Ontario – arbitrator has jurisdiction to hear summary judgment despite party’s objection provided process complies with Hryniak – #474

In Optiva Inc. v, Tbaytel, 2021 ONSC 2929, Mr. Justice W. Daniel Newton dismissed a post-award challenge to an arbitrator’s initial decision to proceed by way of summary judgment absent defendant’s consent.  Newton J. determined that section 26 of Ontario’s Arbitration Act, 1991, SO 1991, c 17 describes hearings for “presentation of evidence” and “oral argument” but expresses no requirement for oral evidence.  As the parties proceeded by affidavit, after cross-examination, and with oral argument, Newton J. held that arbitrator’s process had met requirement to “hold a hearing” as requested by defendant.  Newton J also held that summary judgment should be available in arbitration for the same reasons as those given in Hryniak v. Mauldin, 2014 SCC 7 (CanLII), [2014] 1 SCR 87 provided the process “(1) allows the arbitrator to make the necessary findings of fact; (2) allows the arbitrator to apply the law to the facts; and (3) is a proportionate, more expeditious and less expensive means to achieve a just result”.

Update: Optiva Inc. filed a May 5, 2021 Notice of Motion for Leave to Appeal proposing to raise on appeal, among other issues, whether summary judgment, absent consent of the parties, is compatible with arbitration practice.

Further Update: On October 22, 2021, the Ontario Court of Appeal granted leave to appeal.

Tbaytel and Optiva Inc. (“Optiva”) entered into a June 2016 Software Supply, License, Hardware and Services Agreement (“Agreement”) which provided for a twenty-four (24) month timeline for the design, implementation and project management services. Tbaytel terminated the Agreement March 2018 and initiated arbitration against Optiva. 

The parties entered into a November 2018 arbitration agreement which included, at section 8.1, jurisdiction for the sole arbitrator:

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”.

After entering into the arbitration agreement, the parties engaged in mediation but did not resolve their dispute.  Optiva wrote to inform the arbitrator to set a hearing and scheduling, including the “possibility of a summary judgment by Tbaytel”.  That hearing resulted in a July 2, 2019 procedural order (“Procedural Order”) which contained the following mention:

Hearing the submissions made by counsel for the parties at a meeting for directions…I accept that a motion for summary judgment to be launched by the Claimant Tbaytel may obviate or reduce the significant time and cost of expansive documentary production that might be required in this arbitration”.

The Procedural Order also set out a series of steps and corresponding dates by which both Tbaytel and Optiva would prepare for the hearing on the motion for summary judgment.

Each party communicated written material and affidavits.  Optiva’s responding materials included its objections to the arbitrator’s jurisdiction to proceed by summary judgment.  While Tbaytel cross-examined Optiva’s affiants, Optiva did not cross-examine Tbaytel’s affiants.

Newton J. recorded Optiva’s oral arguments, at the onset of the hearing, to the arbitrator’s jurisdiction to hear and decided the motion for summary judgment.

[16] At the commencement of the summary judgment motion, Optiva raised its objection to proceeding by way of summary judgment, arguing that the arbitrator had no jurisdiction to proceed by summary judgment absent its consent.

[17] After submissions, the arbitrator, acknowledging that the law was “unsettled”, concluded that he had “jurisdiction [to proceed by way of summary judgment] based on section 20 of the Arbitration Act and section 8.1 of the arbitration agreement, and the lack of exceptions or exclusions” and determined that it was “appropriate to do so in this instance.” Following delivery of his oral reasons, the arbitrator delivered Procedural Order, November 21, 2019, confirming his decision”.

The two (2) day hearing resulted in an award by which the arbitrator granted summary judgment (“Award”).  The arbitrator determined that Tbaytel had succeeded in proving two (2) of the three (3) alleged breaches and that those breaches entitled Tbaytel to terminate the Agreement under its own terms as well as at common law. The arbitrator affirmed Tbaytel’s right to terminate and to recover money paid to Optiva

Optiva applied under Ontario’s Arbitration Act, 1991, SO 1991, c 17 to set aside the Award and for leave to appeal, raising three (3) grounds:

(i) the arbitrator could not, absent consent of Optiva, proceed by way of summary judgment;

(ii) the arbitrator decided the summary judgment motion on issues not raised by Tbaytel and, therefore, decided matters beyond the scope of the arbitration agreement; and,

(iii) the arbitrator decided the motion for summary judgment based on his own legal research without giving the parties the right to make further submissions.

