Ontario – Court of Appeal reiterates that appeals of interlocutory orders in arbitration challenges are beyond its jurisdiction – #052

In brief reasons, the Ontario Court of Appeal in DAC Group (Holdings) Limited v. Fuego Digital Media Inc., 2018 ONCA 43 rebuffed a dissatisfied arbitral party’s attempt to foist jurisdiction on it over a Superior Court decision.  That decision had stayed enforcement of the arbitral award, on conditions, pending a hearing on the merits in Superior Court a few months away.  Madam Justice Mary Lou Benotto qualified such orders as interlocutory, observing that only the Divisional Court had jurisdiction to continue any appellate activity in regard to such Superior Court orders made pending final disposition of the challenge. 

As a preliminary matter, Benotto J.A. had to determine whether a Superior Court’s grant of a conditional stay of enforcement of an arbitration award was interlocutory or final.  Her decision would decide the jurisdiction of which court, the Court of Appeal or the Divisional Court, would hear the appeal.

DAC Group (Holdings) Limited (“DAC”) and Fuego Digital Media Inc. (“Fuego”) had engaged in an arbitration subject to Ontario’s Arbitration Act, 1991, SO 1991, c 17.

Fuego applied under section 46 of the AA to set aside part of the award.  The reasons for judgment include no mention (nor need to) of which part of the award or which paragraph of section 46 was in play.  The list in that section offers those grounds which are independent of a challenge to the merits, either on a question of law, mixed fact and law or fact.

46 (1) On a party’s application, the court may set aside an award on any of the following grounds:

 1. A party entered into the arbitration agreement while under a legal incapacity.

 2. The arbitration agreement is invalid or has ceased to exist.

3.  The award deals with a dispute that the arbitration agreement does not cover or contains a decision on a matter that is beyond the scope of the agreement.

4. The composition of the arbitral tribunal was not in accordance with the arbitration agreement or, if the agreement did not deal with that matter, was not in accordance with this Act.

 5. The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law.

 6. The applicant was not treated equally and fairly, was not given an opportunity to present a case or to respond to another party’s case, or was not given proper notice of the arbitration or of the appointment of an arbitrator.

7.  The procedures followed in the arbitration did not comply with this Act.

8.  An arbitrator has committed a corrupt or fraudulent act or there is a reasonable apprehension of bias.

 9. The award was obtained by fraud.

10.  The award is a family arbitration award that is not enforceable under the Family Law Act.

Section 46(2) anticipates and authorizes applications to set aside only parts of the award from “the impugned ones”, avoiding an all-or-nothing approach.

The arbitrator’s final award declared DAC the owner of the software in dispute, provided for injunctive relief and ordered costs exceeding $1.5 million.  Fuego’s challenge therefore targeted only part of the award and for the reasons set out in section 46 which do not seek to revisit the merits.

On application by Fuego, a Superior Court judge had stayed enforcement of the arbitration award under section 50(5) and 50(8) pending disposition of Fuego’s application scheduled to be heard in April 2018.  As a condition for the stay, the judge required that Fuego pay DAC $25,000.00 the 15th day of each month, commencing January 2018, until disposition of Fuego’s section 46 application.

Fuego sought leave to appeal that Superior Court decision.

For two reasons, Benotto J.A. determined that the Superior Court decision was interlocutory and thus within the jurisdiction of the Divisional Court.

First, the decision did not determine the merits of the real matter in dispute between the parties.  Benotto J.A. referred to and applied Hendrickson v. Kallio, 1932 CanLII 123 (ON CA).

Second, the Superior Court judge had identified section 50(5) as the source of authority which allows a court to stay an award pending the result of the proceeding which finally disposes of the challenge.  The wording in that section also points to the order not being a final disposition.

Fuego was not represented by counsel but by an individual whose entitlement to represent the corporation in court was the subject of Fuego’s own motion.  That motion, and another by Fuego for a stay, were also, as a consequence, not within the Court of Appeal’s jurisdiction and no order was made in their regard.