In Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, 2020 ONCA 612, Ontario’s Court of Appeal delivered a masterclass in judicial reasoning/drafting. It set out the role of judicial interpretation of statutes, observed how a wrong interpretation is never right, set out its approach to overruling its own precedents, acknowledged new guidance given in TELUS Communications Inc. v. Wellman, 2019 SCC 19 (CanLII),  2 SCR 144 on section 7(5) of Arbitration Act, 1991, SO 1991, c 17 but distinguished its impact from the Court of Appeal’s well-accepted reasoning in Huras v. Primerica Financial Services Ltd., 2000 CanLII 16892 (ON CA) on section 7(6)’s application. Reasserting its interpretation on section 7(6), the Court held that it did have jurisdiction to hear an appeal of a motion judge’s decision purporting to exercise discretion under section 7(5) to deny a stay. On the merits of the appeal, the Court then applied the Supreme Court’s interpretation which overturned the Court of Appeal’s interpretation on section 7(5).
The dispute involved four (4) parties: Soho Grand Condominiums Inc. (“Soho”); Toronto Standard Condominium Corporation No. 1628 (“Condo 1628”); Toronto Standard Condominium Corporation No. 1636 (“Condo 1636”); and, Soinco Limited (“Soinco”).
The parties disputed amounts allegedly owing under a cost-sharing agreement (“Reciprocal Agreement”) for common facilities in two (2) adjoining condominium projects. Each of the projects was administered separately, one by Condo 1628 and the other by Condo 1636. Condo 1628 and the declarant, Soho Grand Condominiums Inc. (“Soho”), signed the Reciprocal Agreement. Soinco Limited (“Soinco”) owned the common facilities.
Ontario’s Condominium Act, 1998, SO 1998, c 19 at section 132(1) deems that specific types of agreements involving specific groups of parties contain a provision to submit disagreements to mediation and then, if no settlement has arisen, to arbitration under Ontario’s Arbitration Act, 1991, SO 1991, c 17. Though the legislation inserted agreements to arbitrate whether or not the parties chose to do so, the Reciprocal Agreement did contain the following provision:
“6.1 The validity, construction and performance of this Agreement shall be governed by the laws of the Province of Ontario and any dispute that may arise under this Agreement shall be determined by arbitration by a single arbitrator to be agreed upon by the parties within thirty (30) days of written notification by any of the parties of a request for arbitration. If the parties are unable to agree upon the arbitrator, same shall be appointed upon application to a single judge of the Ontario Superior Court of Justice in accordance with and pursuant to the Arbitration Act, 1991 (Ontario), as amended. The arbitrator’s decision shall be final and binding upon the parties and shall not be subject to appeal”.
On December 29, 2017, Condo 1636 demanded that Condo 1628 pay Soinco arrears totalling $412,903.20 owed by Condo 1628’s. Condo 1628 refused. Condo 1636 threatened to bring the matter to arbitration if they could not resolve it amicably. Condo 1628 required that the parties undertake mediation which they did but unsuccessfully. Condo 1636 then advised that they should proceed to arbitration.
Rather than pursue arbitration, on September 26, 2018 Condo 1628 initiated litigation against Condo 1636, Soho and Soinco. In its litigation, Condo 1628 alleged that Soho imposed the Reciprocal Agreement on Condo 1628 through oppression, seeking remedies under section 135 of the Condominium Act, and based on false, deceptive, or misleading statements or information, seeking remedies under section 133 of the Condominium Act. Condo 1628 further alleged that Soho controlled the board of directors of Condo 1628 when it signed the Reciprocal Agreement and imposed a disproportionate share of common facilities costs on Condo 1628.
