In Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corporation, 2021 ONCA 592, Justice Jamal (as he then was), writing for the Court of Appeal, found that it was unnecessary to address whether Vavilov changed the standard of review analysis in Sattva and Teal Cedar in an appeal from a commercial arbitration decision. Justice Jamal held that the parties’ disagreement as to how the applicable principles of contractual interpretation should be applied to the contractual facts is, absent an extricable error of law, an exercise of contractual interpretation by a first-instance decision maker on a matter of mixed fact and law that attracts appellant deference. Further, the Court should refrain from deciding issues of law that are unnecessary to the resolution of an appeal.
In 2008, Her Majesty the Queen in Right of Ontario (“Ontario”) and the Ontario Lottery and Gaming Corporation (“OLG”) entered into a “Gaming Revenue Sharing and Financial Agreement” with First Nations Partnership, a limited partnership of Ontario First Nations. Under the Agreement, Ontario and OLG agreed to share with the First Nations Partnership three types of revenue (gaming revenue, non-gaming revenue and Comps) associated with gaming in Ontario. A few years later, OLG decided to outsource its non-gaming amenities to private operators, effectively giving them the responsibility for generating two of the three types of revenue under the Agreement. Private sector operators assumed the risk and responsibility for non-gaming amenities, in exchange for keeping 100% of the associated non-gaming revenue and Comps.OLG described this arrangement as “modernization” and did not disclose its plans to the First Nations Partnership. OLG also did not seek to amend the Agreement to be relieved of the obligation to pay the First Nations Partnership all three types of revenue.
When OLG implemented the modernization, however, it stopped paying the First Nations Partnership two of the three types of revenue under the Agreement. When the First Nations Partnership discovered this, it initiated an arbitration under the Agreement.
The arbitration panel held that Ontario and OLG breached the Agreement. The majority ruled that Ontario and OLG breached express contractual terms when they stopped paying two of three agreed-upon types of revenue, while the dissenting tribunal member found that Ontario and OLG’s unilateral changes to the operation of the Agreement breached an implied contractual term.
OLG and Ontario appealed the decision of the arbitral tribunal to the Ontario Superior Court of Justice and, on March 31, 2020, Justice Hainey dismissed the appeal. OLG and Ontario then appealed to the Court of Appeal on the basis that the appeal judge had made three errors: he applied the wrong standard of review, misinterpreted the Agreement, and erred in concluding that OLG and Ontario breached the honour of the Crown.
Ontario and OLG argued that the appeal judge erred in concluding that the standard of review of the majority’s interpretation of the Agreement and its damages award is reasonableness; rather, the standard of review is correctness for questions of law and palpable and overriding error for questions of mixed fact and law. First Nations Partnership asserted that Vavilov governs the standard of review in administrative law but does not apply to commercial arbitration decisions, which should continue to be reviewed under a deferential standard on questions of law, and in any event, the standard of review would not affect the outcome of the appeals.
Justice Jamal found that it was unnecessary to address whether Vavilov changed the standard of review analysis in Sattva and Teal Cedar in an appeal from a commercial arbitration decision:
“[38] First, as I will address below, whether the standard of review on questions of law is reasonableness or correctness, the appeal judge did not err in upholding the majority’s decision. Because a court should generally refrain from deciding issues of law that are unnecessary to the resolution of an appeal (Phillips v. Nova Scotia (Commission of Inquiry into the Westray Mine Tragedy), 1995 CanLII 86 (SCC), [1995] 2 S.C.R. 97, at para. 6), I would not address the standard of review issue.
[39] The Supreme Court took the same approach in Wastech Services Ltd. v. Greater Sewerage and Drainage District, 2021 SCC 7, 454 D.L.R. (4th) 1, at para. 46, where the majority, per Kasirer J., declined to consider “the effect, if any, of Vavilov on the standard of review principles articulated in Sattva and Teal Cedar”, partly because the outcome of the case did not depend on the standard of review.
[40] Second, I agree with the First Nations Partnership that, putting aside the extricable errors of law alleged, Ontario and OLG largely advance questions of contractual interpretation, which since Sattva it has been accepted are questions of mixed fact and law attracting a deferential standard of review. There has been no suggestion that Vavilov changed the law on this point, which is distinct from the issue of whether an arbitrator’s decision on a question of law is reviewable under a standard of reasonableness or under the appellate standard.
[41] In Corner Brook (City) v. Bailey, 2021 SCC 29, 17 B.L.R. (6th) 1, per Rowe J., the Supreme Court affirmed the direction from Sattva that a deferential standard of review applies to questions of mixed fact and law involving the interpretation of a contract. The court in Corner Brook underscored that “contractual interpretation is a fact specific exercise, and should be treated as a mixed question of fact and law for the purpose of appellate review, unless there is an ‘extricable question of law’”: at para. 44…
[42] Here, the parties agree on the applicable principles of contractual interpretation. Where they disagree is how those principles should be applied to the contractual facts, consisting of the Agreement itself and the factual matrix or surrounding circumstances. Absent an extricable error of law, such an exercise of contractual interpretation by a first-instance decision maker — whether a court or an arbitrator — attracts appellate deference.”
The Court of Appeal dismissed the two remaining grounds of appeal put forward by Ontario and OLG, finding that the appeal judge did not err in his interpretation of the Agreement and that it was unnecessary to address the honour of the Crown.
Contributor’s Note:
This decision is another example of the courts declining to comment on whether Vavilov applies on appeals of commercial arbitration awards. The Court of Appeal in this decision continues the trend not to address the standard of review and simply say that the result would be the same, regardless of the standard of review applied. The underlying decision of Justice Hainey released on March 31, 2020 is discussed in an earlier Arbitration Matters Case Note: Ontario – Vavilov does not overrule Teal Cedar on Sattva Capital – #302.