Ontario – Arbitrator’s jurisdiction is determined by asking whether the arbitrator had the authority to make the decision not by asking if the decision is correct.

CASE #005D
Fogler Rubinoff LLP v Houle (“Fogler”)
2021 ONSC 5626 (CanLII),
Vermette J., August 17, 2021

Fogler Rubinoff brought an application to enforce a cost award pursuant to the Arbitration Act, 1991(“Act”), s. 50. The Respondents applied to set aside the cost award on the basis that the cost award was beyond the scope of the arbitration agreement or for leave to appeal pursuant to ss. 46(1) and 45(1) of the Act.

With respect to jurisdiction, Justice Vermette referred to Alectra Utilities Corporation v. Solar Power Network Inc .2019 ONCA 254 (“Alectra”) (paras. 25-27). where the Court of Appeal held that: “s.46(1)3 requires that arbitrators act within the bounds of the authority granted by the arbitration agreement pursuant to which they are appointed-no less, but no more. Section 46(1)3 is not an alternate appeal  route and must not be treated as such.”( para. 27).The Court stated that section 41(1)3 of the Act sets out a jurisdictional question that must be answered correctly. Jurisdiction is determined by asking if the arbitrator had the authority to make the inquiry made. In Fogler, the court found that there was no doubt that the arbitrator had authority to determine the issues of costs. Section 46(1)3 of the Act allows for a limited review of jurisdictional error, it neither requires nor authorizes a review the substance of the arbitrator’s award: Alectra, para. 43.

In Fogler, the Court also noted (para. 9) that “Jurisdiction is determined not by asking whether the arbitrator made a correct decision, but by asking whether the arbitrator had the authority to make the inquiry that they made” referring to Parc-IX Limited v. The Manufacturer’s Life Insurance Company, 2021 ONSC 1252, at paras. 40-42.

In the arbitration agreement and Terms of Appointment, the parties agreed that the Act and the ADR Chambers Arbitration Rules (“Rules”) applied to the dispute. The Rules provided that the arbitrator has authority to make a costs award and do not allow an appeal on a question of law, “unless the Parties have otherwise agreed, or the Law of the Arbitration requires.”(para. 14 f.n.2,). Similarly, the Act, section 54 provides that the tribunal may make an award of costs of an arbitration which include the costs of the parties and fees and expenses of the tribunal.

The award referred to the principles of assessment pursuant to the Solicitor’s Act and Rule 57 of the Rules of Civil Procedure and that the exercise of discretion in assessing costs is different than the exercise of discretion by a judge in an action.

The Court found that the arbitrator had authority and jurisdiction to determine the issue of costs and therefore the court had no authority to set aside the award.

The Court then dealt with the Respondents’ leave to appeal application which was denied. Section 45(1) of the Act indicates that if the agreement to arbitrate does not deal with questions of law, a party may appeal an award on a question of law with leave.

The Court reviewed the Sattva Capital Corp .v Creston Moly Corp., 2014 SCC 53 (“Sattva”) and SCC’s analysis that questions of law are those questions  about what the correct legal test is, and questions of mixed fact and law involve applying a legal standard to a set of facts.

In Sattva, the SCC held that legal errors include the application of a required element of a legal test or the failure to consider a relevant factor (paras. 51-53). The SCC indicated that the role of an appeal court of appeals of questions of law are to ensure the consistency of the law rather than to allow parties to continue their private litigation in a new forum. In addition, the Court in Fogler found that the alleged errors of law raised by the Respondents were not questions of law and instead related to questions of mixed fact and law and whether the facts and evidence satisfy the legal test, not an error of law. Therefore, leave to appeal was not granted and the application to enforce the award was granted.