of Arbitration are closely connected with the agreement to arbitrate should be decided by the arbitrator” and that “it is not appropriate to limit the arbitrator’s mandate at this stage.” (citing the SCC in Desputeaux v. Editions Chouette (1987) Inc., 2003 SCC 17 (CanLII)) (para. 17)

A final issue the Court addressed was whether the condominium was a necessary party to the arbitration. The Court held that the necessity of that third party turned on substantive issues that the arbitrator would hear under their mandate and jurisdiction and pursuant to the parties’ agreement. (para. 18)