Decision in first instance issues before TELUS Communications Inc. v. Wellman – Condo 1636, Soho and Soinco applied, unsuccessfully, for an order staying the litigation under section 7 of the Arbitration Act. In first instance, the motion judge dismissed the application in Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636 et al., 2019 ONSC 1827. In doing so, the motions judge relied on the Court of Appeal’s interpretation of section 7(5) in Griffin v. Dell Canada Inc., 2010 ONCA 29, leave to appeal refused Dell Canada Inc. v. Thaddeus Griffin, 2010 CanLII 27725 (SCC),  S.C.C.A. No. 75. That interpretation affirmed discretion to refuse a partial stay.
That decision in first instance issued a few weeks before the Supreme Court of Canada released its own interpretation of section 7(5) in TELUS Communications Inc. v. Wellman, 2019 SCC 19 (CanLII),  2 SCR 144, appearing to effectively overturn the Court of Appeal’s contrary interpretation of section 7(5). In its reasons, the Supreme Court commented on section 7(6) at paras 91 and 104:
“ Finally, s. 7(6) provides simply that “[t]here is no appeal from the court’s decision”. Given the absence of any qualifying language, s. 7(6) must be taken as referring to a “decision” made under any subsection contained in s. 7. This would include, for example, a decision to stay the proceeding under s. 7(1), a decision to refuse a stay under s. 7(2), or a decision to order a partial stay under s. 7(5)”.
“ Finally, I note that the court below did not address the potential application of s. 7(6) of the Arbitration Act, and the matter was discussed only briefly during oral argument before this Court. Neither of the parties has suggested that the s. 7(6) bar applies. In the absence of full submissions, I do not consider it appropriate to make a final ruling on the matter”.
Condo 1636, Soho and Soinco (“Respondents”) appealed. Prior to the hearing, the parties alerted the Court of Appeal that they would ask it to address its jurisdiction to hear Respondents’ appeal given the comments in TELUS Communications Inc. v. Wellman at paras 91 and 104.
At the hearing, Condo 1628 formally argued for an order to quash Respondents’ appeal, claiming that section 7(6) bars an appeal. In doing so, it would require that the Court of Appeal to overturn its prior decision in Huras v. Primerica Financial Services Ltd., 2000 CanLII 16892 (ON CA).
Key issue and questions – The Court of Appeal framed the key issue as follows and identified three (3) questions which it answered:
Issue: whether section 7(6) bars an appeal to the Court of Appeal from a motion judge’s order refusing to stay the court proceeding and permitting both arbitrable and non-arbitrable claims to proceed in court.
Question 1: Did TELUS Communications Inc. v. Wellman overrule the Huras v. Primerica Financial Services Ltd. line of cases on the interpretation of section 7(6)? Following its analysis at paras 64-71, the Court of Appeal answered “No”.
Question 2: Should the Huras v. Primerica Financial Services Ltd. line of cases be overruled? Following its analysis at paras 72-96, the Court of Appeal answered “No”.
Question 3: Does section 7(6) bar this appeal? Following its analysis at paras 97-116, the Court of Appeal answered “No”.
To answer those three (3) questions, and as a preface to its analysis of them, the Court reviewed (i) TELUS Communications Inc. v. Wellman in detail at paras 27-44 and (ii) the Huras v. Primerica Financial Services Ltd. line of cases on section 7(6) at paras 45-63.
Having noted that TELUS Communications Inc. v. Wellman “was mainly concerned with the proper interpretation of s.7(5)”, the Court set out in detail the reasoning in Huras v. Primerica Financial Services Ltd. and the cases which applied it.
This note focuses only on the Court’s re-affirmation of the principles animating Huras v. Primerica Financial Services Ltd. and the line of cases which followed it.
Huras v. Primerica Financial Services Ltd. – In this case, the Court of Appeal held that a motion judge’s decision that a matter is not subject to arbitration under an arbitration agreement is a decision outside the scope of section 7 and therefore section 7(6) does not bar an appeal from that decision.
