In Schickedanz v Wagema Holdings Ltd., 2022 ONSC 5315, Justice Ramsay dismissed the motion by Wagema Holdings Ltd (Respondent on appeal) to quash Appellant Schickedanz’s appeal of a costs award. Wagema argued that leave was required under s. 133(b) of the Ontario Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”) and so the appeal was also out of time. Justice Ramsay was not persuaded that Wagema would prevail when the issue was determined by the appeal judge. First, the parties’ arbitration agreement contained a broad appeal process, without a leave requirement for costs appeals. Second, there is nothing in s. 45 of the Ontario Arbitration Act, 1991, S.O. 1991, c. 17 that requires leave to appeal a costs award or imports the leave requirement set out in the general costs appeal provision in s. 113(b) of the CJA. Third, the parties could contract out of the appeal provisions in s. 45 of the Arbitration Act pursuant to s. 3. Imposing a leave requirement to appeal a costs award would amount to judicial interference with the parties’ right to contract, which was recognized by the Supreme Court of Canada in TELUS Communications Inc. v. Wellman, 2019 SCC 19. Ultimately, it would be up to the judge hearing the appeal to decide whether leave was required and, if so, whether the appeal was out of time and whether the appeal had merit.
The underlying dispute involved five siblings (four brothers and one sister) and an Alberta corporation (Wagema). The siblings were all directors and shareholders of Wagema. A corporate re-organization of Wagema took place to divide the proceeds of sale of land in Ontario owned by Wagema, and to separate the siblings’ interests in Wagema’ s business. A dispute arose.
In October, 2020, Appellant Schickedanz commenced an arbitration under the Ontario Arbitration Act against her brothers and Wagema. She discontinued the arbitration in 2021. The brothers and Wagema sought their costs of the arbitration.
On October 8, 2021, the Arbitrator awarded them costs on a substantial indemnity basis. On November 8, 2021, Schickedanz delivered a Notice of Appeal to the Superior Court of Justice from the costs award in favour of Wagema. The parties’ arbitration agreement contained broad rights of appeal:
“The Parties further agree that all Parties shall have appeal rights from any final decision in this Arbitration as set out in ss. 45(2) and 45(3) of the Arbitration Act, 1991, S.O. 1991, c. 17, including, for the avoidance of doubt, an appeal on an issue of fact, law or mixed fact and law.”
Wagema brought a motion to quash the appeal on the ground that leave to appeal was not sought pursuant to s. 133(b) of the Ontario Courts of Justice Act, R.S.O. 1990, c. C.43. It states that: “[n]o appeal lies without leave of the court…where the appeal is only as to costs that are in the discretion of the court that made the order for costs”. Wagema’s position was that an appeal of a costs award of an arbitrator, like that of a trial judge, requires leave of the court. Wagema also argued that because Schickedanz did not seek leave to appeal the costs award within the 30-day period prescribed by s. 47 of the Ontario Arbitration Act, 1991, the appeal must be quashed. The Court has no discretion to extend the time for seeking leave.
Schickedanz argued that leave is not necessary to appeal an arbitral costs award under s. 45 of the Arbitration Act, 1991. However, if leave is required, the court can direct her to bring a motion for leave to appeal. Schickedanz also pointed to Wagema’s delay in raising the issue with respect to the requirement for leave.
Justice Ramsay noted that the court has the power to quash an appeal “in a proper case” under s. 134(3) of the Courts of Justice Act. Ultimately, she dismissed the motion to quash because she was not persuaded that Schickedanz could not succeed on the leave issue, or the appeal.
First, Schickedanz argued that the Arbitration Act, 1991, allows parties to agree upon their own appeal process. Here, the parties’ arbitration agreement contained the broadest appeal rights from any final decision of the Arbitrator on any questions of fact, law, or mixed fact and law, in accordance with ss. 45(2) and (3) of the Arbitration Act, 1991. Schickedanz submitted that the appeal framework in the CJA does not apply to commercial arbitrations, which are governed entirely and exclusively by the Arbitration Act, 1991. Section 3 permits parties to “vary or exclude” any provision in the Act, with certain limited exceptions. Those exceptions do not include appeals of commercial arbitration awards under s. 45.
