January 30, 2025
Section 45(1) of the Arbitration Act, 1991 (the “Arbitration Act“) provides:
45(1) If the arbitration agreement does not deal with appeals on questions of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that;
(a) the importance to the parties of the matters at stake in the arbitration justifies an appeal; and
(b) determination of the question of law at issue will significantly affect the rights of the parties.
The first lesson to be learned from reviewing this section is that wherever possible, in drafting, you should address the right to appeal.
There are three categories of appeal rights:
- No appeal from the decision. This is typically when the agreement says that the arbitrator’s decision is “final and binding”.
- An appeal as to questions of law only. Section 45 is an example of this and is discussed below. This is probably the most common appeal formula.
- A right of appeal on questions of fact and law. This breaks down into two sub-categories:
- A right of appeal on MIXED questions of facts and law.
- An unrestricted right of appeal on questions of fact OR law. This is probably the least popular option, and economically the least attractive, as it may result in the appeal approximating a fresh hearing of the entire case. It defeats the purpose of electing arbitration over the court process in the first place.
Which option is best for you depends upon your confidence in finding the right arbitrator; your need for certainty as soon as practical; and your cost sensitivity.
A recent Ontario Superior Court decision, Johnson Bros. Corporation v. Soletanche Bachy Canada Inc , illustrates the difficulties possible in obtaining or maintaining an appeal right, in a construction context. The contract in question was a standard form sub-contract document, adopting CCDC 40 rules of arbitration.
CCDC 40 provides that “ …any award is final and binding…”. There is provision in the rules for the parties to provide otherwise in the contract, but in this case, that did not happen.
The party that lost the arbitration decided they wanted to appeal, and argued, based on the circumstances, that the arbitration was not under CCDC rules, but rather was an ad hoc submission to arbitration, because the submission was made after the deadline provided in the contract. This argument failed, because the Notice to Arbitrate was headed by reference to submission under the terms of the contract.
The judge then has no difficulty determining that “final and binding” means no rights of appeal. They further determined that even if there was a right to seek leave to appeal under section 5, they would not grant leave, because the aspects of the arbitrator’s decision complained about dealt with facts, not law, and a section 45 appeal is on questions of law only- likelythe most common appeal right.
TAKEAWAYS
- The arbitration clause in your agreement is not just boilerplate. The time to consider the suitability of the clause is at the time of drafting.
- Even a standard form document may be amended to provide a custom choice of appeal rights
- If the agreement is silent on appeal rights, section 45 provides very narrow rights of appeal. This is fine if speed and certainty are the most important reasons to arbitrate. Less so if correctness is your main concern.
WHAT WEILERS LLP CAN DO TO HELP YOU
At Weilers LLP, our corporate commercial have experience drafting and interpreting unusual clauses in agreements and do our best to make sure our clients understand them, but in order for that to work, our clients need to be open with us about their understanding of the terms, and of course, need to read the fine print.
If you are dragged into a complex commercial arbitration, Weilers LLP has lawyers well-suited to represent you at a realistic cost, with realistic advice and strong representation. We work closely with our own commercial drafting colleagues within the firm to provide clear and concise opinions. We are able to share the same cooperation with many outside lawyers who appreciate our commitment to our mutual clients.