Canada – Enforcing Award’s Remedy Excludes Substituting Court’s Own Remedy

This article first appeared on Urbas Arbitral, here.

In Abittan v. Wilcox, 2020 ONSC 6836, Mr. Justice Frederick L. Myers reiterated the “consequences” of agreeing to submit disputes to arbitration, limiting his involvement by “[i]gnoring the merits of the Arbitrator’s decisions, as I must, and considering only the nature and form of remedy granted”. Enforcing the award which ordered one party to pay the other the costs of the arbitration, Myers J. explained that section 50(7) of the Arbitration Act, 1991, SO 1991, c 17 did not authorize him to change the remedy ordered in an award. Doing so would not be enforcing an award but substituting the court’s award for that of the arbitrator.

W and A arbitrated their dispute involving the binding effect of and compliance with a letter of intent (“LOI”).  The arbitrator issued an award which confirmed the LOI’s legally binding effect, ordered W to comply with it and awarded A payment of $46,000.00 in costs from the arbitration.

A applied under section 50(3) of the Arbitration Act, 1991, SO 1991, c 17 for enforcement of the Award.  A did not seek enforcement of that term of the Award requiring W’s compliance with the LOI, focusing on the declaration that the LOI bound the parties and also enforcement of the costs award made against W in A’s. favour.

Eighteen (18) months had passed since the Award issued and W had sought neither leave to appeal nor to set aside the Award under sections 45 and 46.   Having noted the delay and the absence of any post-award proceedings by W, Myers J. observed the limited role left to him. “None of the conditions that could allow the court to refuse to enforce an award under s. 50 (3) are present”.

In resisting A’s application, W raised section 50(7) as grounds to refuse enforcing the costs component of the Award. W relied on para. 12 of the LOI which mentioned that W and A “will each bear their own expenses in connection with this LOI”.  W relied on this stipulation to argue that the arbitrator had no jurisdiction to award costs and therefore exceeded his jurisdiction.  Myers J. excerpted the passage from the Award which contained the arbitrator’s consideration of W’s argument on para. 12 of the LOI.

[35] [W] submits that each party should bear her own costs of the arbitration and 50% of the Arbitrator’s fees. She relies on clause 12 of the LOI which provides that “[W] and [A] will each bear their own expenses in connection with this LOI”. In my opinion, the expenses referred to in clause 12 of the LOI are the expenses of negotiating, preparing, executing and implementing the terms of the LOI. In my view, clause 12 does not apply to the costs of the arbitration to determine whether the LOI is binding on the parties and enforceable”.

W argued that the arbitrator “failed to consider that the words “in connection with this LOI” used in para. 12 are words of the widest import which encompass the costs of any arbitration arising under the terms of the LOI”.

Myers J. confirmed that he had read the record closely and understood W’s arguments regarding the dispute.

[12] I have read carefully [W]’s detailed affidavit and exhibits. Her factum presented very thorough legal research. She explains numerous bases on which she believes she has been harmed, impoverished, oppressed, and wrongly deprived of government grants and other funds by [A]. She explains in some detail the facts, evidence, and her conclusions demonstrating her commitment, determination, and belief in the justice of her positions and the injustice of the Arbitrator’s decision”.

Having done so, Myers J. further observed that his role was not to reconsider W’s arguments on the result. 

[13] In my view however, the Legislature has decided that none of [W]’s concerns may be properly raised with the court in this enforcement proceeding under s. 50 of the statute. The parties chose to arbitrate. The Arbitrator made awards. He interpreted the parties’ LOI in a way that [W] believes is erroneous and led to an unjust outcome. The LOI did not prevent appeals. Therefore [W] was entitled to seek leave to appeal on a question of law had she wished to do so. She thought about it. She discussed appealing with her lawyer at the time and decided against it for her own reasons.

[14] Peoples’ decisions to resolve their disputes by arbitration have consequences. One consequence is that, unless they agree otherwise in their arbitration agreements, they cannot come to the court when they feel aggrieved by the arbitrator’s decisions except in the very limited circumstances set out in the statute. The court has no ability to reconsider the findings of fact or law made by the arbitrator in this proceeding”.

Myers J. further underlined that the “very narrowly drafted” section 50(7)’s had no application, drawing on Fuhr Estate v. Husky Oil Marketing Company, 2010 ABQB 495 which addressed “the equivalent section” in Alberta’s Arbitration Act, RSA 2000, c A-43.  In that Alberta decision, the court held that jurisdiction to enforce an order is not authorization to issue a different remedy. “The heading of s. 49 is “Enforcement”; if the Court orders a remedy that is fundamentally different than that of the Arbitrator, it is not enforcing it, it is substituting its award for the Arbitrator’s”.

Myers J. limited his endorsement of the statements made in the Alberta decision, affirming only his agreement that Ontario’s section 50(7) had limited scope.  “Whatever its scope may be in a proper case, I agree with him that it would be wholly inconsistent with limited role of the court intended by the statutory scheme to interpret s. 50 (7) to allow a court to conduct a review of the merits of an arbitral award in an enforcement application”.

In completing that portion of his reasons, Myers J. underlined his limited role. “Ignoring the merits of the Arbitrator’s decisions, as I must, and considering only the nature and form of remedy granted, I find that a costs award is indeed a remedy which a court has jurisdiction to grant and would grant in a proceeding similar to this one”.  He added that the inclusion of interest was also permitted by section 57 of the Arbitration Act.

Though W raised arguments involving potential setoffs against A, Myers J. declined to engage in the discussion given the limited scope and mandatory terms of section 50(3).

[23] [W]’s setoff argument also cannot succeed. The Arbitrator dealt with the issues before him. I am in no position in this proceeding to determine whether [W] may have oppression or other claims against [A].  Her claims may be well-founded if they are ever acted upon. But the existence of possible claims by [W] against [A] is not a basis to decline enforcement of the arbitral awards under the mandatory terms of s. 50 (3) of the statute”.

urbitral notes – First, in his follow-up decision on costs, Abittan v. Wilcox, 2020 ONSC 7179, Myers J. characterized the nature of W’s contestation of A’s application and the fact that A was “required to bring this proceeding to enforce the arbitrator’s decision”. 

Referring to his earlier reasons, Myers J. noted the following as part of his reasons to award A court costs which he qualified as “modest”. In doing so, Myers J. underlined the costs consequences of contesting recognition and enforcement despite the sincerity of one’s objections to the conclusions of an award.

[W] tried to turn the application into a re-assessment of the merits that were before the arbitrator and raised these additional issues that have yet to be litigated. I ruled that none of it was appropriately considered in the application that was before the court”.

Second, in his costs decision, Myers J. corrected the caption given to the earlier decision.

The endorsement was erroneously labeled, “Case Conference Endorsement”. In fact, the proceeding was scheduled and heard on its merits as a regular opposed application. It was not resolved at a case conference”.

author

Daniel Urbas

Daniel Urbas is an experienced litigator, arbitrator and mediator with over 25 years of dispute resolution experience. He has earned a variety of repeat, annual peer recognitions including “Leading Lawyer” in “Commercial Arbitration” in the 2019 edition of the Lexpert ® / American Lawyer Guide to the Leading 500 Lawyers…

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