Limited role of the courts – Newton J. referred to section 6 and 46(1) of the Arbitration Act and to Inforica Inc. v. CGI Information Systems and Management Consultants Inc, 2009 ONCA 642 para. 16 when noting the courts’ limited role in arbitration in set asides.  Newton J. did note that an arbitral tribunal can rule on its jurisdiction under section 17(1) and section 17(8) provides a thirty (30) day period within which a party can apply to challenge that ruling.

(i) Jurisdiction to proceed to summary judgment absent both parties’ consent (paras 40-52) – Newton J. pointed to the grant of jurisdiction to the arbitrator in section 20 of the Arbitration Act to “determine the procedure to be followed in the arbitration, in accordance with this Act”, subject to section 26(1):

Section 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”.

Referring to the time limit in section 17(8) to challenge jurisdiction and objections promptly, Newton J. held that Optiva was out of time.

The arbitrator ruled on November 21, 2019 that summary judgment was appropriate but Optiva challenged that ruling only after release of the Award on February 13, 2020.  As a result, Optiva’s challenge was out of time.

The rationale for such a timeline is clear. Objections to jurisdiction and procedure are to be determined at the outset, and not after the arbitration proceeding and the award”.

Newton J. added that, even if the challenge were not out of time, he concluded that the arbitrator could proceed to determine the matter by way of summary judgment without Optiva’s consent.

[48] Optiva argues that a summary judgment motion is not a hearing as there was no opportunity to present oral evidence, and that a summary judgment does not give a party an opportunity to present a case or respond to the other party’s case”.

Newton J. disagreed, relying on the Supreme Court of Canada’s guidance on summary judgments in Hryniak v. Mauldin, 2014 SCC 7 (CanLII), [2014] 1 SCR 87 paras 49-50. 

[50] Hearings are required if requested under s. 26 of the Act. However, s. 26 describes hearings as for the “presentation of evidence” and for “oral argument.” In this case, evidence was presented by affidavits filed by both parties and supplemented by cross-examination, although Optiva opted not to cross-examine the deponents of the Tbaytel affidavits. There is no requirement under the Act for oral evidence, only oral argument which occurred over the two days of the hearing”.

He held that summary judgment should be available in arbitration for the same reasons as those given in that decision.

[52] For the same policy reasons expressed in Hryniak, summary judgment should be available to the parties in an arbitration subject to the requirement, as stated in Hryniak, that the process:

(1) allows the arbitrator to make the necessary findings of fact;

(2) allows the arbitrator to apply the law to the facts; and

(3) is a proportionate, more expeditious and less expensive means to achieve a just result”.

(ii) Decided matters beyond the scope of the motion (paras 53-56) – In regard to this ground, Newton J.’s analysis rested on the particular circumstances of the dispute as argued by the parties and the arbitrator’s own determinations.  Newton J.’s reading of the arguments and those determinations allowed him to conclude that the arbitrator was aware that certain issues were not raised before him on the summary judgment motion.  As a result, the arbitrator had not decided beyond the submissions.

(iii) Decided motion of basis of arbitrator’s own research (paras 57-34) – Optiva argued that the arbitrator’s reliance on a particular case submitted by Tbaytel in its supplementary book of authorities, Ticketnet Corp. v. Air Canada, 1997 CanLII 1471 (ON CA), essentially deprived Optiva of its opportunity to respond.  Newton J. noted that Optiva did not object to the supplementary book of authorities and, in any event, knew that the issue raised by it was a “live” issue and “in play”.  “I find no merit to the suggestion that, as Optiva had not anticipated that the entire decision would be read by the arbitrator, it must be given the right to make further submissions”.

Leave to Appeal – Newton J. addressed Optiva’s application for leave to appeal on a question of law but, following Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 SCR 633, determined that the arbitrator’s determinations on the limitation of liability provisions did not qualify as a question of law.

urbitral notes – First, see the earlier Arbitration Matters note “Ontario – summary judgment motion opportunity for arbitrator to determine issues in favour of respondent – #227” regarding Canada Bread v. Mallot Creek, 2019 ONSC 2578. Madam Justice Bernadette Dietrich upheld an arbitrator’s decision to dismiss one party’s motion for summary judgment but then also make a final determination of a key issue in favour of the other party.  Dietrich J. determined that, if the sufficiency of the record permits the arbitrator to decide the motion, it is “axiomatic” that the arbitrator resolve the issue raised by the motion in favour of either party.  The parties selected the mediator to serve as arbitrator for their settlement agreement should a dispute arise in the interpretation of the settlement.