Ontario Court of Appeal upholds arbitrator's $4.39M award and validates use of summary judgment-like procedures in domestic arbitrations
Optiva sold an $8.5M software package to Tbaytel. A dispute arose resulting in Tbaytel terminating the contract and the parties referring their disputes to arbitration under the Arbitration Act, 1991 (the "Act"). A further agreement on the arbitration procedure was negotiated and agreed by the parties. It described the powers of the arbitrator, including the power to decide all motions and determine all procedural matters. However, no explicit reference to "summary judgment" was included in this agreement.
Tbaytel elected to bring a motion for "summary judgment" on the basis that the executives of Optiva had made admissions that established the material facts for its claim. The arbitrator permitted Tbaytel to proceed with a summary judgment motion, despite Optiva's "concerns" with that procedure. Optiva made submissions on the motion that the arbitrator had no jurisdiction to use summary judgment as a procedure, absent consent of the parties. Nevertheless, the arbitrator granted Tbaytel a partial award of $4.39M.
Optiva moved to set aside the award under s. 17 and s. 46 of the Act by application to the Ontario Superior Court of Justice. The applications judge dismissed the application on the basis that (1) Optiva was out of time under s. 17(8) of the Act to set aside the decision, and (2) that the grounds for setting aside the award were without merit. Optiva appealed to the Court of Appeal for Ontario.
The appeal was dismissed. The Court of Appeal disagreed with the lower court finding that Optiva was out of time under s. 17(8) of the Act. The Court of Appeal found that the time limit under s. 17(8) applies only to jurisdictional decisions of the arbitrator, not to challenges relating to procedural fairness under s. 46(1) 6 of the Act, which was the correct basis to challenge the arbitrator's use of a summary procedure. As such, Optiva was not out of time. However, the Court of Appeal dismissed the balance of the grounds for appeal. The Court concluded that Optiva had agreed that the arbitrator could determine the procedures governing the arbitration and this included summary procedures. Furthermore, there was no evidence that Optiva was either denied the opportunity to present any evidence that it wanted to present before the arbitrator or that it did not have a full and fair opportunity to challenge the case put forward by Tbaytel.
This case establishes a clear precedent for arbitrators to use summary judgment as a procedural mechanism where such a procedure has not been explicitly excluded by the parties. This is an important case for empowering arbitrators with the tools already in the hands of the courts by virtue of decisions such as Hryniak v. Mauldin, 2014 SCC 7. As noted by the Court of Appeal, "The advantages flowing from a properly invoked summary judgment process have equal application in the arbitration and the civil trial context." If a party wants to exclude the use of summary judgment in an arbitration, then clear language in the arbitration agreement to that effect will be required.
The potential lack of a summary process in arbitration (or more accurately the lack of willingness of arbitrators to adopt a summary process because of due process concerns) has often been a criticism of arbitration. Hopefully, this decision will encourage arbitrators to adopt a summary process in the future, where appropriate, subject to the need to treat all the parties equally and fairly and to allow each party an opportunity to present its case or to respond to the other party's case.