“ In the 20 years since Huras was decided, Finlayson J.A.’s interpretation of s. 7(6) has been followed by this court in seven unanimous decisions, including by two five-judge panels: see Brown v. Murphy (2002), 2002 CanLII 41652 (ON CA), 59 O.R. (3d) 404 (C.A.), at para. 8, per Charron J.A. (as she then was); Mantini v. Smith Lyons LLP (2003), 2003 CanLII 20875 (ON CA), 64 O.R. (3d) 505 (C.A.), at paras. 15-16, per Feldman J.A., leave to appeal refused,  S.C.C.A. No. 344; Woolcock v. Bushert (2004), 2004 CanLII 35081 (ON CA), 246 D.L.R. (4th) 139 (Ont. C.A.), at para. 15, per Cronk J.A.; Smith Estate v. National Money Mart Co., 2008 ONCA 746, 92 O.R. (3d) 641, at para. 29, per Sharpe J.A. (five-judge panel), leave to appeal refused,  S.C.C.A. No. 535; [Inforica Inc. v. CGI Information Systems and Management Consultants Inc., 2009 ONCA 642, 97 O.R. (3d) 161], at paras. 31-32, per Sharpe J.A.; [Griffin v. Dell Canada Inc., 2010 ONCA 29, leave to appeal refused Dell Canada Inc. v. Thaddeus Griffin, 2010 CanLII 27725 (SCC),  S.C.C.A. No. 75], at para. 25, per Sharpe J.A. (five-judge panel); and Haas v. Gunasekaram, 2016 ONCA 744, 62 B.L.R. (5th) 1, at para. 3, n. 1, per Lauwers J.A”.
The Court referred expressly to similar summaries given by leading texts on Canadian arbitration law.
“ Two of the leading texts on Canadian arbitration law have summarized the jurisprudence on s. 7(6) in comparable terms.
It is now well established that prohibition respecting appeal does not preclude an appeal from an order refusing to grant a stay on the ground that the matter is not subject to arbitration.
 Similarly, J. Kenneth McEwan and Ludmila B. Herbst in Commercial Arbitration in Canada: A Guide to Domestic and International Arbitrations (Aurora: Canada Law Book, 2004) (loose-leaf updated 2018) state, at para. 3:40.110:
[A] decision by the motions court that a matter (or, where applicable, all the claims) is not subject to arbitration under the terms of the arbitration agreement falls outside the scope of the stay provision and a right of appeal lies to the court of appeal from that decision. An order refusing a stay finally determines the forum in which the dispute is to be resolved and terminates any possible proceedings before the arbitral body. The order also deprives a party of the substantive right of resolving its dispute by good faith negotiation and arbitration”.
The Court further noted that, despite amendments brought to the Arbitration Act since Huras v. Primerica Financial Services Ltd., the Ontario legislature “has never overridden the court’s interpretation” of section 7(6).
The Court advanced, underlining that other Canadian jurisdictions with similar legislation have adopted the interpretation as persuasive.
“ This court’s interpretation of s. 7(6) in the Huras line of cases has also been adopted as persuasive authority by the appeal courts of Manitoba, New Brunswick, and Alberta in interpreting identical provisions in their arbitration statutes, all of which are modelled on s. 7(6) of the Uniform Law Conference of Canada’s Uniform Arbitration Act (1990): see Hnatiuk v. Court, 2010 MBCA 20, 251 Man. R. (2d) 178, at paras. 26-35; Chrysler Canada Inc. v. Eastwood Chrysler Dodge Ltd., 2010 MBCA 75, 262 Man. R. (2d) 1, at para. 37; Hopkins v. Ventura Custom Homes Ltd., 2013 MBCA 67, 294 Man. R. 168, at paras. 43-49; Briones v. National Money Mart Co., 2014 MBCA 57, 306 Man. R. (2d) 129, at paras. 21-22, leave to appeal refused,  S.C.C.A. No. 355; SNC-SNAM, G.P., a partnership between SNC-Lavalin Inc. and Snamprogetti Canada Inc. v. Opron Maritimes Construction Ltd., 2011 NBCA 60, 336 D.L.R. (4th) 129, at paras. 35-40; A.G. Clark Holdings Ltd. v. HOOPP Realty Inc., 2013 ABCA 101, 544 A.R. 114, at paras. 6-14; and Lafarge Canada Inc. v. Edmonton (City), 2013 ABCA 376, 561 A.R. 305, at para. 4”.
