In Johnson Bros. Corporation v. Soletanche Bachy Canada Inc., 2024 ONSC 6296, the Court found that the parties had contracted out of the right to appeal on the basis that the arbitration agreement provided that disputes were to be “finally resolved” by arbitration.
Background to dispute – A joint venture entity engaged in building a new water treatment plant near Toronto entered into a contract with Johnson Bros. to perform marine works. Johnson Bros subcontracted some of that work to Soletanche Bachy Canada Inc. (“SBC”).
The subcontract between Johnson Bros. and SBC included an arbitration clause specifying that disputes were to be “finally resolved” by arbitration under the CCDC 40 rules (2018 Rules for Mediation and Arbitration of Construction Disputes). Both the 2005 and 2018 versions of the CCDC 40 rules provide that an award is to be “final and binding” on the parties.
SBC commenced its work in 2019. In October 2020, Johnson Bros notified SBC that it was terminating the subcontract for cause. In response, SBC asserted that Johnson Bros. had not properly terminated the subcontract and that SBC was entitled to terminate as a result of Johnson Bros.’ repudiation.
The parties corresponded with each other about the terms for mediation and arbitration. They went through an unsuccessful mediation. Then, Johnson Bros. delivered a Notice to Arbitrate in September 2021. Following this, the parties entered into an agreement containing the “Terms for Arbitration” in March 2022 (the “March 2022 Agreement”).
A partial award was rendered in favour of SBC. The arbitrator issued a final award shortly thereafter, awarding costs to SBC.
The application for leave to appeal – Johnson Bros. filed an application for leave to appeal both awards.
The Court started with the language of section 45(1) of Ontario’s Arbitration Act, 1991 (the “Arbitration Act”), which provides that a party may seek leave to appeal questions of law if the arbitration agreement is silent on appeals:
“If the arbitration agreement does not deal with appeals on questions of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that,
(a) the importance to the parties of the matters at stake in the arbitration justifies an appeal; and
(b) determination of the question of law at issue will significantly affect the rights of the parties.” [Emphasis added]
Johnson Bros. argued that, because the parties did not follow the pre-arbitration steps set out in the subcontract, the parties conducted an ad hoc arbitration which was not subject to the terms of the subcontract or the CCDC 40 rules. Johnson Bros. submitted that the arbitration was conducted pursuant to the March 2022 Agreement alone, and because the March 2022 Agreement did not deal with appeals, Johnson Bros could seek leave to appeal on questions of law as permitted under section 45(1) of the Arbitration Act.
The Court disagreed. It found that the March 2022 Agreement was an addition to, and formed part of, the arbitration agreement contained in the subcontract, but did not replace it.
The Court relied on the Notice of Arbitration in coming to this conclusion. It specified that it was issued pursuant to “Part 8 of a CCA 1 – 2008 Subcontract,” and quoted Part 8 of the subcontract at issue, which also referred to the CCDC 40 rules.
The Court also relied on the March 2022 Agreement, which referred to the Notice of Arbitration and so demonstrated that the parties agreed it was a valid pleading.
The Court thus concluded that the March 2022 Agreement and the dispute resolution terms in the subcontract both formed part of the arbitration agreement, including the section providing for disputes to be “finally resolved” by arbitration under the CCDC 40 rules.
Finally, the Court referred to Baffinland Iron Mines LP v. Tower-EBC G.P./S.E.N.C., 2023 ONCA 245, in which the Court of Appeal found that the phrase “final and binding” is language which precludes appeals from an arbitration award (see Case Note #737 – No appeal where parties agree dispute “finally settled” by arbitration). As explained at paragraph 41 of Baffinland:
“… the phrase ‘final and binding’ in an arbitration agreement precludes appeals because of the word ‘final’, and that a different phrase that contains ‘final’ will convey the same meaning as long as the additional words do not materially modify it.”
On that authority, the Court found that “finally resolved” carried the same implication as “final and binding”, and that this language precluded appeals of the partial award or final award.
In the alternative, the Court also determined that Johnson Bros. had not established that its appeal would have been based on questions of law, and would have denied leave on that basis, as well.
Contributor’s Notes:
This case serves to bring more clarity to the perennial question of the language necessary for the parties to waive appeal rights. In addition to “final and binding” terms like “finally resolved,” “finally settled” and other phrases incorporating the term “final” (unless otherwise modified by other terms) will likely serve to preclude appeals under the Ontario Arbitration Act. (Domestic arbitration acts in some provinces, like Alberta, do not allow parties to fully contract out of appeal rights – see e.g. Schafer v Schafer, 2023 ABCA 117, para 29.)
In addition, this case is also a reminder of the importance of applying basic contract principles to the drafting of arbitration clauses. Parties who wish to revise or modify their arbitration agreements should take care of how they refer to them in other related documents. The Court in this case took the claimant’s references to the dispute resolution provisions in the subcontract as evidence that those provisions remained in effect. Parties who intend to proceed under different rules than were previously agreed should make that clear.