The parties referred Justice Ramsay to contradictory Ontario Superior Court of Justice authority on whether parties to an arbitration may contract out of the leave requirement. In Flowers v. Eickmeier, 2017 ONSC 3376, the court found that absent express language in s. 133(b) of the CJA, the parties to an arbitration agreement could not do so, and noted that s. 45 of the Arbitration Act, 1991, does not address the leave requirement with respect to cost awards. The court there found it “incongruous that a party needs leave to appeal a costs order made by a trial judge but where an arbitrator sits in the position of a trial judge, the parties can contract out of a leave requirement in relation to an appeal of a costs award” (at para. 16). By way of contrast, in Pagliaroli v. Rite-Pak Produce Co. Limited, 2010 ONSC 3729, the court found that, because of the breadth of the appeal rights contained in the parties’ arbitration agreement and s. 45(3) of the Arbitration Act, 1991 (which states that, if the arbitration agreement so provides, an appeal of a costs award to the court is permitted on a question of fact or on a question of mixed fact and law), leave to appeal is not required.
Justice Ramsay agreed with this latter case. Imposing a leave requirement where the parties had agreed upon a broad appeal process would amount to judicial interference with the parties’ right to contract, which the Supreme Court of Canada warned against in TELUS Communications Inc. v. Wellman, 2019 SCC 19 (at para. 131).
Second, Schickedanz argued that the language in s. 133(b) of the CJA, which provides that: “[n]o appeal lies without leave of the court…where the appeal is only as to costs that are in the discretion of the court that made the order for costs”, does not impose a leave requirement where the costs order under appeal was made in the discretion of an arbitral tribunal, rather than the court. In other words, the word “court” does not include “tribunal”.
Without deciding the issue, Justice Ramsay stated that she agreed with Schickedanz on this point on a plain reading of the CJA. To support this conclusion, the language in s. 133(b) of the CJA is to be distinguished from that in s. 134(1), which governs the court’s general powers on appeal. It provides that a court to which an appeal is taken may make any order or decision that ought to or could have been made by the “court or tribunal” appealed from.
Justice Ramsay also looked at the application of the appeal provisions of the CJA to arbitrations and whether the jurisdiction granted to a court to order costs “of and incidental to a proceeding” pursuant to s. 131 includes the costs of an arbitration. She noted that the CJA does not include “arbitration” in the definition of a “proceeding”. Nor is there any reference in the Arbitration Act, 1991, to s. 131 of the CJA, although it does refer to the pre- and post-judgment interest provisions.
Third, Wagema argued that the Arbitrator had no jurisdiction to award costs on a substantial indemnity basis. Justice Ramsay noted that the jurisprudence in Ontario establishes that no leave is required to appeal a costs award where the order is made without jurisdiction: Alexanian v. Dolinski (1973), 1973 CanLII 835 (ON CA), 2 O.R. (2d) 609, 43 D.L.R. (3d) 649 (C.A.).
Fourth, Justice Ramsay also said that she was not persuaded that Schickedanz was out of time. Wagema argued that the appeal should be quashed because it was brought without leave and that the court could not adjourn the appeal to permit the appellant to seek leave. Justice Ramsay disagreed. Section 47 of the Arbitration Act, 1991, states that an appeal must be “commenced” within 30 days after the appellant or applicant receives the award on which the appeal or application is based. Here, Schickedanz delivered her Notice of Appeal within 30 days of receipt of the costs award, the time within which she would have had to seek leave, if required. And there was no prejudice to Wagema by Schickedanz’s failure file a motion for leave to appeal.
Therefore, Justice Ramsay declined to quash the appeal. The test for quashing an appeal on its merits involves consideration of whether the appeal is “manifestly devoid of merit”: Schmidt v. Toronto Dominion Bank (1995), 1995 CanLII 3502 (ON CA). She was not persuaded that the appeal was devoid of merit, nor that if leave to appeal were required, it would not be granted in this case. It would be up to the judge hearing appeal to determine whether it was out of time and, if so, whether an extension of time could or would be granted, and the merits of appeal itself.
First, the parties agreed in their arbitration agreement that the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, would apply to the arbitration. It may have been this decision that caused the parties to consider the application of the Ontario Courts of Justice Act generally to the arbitration conducted under the Arbitration Act, 1991. Note that s. 57 of the Arbitration Act, 1991, explicitly states that only sections 127 to 130 of the CJA (relating to prejudgment and post-judgment interest) apply to an arbitration. This is necessary because these sections fall within Part VII of the Courts of Justice Act, which, according to s. 95, “applies to civil proceedings in courts of Ontario”. As Justice Ramsay noted, an arbitration is not a “proceeding” under the CJA.
Second, this case is another that demonstrates the challenges that arise where there is some interconnection with, and potential conflict between, the Arbitration Act, 1991, and other legislation. For other Case Notes that address this issue, see: Ontario – courts cannot imply terms which legislation requires be express to have valid arbitration agreement – #354; Ontario – Court of Appeal upholds “single proceeding” insolvency model over recourse to arbitration – #660.