In Edenrock Holdings Inc. v. Moscone, 2025 ONSC 32, the Court refused to set aside an arbitral award, or grant leave to appeal, with respect to a claimed breach of natural justice, the supposed improper re-opening of earlier decisions, or the alleged apprehension bias of the Arbitrator who issued the Award. The Court found that there was no denial of natural justice when the Arbitrator ruled on a matter in respect of which the Applicants did not make submissions because they argued that the Arbitrator did not have jurisdiction. They argued they should have been given a separate opportunity after the Arbitrator ruled that he had jurisdiction.
Background to the Dispute – The dispute arose out of an ongoing lease of a commercial property of which Moscone Tile and Moscone Marble were co-tenants. They shared warehouse space and a showroom, and since 2020, the parties had conducted several arbitrations to resolve a range of issues in respect of the property. In 2023, the Arbitrator issued the Award which covered a variety of topics, including a rental adjustment claim, a claim dealing with the allocation of charges for exterior water use, and a claim seeking a direction that Moscone Tile displays be removed from shared spaces in the showroom.
Application to Set Aside Award – The Moscone Tile parties (“Moscone Tile Applicants”) applied to the Court to set aside the Award, and the Moscone Marble parties applied to the Court to enforce it. The Moscone Tile Applicants claimed that there was a breach of natural justice in the conduct of the arbitration, that the Arbitrator had improperly re-opened his earlier decisions, and that the Arbitrator’s conduct gave rise to a reasonable apprehension of bias. The application to set aside the award was brought pursuant to s. 46(1) of the Arbitration Act, 1991, S.O. 1991, c. 17 (the “Act“), which provides:
“46(1) On a party’s application, the court may set aside an award on any of the following grounds: […]
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. […]
8. An arbitrator has committed a corrupt or fraudulent act or there is a reasonable apprehension of bias.”
The Moscone Tile Applicants also raised s. 19 of the Act, which provides that “[i]n an arbitration, the parties shall be treated equally and fairly” (s. 19(1)) and “[e]ach party shall be given an opportunity to present a case and to respond to the other parties’ cases” (s. 19(2)).
Issue #1 – Breach of Natural Justice – First, the Moscone Tile Applicants argued that the Arbitrator breached natural justice and treated them unfairly by not allowing them to make submissions on the claim relating to the exterior water charges. This was a claim that was included in a schedule set by the Arbitrator in respect of which the parties were to make submissions. However, the Moscone Tile Applicants did not accept that the Arbitrator had jurisdiction over the claim and advised that they would not make any substantive argument because they did not attorn to the jurisdiction of the Arbitrator. The Arbitrator ultimately held that he had jurisdiction over the claim and proceeded to decide the matter based upon the materials that were submitted, which did not include submissions from the Moscone Tile Applicants.
The Moscone Tile Applicants argued that the Arbitrator proceeding in this way constituted a breach of natural justice. Instead, they claimed that the Arbitrator should have invited them to make submissions after he concluded that he had jurisdiction over the matter. The Court rejected the Moscone Tile Applicants’ position, stating that:
“The principles of natural justice and ss. 19 and 46(1) of the Act require that the Moscone Parties be afforded the opportunity to make submissions. The Moscone Parties were in fact afforded this opportunity, through the timetable established by the Arbitrator. They chose not to make submissions. By doing so, they declined the opportunity afforded to them by the Arbitrator.” (at para 13)
The Court concluded: “In my view, there was no obligation on the Arbitrator to extend to the Moscone Parties a second opportunity to make submissions after they expressly declined the first opportunity.” (at para 15)
Issue #2 – Re-Opening of Earlier Decisions – Second, the Moscone Tile Applicants argued that the Arbitrator treated them unfairly by re-opening and re-interpreting two earlier awards. The Court rejected this argument for primarily factual reasons and the fact that the Arbitrator did not re-open his earlier decisions. Instead, the Court held that the Arbitrator was simply invoking and applying his earlier orders in making this Award.
