Arbitration agreement bars appeal in construction dispute: Ontario Court of Appeal

The dispute arose from a breach of contract for railway construction

Arbitration agreement bars appeal in construction dispute: Ontario Court of Appeal

The Ontario Court of Appeal has refused to allow an appeal of an arbitral award, finding that the parties’ arbitration agreement precluded an appeal on questions of law.

Baffinland Iron Mines (BIM) and Tower-EBC G.P./S.E.N.C (TEBC) entered two identical contracts in 2017, under which TEBC undertook to perform earthworks for BIM’s railway construction. The contracts contained dispute resolution provisions that provided three pathways to resolve conflicts: referral to a Dispute Adjudication Board (DAB), amicable settlement, or arbitration if the DAB or amicable settlement failed to resolve the despite.

In 2018, BIM terminated the contracts due to delays. TEBC commenced arbitration and filed a statement of claim, challenging BIM’s right to terminate the contracts and claiming damages arising from the termination. A three-member tribunal rendered an award in favour of TEBC.

Leave to appeal on errors of law

BIM sought leave to appeal to the Ontario Superior Court on errors of law. The arbitration agreement did not positively provide that a party could appeal an award. The application judge dismissed BIM’s request for leave to appeal. The judge found that the arbitration agreement precluded appeals by stating that disputes would be “finally settled” by arbitration and by incorporating the Rules of Arbitration of the International Chamber of Commerce (ICC Rules), including the rule stating that parties agreed to carry out any award and waived any form of recourse. The judge held that BIM could not obtain leave to appeal as the precondition to seeking it under s. 45(1) of the Arbitration Act was not met.

BIM elevated the matter to the Ontario Court of Appeal, requesting that the court reverse the application judge’s decision about the arbitration agreement precluding appeals on questions of law.

The appeal court explained that when an arbitration agreement provides that an award made under it may be appealed on a question of law, a party dissatisfied with the award may appeal on such a question to the court as of right. But when no such appeal is provided for in the arbitration agreement, a party may only appeal an award on a question of law with leave of court, and only “if the arbitration agreement does not deal with appeals on questions of law.”

Accordingly, the Arbitration Act allows for three possibilities regarding appeals to the court on questions of law—the arbitration agreement may expressly provide for, be silent on, or preclude such appeals.

Presumption of consistent expression

BIM asserted that the application judge misconstrued and misapplied the principle of contractual interpretation that presumes that the language in a contract is used consistently, with the same words meaning the same thing and using different words indicating an intention to refer to other things.

BIM argued that the contracts used the phrase “final and binding” about some decisions of the DAB but did not use that exact phrase for arbitration decisions, instead using “finally settled.” “Final and binding” is terminology that precludes appeals from an arbitration award. Therefore, BIM submits that applying the presumption of consistent expression requires giving “finally settled” a different meaning.

The appeal court said that although the presumption of consistent expression may, in some cases, help illuminate the parties’ intention, it is essential 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 meanings of its text.

The court further said there could be more than one way to say appeals are precluded. The court found that the ordinary and grammatical meaning of “finally settled” by arbitration, when situated in the context of the contracts’ dispute resolution provisions, clearly means no further recourse by way of appeal, in the same way as “final and binding” would.

The court said that the presumption of consistent expression pulled in favour of precisely what the application judge did –give consistent meaning to the repeated word “final” when it was used with “binding” and when it was used with “settled.” In each phrase, it carried the meaning of “admitting of no further disputation,” “excluding any right of appeal which would otherwise have existed,” or “ousting all rights of appeal.”

Further, the court said that “settled” reinforces the meaning of “final” and that no further recourse regarding the dispute beyond the arbitration award is available.

The appeal court concluded that the application judge correctly interpreted that the arbitration agreement contained in the contracts dealt with appeals on questions of law by precluding them. As a result, leave to appeal was not available to BIM.

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