In summary, the Court of Appeal identified the following instances in which section 7(6) did not bar an appeal.
“ This review of the Huras line of cases shows that courts have tackled the question of when s. 7(6) bars an appeal through several related inquiries. Courts have held that s. 7(6) does not bar an appeal when: (i) there is no arbitration agreement or no applicable arbitration agreement; (ii) the dispute lies beyond the scope of s. 7; (iii) the Arbitration Act does not apply; and (iv) the motion judge did not make a decision under s. 7. Each of these inquiries is directed at the same question — the question raised by s. 7(6) — whether the motion judge made a decision under s. 7 of the Arbitration Act. If the answer is “yes”, s. 7(6) bars an appeal. If the answer is “no”, s. 7(6) does not bar an appeal”.
Role of Supreme Court obiter dicta – Condo 1628 did not claim that the TELUS Communications Inc. v. Wellman overruled the Court of Appeal’s interpretation of section 7(6), acknowledging in its factum that the Supreme Court decision expressly avoided ruling on section 7(6). See para. 64.
The Court distinguished para. 91 from TELUS Communications Inc. v. Wellman, holding that section 7(6) was “not the legal point actually decided” and therefore not part of the ratio decidendi of the case. The Court nonetheless recognized that, even as obiter dicta, those comments in para. 91 should be viewed as intended to provided guidance but “should not be treated as if enacted in a statute”. See para. 68 and the Court’s reference to R. v. Henry, 2005 SCC 76,  3 S.C.R. 609 para. 57.
The Court also observed the limited role of para. 104 in TELUS Communications Inc. v. Wellman. “This paragraph flags for future consideration, and with the benefit of full submissions, the issue of when s. 7(6) applies”. As such, the comments did not overrule Huras v. Primerica Financial Services Ltd.
Court’s interpretation not asymmetrical – The Court did analyse the scope of its interpretation and expressly held that its interpretation was not asymmetrical. Its interpretation was not limited to only decisions in which a motions judge refuses a stay. “Section 7(6) bars an appeal from a motion judge’s decision made under s. 7, whether that decision grants or refuses a stay”. See paras 93-95.
No discretion to stay – At paras 99-105, the Court asserted the rule in TELUS Communications Inv. v. Wellman that a court had no discretion to refuse a stay. It recognized that the motion judge did not have the benefit of the new TELUS Communications Inc. v. Wellman reasons and reliance on the Court of Appeal’s reasoning in Griffin v. Dell Canada Inc., 2010 ONCA 29, 98 O.R. (3d) 481 would have lead him to believe he had discretion to override the agreement to arbitrate and require the parties to continue in court.
No legal effect of the wrong interpretation – At paras 105-108, the Court held that a wrong interpretation does not change the law.
“But the Supreme Court in Wellman corrected this court’s earlier error of interpretation and explained what s. 7(5) always meant, from the day of its enactment. The Court did not change what s. 7(5) meant or alter its meaning with prospective effect only. Section 7(5) never provided statutory authority for the motion judge to override the parties’ arbitration agreement. Such a disposition has never been available under s. 7(5). The motion judge’s decision was thus not made — because it could not be made — under s. 7(5)”.
See National Westminster Bank plc v. Spectrum Plus Limited,  UKHL 41,  2 A.C. 680, excerpted at para. 106 of the reasons, and cited with “approvingly” earlier in Ontario (Finance) v. Progressive Casualty Insurance Company of Canada, 2009 ONCA 258 para. 57 regarding the distinction between prospective and retrospective effects of judicial interpretation of statutes in contrast to common law.
