Ontario – “final and binding” means “final and binding” – #163

In 108 Media Corporation v. BGOI Films Inc., 2019 ONSC 880, Mr. Justice Mario D. Faieta applied the “ordinary and grammatical meaning” of the expression “final and binding” to refuse leave to appeal, adding that a party’s subjective view of that expression is irrelevant to interpreting it. Faieta J. further held that where the appeal would only give the parties “a new forum in which to continue their private litigation” without a potential application of the ruling to others, the court will not characterize their dispute as a question of law.

108 Media Corporation (“108”), a film and television distributor, and BGOI Films Inc. (“BGOI”), a film producer, entered into a July 15, 2015 Sales Agency Agreement (“SAA”) by which they agreed that 108 would act as sales agent for one of BGOI’s films (the “Picture”) outside of North America (the “Territory”) for five (5) years. Under the SAA, 108 undertook to pay BGOI a minimum guarantee of USD$55,000.00 upon the initial release of the Picture in the Territory, payable within six (6) months of the Picture’s release.

Section 18.2 of the SAA stated the parties agreement to arbitrate:
Should there be a disagreement or a dispute between the parties hereto with respect to this Agreement or the interpretation thereof, the same shall be referred to a single arbitrator, selected jointly by the parties, and the determination of such arbitrator shall be final and binding upon the parties hereto.

The Picture was released in the Territory on September 8, 2015 but 108 failed to pay BGOI the minimum guarantee. BGOI terminated the SAA on June 1, 2016 and subsequently delivered a Notice of Request to Arbitrate under Ontario’s Arbitration Act, 1991, SO 1991, c 17.  Following a hearing in November 2017, an award issued on December 11, 2017 (“Award”). In the Award, the arbitrator determined that each party had failed to perform certain of their respective obligations under the SAA but that the release of the Picture triggered 108’s obligation to pay BGOI the minimum guarantee.

On January 11, 2018, 108 applied for leave to appeal the Award, invoking what it characterized as errors in law. Those grounds are summarized at paras 8-9 of the reasons. BGOI responded by applying for recognition and enforcement of the Award. 108 and BGOI both agreed that their SAA did not provide for an appeal on a question of fact or a question of mixed fact and law.

Faieta J. identified four (4) matters which 108’s leave to appeal application raised:

Does the SAA deal with “appeals on questions of law”;

Does either of the two grounds of appeal advanced by 108 amount to a question of law;

Does the importance to the parties of the matters at stake justify an appeal; and,

Will the decision of the question of law at issue significantly affect the rights of the parties?

Faieta J. noted that section 45 of the Arbitration Act governed appeals on questions of law and should be read with section 3 which provides that parties to an arbitration agreement may agree, expressly or by implication, to vary or exclude certain provisions of the Arbitration Act.

[16] Reading s. 3 and s. 45(1) of the Act together, a statutory right of appeal on a question of law exists, subject to certain conditions, unless the parties by agreement, whether expressly or by implication, eliminate the right of appeal: Labourers’ International Union of North America, Local 183 v. Carpenters and Allied Workers Local 27 et al., 1997 CanLII 1429 (ON CA), [1997] O.J. No. 2649, paras. 13, 14 (C.A.); Denison Mines Ltd. v. Ontario Hydro, 2002 CanLII 20161 (ON CA), [2002] O.J. No. 91, para. 4 (C.A.).

108 submitted three (3) grounds on which it argued that the SAA did not deal, and therefore did not exclude, appeals on a question of law under section 45.

(i) the phrase “final and binding” does not preclude an appeal on a question of law

Faieta J. devoted only two (2) brief paragraphs to this ground. Absent anything in the “context” which indicates the contrary, where a legislative provision provides that an order is “final”, there is no appeal. “The phrase “final and binding” would have no meaning whatsoever if it did not exclude a right of appeal that had been given by statute: Yorkville North Development Ltd. v. North York, 1988 CanLII 4701 (ON CA), [1988] O.J. No. 410, paras. 7 & 8 (C.A.).

Referring again to Labourers’ International Union of North America, Local 183 v. Carpenters and Allied Workers Local 27, 1997 CanLII 1429 (ON CA), para 22 and also to Kucyi v. Kucyi, 2005 CanLII 48539 (ON SCDC), [2005] O.J. No. 5626 (Div. Ct.) para. 14, Weisz v. Four Seasons Holdings Inc., 2010 ONSC 4456, paras 22-25 and 37-39 and Nasjjec Investments Ltd. v. Nuyork Investments Ltd., 2015 ONSC 4978, paras 30-35, Faieta J. noted that “[i]t is now well-established that an arbitration agreement which states that the parties agree to “final and binding” arbitration does not necessarily preclude judicial review, but it does reflect an intention to exclude a right of appeal”.

