Optiva Inc. v Tbaytel, 2022 ONCA 646, raises two issues of interest to arbitration law. First, the Appellant (Optiva) made a jurisdictional objection to the arbitrator’s ruling allowing the Respondent (Tbaytel) to bring a motion for summary judgment. The arbitrator then issued a procedural order in which he ruled that he had jurisdiction. After hearing the motion, the arbitrator issued a partial award on the merits, which was in favour of Tbaytel. Optiva applied to the Ontario Superior Court of Justice to “decide the matter” of the arbitrator’s jurisdiction and to set aside the partial award, both pursuant to s.17 (rulings and objections re jurisdiction) of the Ontario Arbitration Act, 1991, S.O. 1991, c. 17 (the “Act”). However, the application judge found that Optiva had failed to bring its application on time and dismissed it. Pursuant to s. 17(8), it was required to do so within 30 days of the arbitrator’s jurisdiction ruling, not after the issuance of the partial award on the merits. The Ontario Court of Appeal agreed with the application judge and dismissed Optiva’s appeal, but for different reasons. The application judge erred in finding that Optiva was out of time to ask the Court to “decide the matter” because the preliminary ruling was not jurisdictional. Relying upon Inforica Inc. v. CGI Information Systems and Management Consultants Inc., 2009 ONCA 642, the ruling that the matter could proceed by summary judgment was procedural, not a ruling on the arbitrator’s “own jurisdiction”; therefore, s. 17 was not engaged. However, the appeal was dismissed because the arbitrator was entitled to decide matters of procedure, both under the Act and under the parties’ arbitration agreement, and did so. Second, the Court of Appeal held that s. 26(1) of the Act does not require an oral evidentiary hearing, even if one party requests it.
The dispute: The parties entered into an agreement, pursuant to which Optiva agreed to sell to Tbaytel various services and software products. In March, 2018, Tbaytel terminated the contract, alleging various breaches by Optiva. The contract had an arbitration clause and, in November, 2018, the parties agreed to arbitrate.
The arbitration: The arbitrator was advised that Tbaytel intended to bring a summary judgment motion in the arbitration, to which Optiva objected. During a case management meeting held July 2, 2019, the arbitrator set out a schedule for the exchange of motion material and noted that, “the motion might eliminate or reduce the time and cost of documentary production that might be required if the arbitration were to proceed”.
Optiva’s response to the motion was that the arbitrator had no jurisdiction to hear it, absent the consent of both parties. Optiva did not consent and raised a jurisdictional objection. On November 21, 2019, the arbitrator issued a procedural order in which he ruled that he had jurisdiction, relying upon section 20 (arbitrator’s right to determine procedure) of the Act and the terms of the arbitration agreement.
Following the motion hearing, the arbitrator issued a partial award in February, 2020, in which he decided some of the issues and concluded, on the merits, that Optiva had breached the contract and that Tbaytel was entitled to terminate the contract and recover amounts paid and damages.
The Superior Court of Justice application: Optiva applied to the Superior Court of Justice to set aside the partial award pursuant to sections 17 (rulings and objections re jurisdiction) and 46 (setting aside award) of the Act on several grounds, including that the arbitrator could not proceed by way of summary judgment motion without Optiva’s consent.
On April 20, 2021, Justice Newton refused to set aside the partial award. He held that Optiva was required, under s. 17(8) of the Act (review by court of jurisdiction objection as a preliminary question), to challenge the arbitrator’s preliminary ruling that Tbaytel could proceed by summary judgment motion within 30 days of receiving notice of that ruling. Optiva was too late; it objected and applied to the Superior Court of Justice to “decide the matter” under s. 17(8) only after the issuance of the partial award on the merits. Justice Newton also agreed that the arbitrator had jurisdiction to hear the summary judgment motion. (For an earlier Case Note on this decision see Ontario – arbitrator has jurisdiction to hear summary judgment despite party’s objection provided process complies with Hryniak – #474.)
The Court of Appeal: In October, 2021, one Court of Appeal panel granted Optiva’s motion for leave to appeal; however, another ultimately dismissed the appeal.
The first issue to be determined on the appeal was whether the application judge had erred in holding that Optiva was required, under s. 17(8) of the Act, to challenge the arbitrator’s preliminary ruling that Tbaytel could proceed by summary judgment motion within 30 days of receiving notice of that ruling. The Court of Appeal found that the application judge had erred.
Optiva argued that s. 17 of the Act has no application to procedural orders like the order made by the arbitrator permitting Tbaytel to proceed with a summary judgment motion, relying upon Inforica Inc. v. CGI Information Systems and Management Consultants Inc., 2009 ONCA 642, 97 O.R. (3d) 161.