Issue #3 – Bias – Third, the Moscone Tile Applicants claimed that the Arbitrator’s conduct gave rise to a reasonable apprehension of bias, and that the Award should be set aside under s. 46(1)8 of the Act. They pointed to the Arbitrator’s findings against them, including his taking jurisdiction over the exterior water claim and making a decision without asking for their substantive submissions, and also his approach to the other issues, in which he also found against them. The Court rejected these allegations of bias. It explained as follows:
“[t]he Moscone Parties ground their complaint of bias in the Arbitrator’s substantive findings. When asked to articulate their claim of bias, they say that the way in which he made his findings reveals bias. They cannot persuasively explain how or why this is. They offer no real grounds and no real evidence for the claim of bias.” (at para 25)
Consequently, the Court dismissed the application to set aside the Award on any of these grounds.
Application for Leave to Appeal Award – In the alternative, if the Award was not set aside, the Moscone Tile Applicants asked for leave to appeal. The Court unequivocally rejected this request given that the arbitration agreement precluded any appeal. The arbitration agreement in question stated that any award, “shall be final and binding upon all of the parties” and “there shall be no appeal therefrom”. The Court stated that, “I find that the arbitration agreement ousts all rights of appeal. […]In my view, this language of finality is unequivocal and does not allow for any appeal of any issue, including a question of law” (para 28). The Court concluded that there was no right of appeal with respect to the Award.
The Court concluded that in any event, the test for granting leave to appeal under the Act was not made out in this case. It requires a question of law on (1) a matter at stake of such importance to the parties to justify an appeal, and (2) the determination of which will significantly affect the rights of the parties. To get leave to appeal, the issue must be a question of law on a matter which is of sufficient importance to justify an appeal and its determination will significantly affect the rights of the parties.
The issue in this case was not a question of law. Plus, it did not deal with a significant issue between the parties, but instead it was primarily the application of earlier orders. Further, and in any event, the amount of rent in dispute was modest. Instead, in this case, the Court stated, “[i]t is, respectfully, difficult to see how these issues rise to the level of importance that would justify an appeal. For the same reasons, it is difficult to see how determining the questions at issue – even if they are questions of law – will affect the rights of the parties in a way that is significant enough to support granting leave.” (para 34)
The Court dismissed the Moscone Tile Applicants’ application and granted the application of the Moscone Marble parties to enforce the Award.
Contributor’s Notes:
This is a short decision, but it has many important points.
First, it highlights the need to exercise caution if a party declines to participate on the grounds that the arbitrator has no jurisdiction. Significant risks can arise if this position is incorrect. However, potential safeguards can be applied. For example, the Court pointed out that:
- The Moscone Tile Applicants could have made substantive submissions in the alternative to its primary argument that the Arbitrator lacked jurisdiction.
- The Moscone Tile Applicants could have asked that the issue of jurisdiction be addressed first and still reserve the right to make substantive submissions in the event that the Arbitrator determined he had jurisdiction.
The Court also suggested that the Moscone Tile Applicants could have used s. 44 of the Act to ask the Arbitrator to reopen the matter after the Award was issued, to get a chance to make substantive submissions at that stage (para 14). We note, however, that this suggestion of the Court is doubtful, given that s. 44 deals with errors and injustice created by oversight of the arbitral tribunal, and the circumstances raised in this case do not appear to fall within any of the s. 44 grounds.
Second, this case highlights that in situations in which earlier awards are involved and a further order is made, it does not automatically mean that an Arbitrator is unfairly re-opening the earlier award. Instead, the Arbitrator could be simply applying and enforcing the earlier award and that does not necessarily mean it is an objectionable re-opening of an earlier award.
Third, this case is a strong reminder about the test for bias. The party alleging it must meet it. Alleging that an Arbitrator has disagreed with a party’s position is not sufficient. See, for example Aroma Franchise Company, Inc v. Aroma Espresso Bar Canada Inc., 2024 ONCA 839 for the test for reasonable apprehension of bias.