(ii) 108’s representative believed that an appeal on a question of law was available

Faieta J. noted the give-and-take of the parties’ negotiation of the SAA and the various, competing drafts forwarded by each party to the other, each of which included an undertaking to arbitrate. In the negotiations, neither party commented on the “final and binding” nature of an award.

Regardless of the sincerity of his views of the meaning of the phrase “final and binding”, [108’s representative’s] subjective view regarding the meaning of that phrase is irrelevant for purposes of interpreting its meaning.” Faieta J. determined that the “surrounding circumstances” argued by 108 “do not alter the ordinary and grammatical meaning of the phrase “final and binding” as found in Section 18.2”.

(iii) a procedural order in the arbitration reflected the parties’ intention to permit an appeal on a question of law

In the arbitrator’s first procedural order, the arbitrator recorded the following:

6.1 The Award of the Arbitrator shall be final and binding on the Parties.
6.2 The Award may only be set aside in accordance with the provisions of the Arbitrations Act.

108 argued that 6.2 of the procedural order could be interpreted as allowing the parties to set aside the Award under the appeal provisions of section 45(1) of the Arbitration Act. Faieta J. disagreed. He found there was no ambiguity in the expression “final and binding” and there was no compelling reason to interpret 6.2 of the procedural order in the way 108 suggested he do. He recognized that, in case of ambiguity, the parties’ subsequent conduct could be admissible in limited circumstances to assist in the interpretation. See Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912, paras 46, 53-54 and 56.  In the case before him, the parties’ conduct was of no assistance in tipping the interpretation either way, even if he had found the expression ambiguous.

Faieta J. then considered whether either of the two (2) questions identified by 108 was actually a question of law, determining that neither was a question of law. He referred to DesRochers v. Fis, 2013 ONSC 6467, para. 43 to articulate the distinction:

Questions of law concern questions about what is the correct legal test; questions of fact involve questions about what actually took place between the parties; and, questions of mixed fact and law are questions about whether the facts satisfy the legal tests. Canada (Director of Investigation and Research, Competition Act) v. Southam Inc., [1997] 1 S.C.R. 758, para. 35; Dr. K. Ansarian Dentistry Professional Corp. v. Dr. A. Mohajeri Dentistry Professional Corp., 2013 ONSC 2662 (CanLII) at para. 21.

Relying on the guidance in Sattva Capital Corp. v. Creston Moly Corp., [2014] 2 SCR 633, 2014 SCC 53 not to provide “a new forum for parties to continue their private litigation”, Faieta J. identified 108’s questions as limited to a private dispute and not an opportunity to advance a general proposition impacting others.

“”The two questions reflect a dispute over a very particular set of circumstances rather than a dispute over a general proposition that can be expected to have an impact beyond the parties and thus qualify as a question of law. In other words, the questions for which leave is sought provide a new forum for parties to continue their private litigation rather than ensuring consistency in the law[.]

For ease of reference, Sattva Capital Corp. v. Creston Moly Corp. at para. 51 stated the following purpose for distinguishing between the nature of questions which might trigger a court’s intervention:

[51] The purpose of the distinction between questions of law and those of mixed fact and law further supports this conclusion. One central purpose of drawing a distinction between questions of law and those of mixed fact and law is to limit the intervention of appellate courts to cases where the results can be expected to have an impact beyond the parties to the particular dispute. It reflects the role of courts of appeal in ensuring the consistency of the law, rather than in providing a new forum for parties to continue their private litigation. For this reason, Southam identified the degree of generality (or “precedential value”) as the key difference between a question of law and a question of mixed fact and law. The more narrow the rule, the less useful will be the intervention of the court of appeal[.]

Faieta J. considered that 108’s appeal did not raise a question of law.

In his brief paragraph 35, Faieta J. then turned to BGOI’s application for recognition and enforcement. As a demonstration of Ontario’s embrace of the role of arbitration and the direct application of its arbitration legislation, at para. 35 Faieta J. cited section 50(3) of the Arbitration Act and, finding no condition arising to prevent its application, enforced the Award.