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Court of Appeal Considers SCC’s Wellman Decision and Upholds its Prior Decision on s. 7(6) the Arbitration Act, 1991

The Ontario Court of Appeal has clari­fied the law on the courts’ powers to stay proceedings where an arbitration agreement covers only part of the dispute, and on the availability of an appeal from a court’s findings on such stay motions.

In Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, 2020 ONCA 612, the ap­plicant brought a motion to quash an appeal from the order of the motion judge refusing to stay a court action in favor of arbitration on the grounds that, following the Supreme Court of Canada’s decision in TELUS Communications Inc. v. Wellman (“Wellman”) in 2019, the court lacked jurisdiction as the appeal is barred by s. 7(6) of the Arbitration Act, 1991. A five judge panel of the Court of Appeal dismissed the motion to quash the appeal.

Subject to specific exceptions, s. 7(1) of the Arbitration Act, 1991 provides that if a party to an arbitration agree­ment commences a court proceeding on a matter subject to arbitration, the court shall, on the motion of another party to the arbitration agreement, stay the court proceeding. Where arbi­trable and non-arbitrable matters are raised in a single court proceeding, the court may stay the proceeding with respect to the arbitrable matters and allow it to continue with respect to the other matters. Section 7(6) provides that there is no appeal from the court’s decision.

For the last twenty years, the leading case in Ontario on s. 7(6) of the Arbitration Act, 1991 was Huras v. Primerica Financial Services Ltd. (“Huras”). The applicant invited the Court of Appeal to overrule Huras fol­lowing the SCC’s decision in Wellman, which overturned the Ontario Court of Appeal’s decision in Griffin v. Dell Canada Inc. (“Griffin”) on the inter­pretation of s. 7(5). The Court held that although Wellman overturned Griffin on the interpretation of s. 7(5), it did not disturb Huras on the interpretation of s. 7(6) and dismissed the motion to quash the appeal.

The court held that Wellman was mainly concerned with whether s. 7(5) granted a motion judge the discretion to refuse to stay arbitrable claims in a court proceeding that combined arbitrable claims with non-arbitrable claims. This discretion had previous­ly been recognized in Griffin and in the Court of Appeal’s decision in Wellman. The court found although Wellman overturned Griffin on s. 7(5), the Wellman court expressly avoided ruling on s. 7(6) and left its interpreta­tion for future consideration.

The court then went on to consider the applicant’s arguments that the Huras line of cases should be overturned on the following grounds:

  1. That Huras was not in accordance with the modern approach to statutory interpretation. Section 7 should be read as granting a one-time opportunity to challenge a proceeding in the courts, with no further recourse allowed, as s. 7(6) provides for “no appeal”.
  2. That s. 7(6) should be read as pre­cluding any appeal from a motion brought under s. 7.
  3. That Huras was wrongly decided because it read words into s. 7(6) by allowing an appeal if the motion judge refused to stay the court proceeding.

The court rejected these submissions and found that Huras was correctly decided. The court held that Huras found that s. 7(6) of the Arbitration Act, 1991 barred an appeal only when the motion judge made a “decision” under s. 7, and this was consistent with the SCC’s finding in Wellman. A party may bring a motion based on statutory provision, but the court’s decision may be made on a different basis. In addition, the court found that the bar in s. 7(6) applied whether that decision grants or refuses a stay.

Having found that Huras remains intact, the court found in this case the motion judge did not make a decision under s. 7 and therefore s. 7(6) does not bar this appeal. The court reasoned that as a result of Wellman, the motion judge had no statutory authority under s. 7(5) to refuse to stay the claims subject to arbitration and therefore his decision was not made under s. 7. The motion to quash the appeal was dismissed. The court found that the motion judge’s decision was a final order and therefore an appeal lay to the Court of Appeal under s. 6(1) of the Courts of Justice Act.

It was interesting that even though the motion judge did not have the benefit of Wellman when he made his decision, the court held the motion judge to the corrected interpretation in Wellman, as it explained what s. 7(5) always meant, from the day of its enactment, not with prospective effect only. In reaching its decision, the court also noted that Huras respects the principles underlying the Arbitration Act, 1991: parties’ autonomy to arbitrate disputes and limited court intervention in the arbitration process.