John’s 2022 Hot Topic: Summary judgment in arbitration – #699

My “hot topic” for 2022 is the Court of Appeal for Ontario’s confirmation that an arbitration can be determined by summary judgment. In Optiva Inc. v. Tbaytel, 2022 ONCA 646, the Court approved proceeding by summary judgment motion where such a motion is consistent with the parties’ arbitration agreement. While the case addressed four grounds of appeal, including whether the arbitrator’s ruling to proceed by summary judgment was a procedural order or a jurisdictional award, the central issue, and my “hot topic,” is whether the arbitrator’s partial award, which decided a summary judgment motion should be set aside. For a summary of the decision, see Case Note – No oral hearing required even if one party requests it #667.

What makes this topic particularly “hot” is the growing number of arbitration rules that provide for “expedited procedures,” “early determination,” or “early disposition” (details below). The Court’s ruling in this case provides support for such procedural mechanisms that have recently been adopted by various arbitral institutions to safeguard and promote one of the fundamental tenets of arbitration of providing an efficient and cost-effective means of dispute resolution. 

The arbitration agreement – Writing for the Court, Justice Doherty noted that the parties’ arbitration agreement, “[30] … gave the arbitrator broad powers to conduct the arbitration.” In particular, the arbitration agreement provided that the arbitrator’s jurisdiction:

“[30] … shall include jurisdiction to consider and rule upon all motions during the Arbitration including, without limitation, the power to: … 

8.1.12 make rulings, directions and generally deal with any and all interlocutory matters and procedural questions relating to the issues within the Arbitration; 

8.1.13 interpret the Parties’ agreements, including the Dispute Resolution Provision, and the Arbitration Act; …” 

The Arbitration Act – The arbitration agreement was subject to Ontario’s Arbitration Act, 1991, SO 1991, c 17, (the “Act”). In addition to the obligation that the parties are “treated equally and fairly” under s 19(1), the Act provides, in relevant part:

20(1) The arbitral tribunal may determine the procedure to be followed in the arbitration …

26(1) The arbitral tribunal may conduct the arbitration on the basis of documents or may hold hearings for the presentation of evidence and for oral argument; however, the tribunal shall hold a hearing if a party requests it.

Optiva’s arguments against proceeding by summary judgment – The appellant, Optiva Inc. (“Optiva”), argued that the motion for summary judgment was inappropriate because: (i) the arbitration agreement does not expressly provide for summary judgment; (ii) s. 26(1) of the Act provides the right to an oral hearing to present viva voce evidence and cross-examine witnesses; and (iii) the summary judgment procedure resulted in unfairness.

Justice Doherty rejected Optiva’s arguments. With respect to the lack of explicit reference to proceeding by summary judgment, Justice Doherty noted the broad powers given to the arbitrator under the arbitration agreement, including the power to interpret the arbitration agreement itself under para. 8.1.13 quoted above. Justice Doherty stated that, “[42] … Optiva’s interpretation of the arbitration agreement, which would limit the arbitrator’s powers to those specifically granted in the agreement, flies in the face of the language used.” He thus concluded that, “[42] [t]he arbitrator performed the task assigned to him by the parties.

Regarding s. 26(1) of the Act and Optiva’s right to present viva voce evidence and cross-examine witnesses, Justice Doherty noted that the word “hearing” and the phrase “presentation of evidence” are not defined in the Act. He remarked that there is no reason why the term “hearing” should have a different meaning in the context of commercial arbitration compared to civil proceedings where “hearings” include applications and motions, which do not include viva voce evidence. Furthermore, Justice Doherty held that the “presentation of evidence” does not solely entail viva voce evidence but includes affidavits and transcripts of cross-examinations. As such, Justice Doherty concluded that “[48] [t]he manner in which evidence is presented at a hearing is ultimately a procedural question” and that under s. 26, a party “[48]has no right to present its evidence in a particular manner.” The arbitration agreement was clear that the arbitrator could decide procedural questions, “[48]including how evidence should be presented.

Justice Doherty similarly dismissed Optiva’s third argument that proceeding by way of summary judgment without its express consent rendered the proceeding unfair: “[49] Optiva agreed that the arbitrator could determine the procedures governing the arbitration.” Moreover, there was no indication that Optiva was denied the opportunity to present any evidence or that it did not have a full and fair opportunity to challenge the case put forward by the respondent Tbaytel.

The growing availability of “expedited procedures” – A number of major arbitral institutions have recently updated their rules to increase the use of “expedited procedures.” 

Perhaps most recently, the Vancouver International Arbitration Centre (“VanIAC”) amended its International Commercial Arbitration Rules of Procedure on July 1, 2022 (the “VanIAC Rules”) to include the availability for “early disposition” under Rule 21. The Rule provides, in part, that, “[a] party may seek leave to bring an application for early disposition of one or more issues of fact or law at any stage of the proceedings.” In addition, VanIAC Rule 1(g) provides that expedited procedures can apply where the dispute does not exceed CAD $500,000 exclusive of interest and costs. Under the expedited procedures, the presumption under Rule A-7(a) is that “… a final award shall be issued without an oral hearing based on written materials delivered to the expedited arbitrator.”

The International Centre for Dispute Resolution (“ICDR”) recently revised its arbitration rules, which entered into force on March 1, 2021 (the “ICDR Rules”). The ICDR Rules introduced a new rule, Article 23: Early Disposition, which provides that:

 “[a] party may request leave from the arbitral tribunal to submit an application for disposition of any issue presented by any claim or counterclaim in advance of the hearing on the merits (“early disposition”). The tribunal shall allow a party to submit an application for early disposition if it determines that the application (a) has a reasonable possibility of succeeding, (b) will dispose of, or narrow, one or more issues in the case, and (c) that consideration of the application is likely to be more efficient or economical than leaving the issue to be determined with the merits.” 

This new rule is consistent with the London Court of International Arbitration (“LCIA”) rule revisions in 2020, which allow for an “Early Determination” under Article 22.1(viii) in finding that “any claim, defence, counterclaim, cross-claim, defence to counterclaim or defence to cross-claim is outside the jurisdiction of the Arbitral Tribunal, or is inadmissible, or manifestly without merit; and where appropriate to issue an order or award to that effect.”

In addition, the ICDR Rules increased the application of its expedited procedures to any case where the claims or counterclaims do not exceed USD $500,000 exclusive of interest and costs (previously USD $250,000). The presumption under the expedited procedures is that if a hearing is to take place, it will not exceed one day unless the arbitrator determines otherwise (Article E-9).

Lastly, the International Chamber of Commerce’s (“ICC”) new rules of arbitration entered into force on January 1, 2021 (the “ICC Rules”). The ICC Rules, under Article 30 and Appendix VI: Expedited Procedure Rules, expanded the application of its expedited procedures to all disputes below USD $3 million (previously USD $2 million). Of note, Article 3(5) of Appendix VI provides that “The arbitral tribunal may, after consulting the parties, decide the dispute solely on the basis of the documents submitted by the parties, with no hearing and no examination of witnesses or experts.”As noted above, the Court’s ruling in the Optiva v Tbaytel case seems to support the use of such procedural mechanisms, even when the parties have chosen ad hoc arbitration rules, so long as they are consistent with the agreement of the parties.