In response, Tbaytel argued that, until this appeal, Optiva had “repeatedly characterized its challenge to the arbitrator’s ability to proceed by way of summary judgment motion as a jurisdictional challenge”. But on this appeal it argued that the arbitrator had no authority to conduct a proceeding by way of summary judgment. Tbaytel argued that Optiva could not resile from its earlier position to avoid its failure to comply with the 30-day time limit to object under s. 17(8).
Justice Doherty (for the Court of Appeal) stated that Optiva’s characterization of the issue as jurisdictional was not determinative. Inforica is the controlling authority. In that case, the arbitrator made an order for security for costs against the claimant, which the Court of Appeal upheld because the arbitrator’s decision ordering security for costs was not a ruling on the arbitrator’s “own jurisdiction” under s. 17(1) of the Act. Rather, it was an interlocutory or procedural order. Consequently, the ruling did not fall under s. 17(1), and the other parts of s. 17, including the time limit in s. 17(8), had no application. The application was not out of time.
The second issue to be determined on appeal was whether the application judge had erred in holding that the arbitrator could proceed by way of summary judgment motion. Justice Doherty found that the arbitrator was entitled to proceed in this manner under both the Act and the arbitration agreement.
Justice Doherty rejected Optiva’s submissions that: (1) as a matter of contract interpretation, the arbitration agreement was silent on the specific availability of summary judgment and could not be inferred; (2) that the Act gave right to an oral hearing in which it could present viva voce evidence and cross-examine witnesses under s. 26 (hearings and written proceedings); and (3) that the summary judgment procedure was unfair to Optiva and warranted the setting aside of the award. Justice Doherty found that the advantages flowing from a properly invoked summary judgment process have equal application in the arbitration and the civil trial context, relying upon Hryniak v. Mauldin, 2014 SCC 7,  1 S.C.R. 87, at para. 27.
Justice Doherty also found that, “[t]he parties’ fashioning of their own rules governing the conduct of the arbitration and their selection of a mutually agreeable arbitrator implies a very limited role for judicial oversight of the conduct or outcome of that arbitration: Popack v. Lipszyc, 2016 ONCA 135, 129 O.R. (3d) 321, at para. 26.” The parties’ arbitration agreement gave the arbitrator broad powers to conduct the arbitration. Those powers were listed “without limitation” and included the broad power to hear “all motions” and determine “any and all” procedural questions, which is consistent with the powers given to the arbitrator under s. 20 (providing that the arbitrator may determine the procedure), and it contemplated procedures other than the taking of viva voce evidence before the arbitrator. Also, s. 26 of the Act (hearings and written proceedings) gives a party a right to make oral argument, but no right to present its evidence in any particular manner. Because the arbitration clause provided that the arbitrator would interpret the agreement, it empowered the arbitrator to decide what powers he had.
The Court could set aside the award based on the arbitrator’s interpretation of the agreement only if satisfied that Optiva was not treated “equally and fairly”, under s. 19 of the Act, or that the procedure followed “did not comply” with the Act [ss. 46(1).6 and 7].” There was no evidence of unfairness Therefore, the Court did not set aside the partial award.
Therefore, the Court dismissed Optiva’s appeal.
First, the Act states that the arbitrator may determine the procedure to be followed in the arbitration. See s. 20(1). This is consistent with the policy decision of minimal intervention of the courts in arbitration. In trying to fulfill arbitration’s promise of greater efficiency and flexibility, arbitrators will often dispose of an issue to streamline the process. In this case, the parties’ arbitration agreement did not abrogate from those powers. The wrinkle was that the arbitrator did not require the parties to “put their best foot forward”, a hallmark of summary judgment in court proceedings. Rather, the motion proceeded without both parties’ consent and, as the arbitrator stated, before the usual exchange of relevant documents – so the evidentiary record was not complete.
Second, Optiva argued that it had a right, under s. 26(1) of the Act (which it was denied), to an oral hearing at which it could present its evidence viva voce and cross-examine Tbaytel’s witnesses. It provides that the arbitrator “shall hold an oral hearing if any party requests it”, which the Court of Appeal interpreted as a requirement to hear oral argument if requested. Compare this with the interpretation generally given to the comparable provision in the Model Law, Art 24(1) which is adopted in the Ontario International Commercial Arbitration Act, 2017, S.O. 2018, c. 2, Sch 5, that a party is entitled to an oral evidentiary hearing –albeit using different language.
Third, Optiva also sought leave to appeal on questions of law pursuant to s. 45 of the Act. The Court of Appeal considered whether the application judge had erred in refusing to grant Optiva leave to appeal on a question of law. Justice Doherty noted that generally such a decision is not appealable to the Court of Appeal, unless it reflects an erroneous declining of the jurisdiction of the Ontario Superior Court judge to grant leave under s. 45. Here, Justice Newton did not decline to exercise his jurisdiction, but refused leave on the merits. This determination raised a question of mixed facts and law, and was not appealable to the Court of Appeal.