Final order subject to appeal – The Court qualified the motion judge’s order as a final one and subject to appeal to it under section 6(1)(b) of the Courts of Justice Act, RSO 1990, c C.43. The order was file because it was “terminating any possible proceedings before the arbitrator and countermanding a substantive contractual right to arbitrate”.
Disposition – In closing, the Court applied its analysis to the circumstances. It held that the motions judge had no statutory authority under section 7(5) to refuse to stay claims subject to arbitration and thereby override the agreement to arbitrate. Such discretion “is unavailable and has always been unavailable” under section 7(5). Because the motion judge’s decision was not made under section 7, section 7(6) did not apply to bar an appeal.
urbitral notes – First, regarding the distinction between “final” and “interlocutory”, see the recent Ontario Court of Appeal decision in Paulpillai Estate v. Yusuf, 2020 ONCA 655 and the related Arbitration Matters note “No appeal lies from an order refusing a stay whether order was made or not”.
In Paulpillai Estate v. Yusuf, 2020 ONCA 655, Ontario’s Court of Appeal held that it lacked jurisdiction to hear an appeal of a motion judge’s order regarding a stay in favour of arbitration. No formal motion had been made to refer the dispute to arbitration, the motion judge’s dispositive order was silent on the issue of arbitration and any comments on waiver of arbitration were merely obiter. Even assuming that an order might have been made, the Court held it lacked jurisdiction because section 7(6) of the Arbitration Act stipulated no appeal lay from a decision under section 7.
Second, see para. 57 from R. v. Henry, 2005 SCC 76 (CanLII),  3 SCR 609:
“ The issue in each case, to return to the Halsbury question, is what did the case decide? Beyond the ratio decidendi which, as the Earl of Halsbury L.C. pointed out, is generally rooted in the facts, the legal point decided by this Court may be as narrow as the jury instruction at issue in Sellars or as broad as the Oakes test. All obiter do not have, and are not intended to have, the same weight. The weight decreases as one moves from the dispositive ratio decidendi to a wider circle of analysis which is obviously intended for guidance and which should be accepted as authoritative. Beyond that, there will be commentary, examples or exposition that are intended to be helpful and may be found to be persuasive, but are certainly not “binding” in the sense the Sellars principle in its most exaggerated form would have it. The objective of the exercise is to promote certainty in the law, not to stifle its growth and creativity. The notion that each phrase in a judgment of this Court should be treated as if enacted in a statute is not supported by the cases and is inconsistent with the basic fundamental principle that the common law develops by experience”.
update – See the decision of the Saskatchewan Court of Appeal in Abbey Resources Corp. v. Andjelic Land Inc., 2020 SKCA 125, released after this note was posted, and the related Arbitration Matters note “Appeal court endorses other appeal courts’ approach to hear appeals where arbitration agreement does not apply”. In Abbey Resources Corp. v. Andjelic Land Inc., Saskatchewan’s Court endorsed the reasoning in Ontario Court of Appeal reasoning Huras v. Primerica Financial Services Ltd., 2000 CanLII 16892 (ON CA) to determine that, under section 8(6) of its The Arbitration Act, 1992, SS 1992, c A-24.1, the Court of Appel did have jurisdiction to hear an appeal of a decision in first instance which refused a stay if the decision held that that arbitration agreement did not apply.
Identifying that case as the first in a “very solid line of authority” and a “significant body of case law from other provinces”, the Court held that it did have jurisdiction to hear the appeal. On the merits, the Court held that the trial judge made no error in deciding the issue of the arbitrator’s jurisdiction because the case qualified as an exception to the “methodic referral of matters to arbitration” favoured by competence-competence. “The leases would seem to be standard form contracts, the interpretation of which is of precedential value, and there appears to be no meaningful factual matrix specific to [the parties] that can inform their interpretation”.