The central issue in the recent Ontario Court of Appeal decision in Baffinland Iron Mines LP v Tower-EBC G.P./S.E.N.C., 2023 ONCA 245 was whether the arbitration agreement entered into by the two parties precluded an appeal on questions of law related to an award exceeding $100 million made by the majority of a three-member tribunal.
The Ontario Arbitration Act contemplates three possible scenarios regarding an appeal of an arbitral award on a question of law: (1) the arbitration agreement expressly provides a right to appeal, (2) the arbitration agreement is silent on the subject of appeals, and (3) the arbitration agreement expressly precludes a right to appeal.
The Court was tasked with determining whether the appeal before it fell within the second or third scenario, by dissecting the language used in the arbitration agreement and applying the interpretative principles laid down in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53.
In a 9 December 2020 arbitral award issued by a three-member tribunal pursuant to the ICC Arbitration Rules, the majority awarded the respondent, Tower-EBC G.P./S.E.N.C ("TEBC”), an amount in excess of $100 million. Notably, the dissenting arbitrator, the Honourable Justice Ian Binnie, formerly of the Supreme Court of Canada, said that he would have deducted approximately $54 million from the award because of disagreements with the majority on how Ontario law applied to the contract in question.
The appellant, Baffinland Iron Mines LP (“BIM”), sought leave to appeal to the Superior Court of Justice on the basis that the arbitration agreement was silent on the right to appeal, and therefore fell under the second scenario, which entitled them to appeal by first seeking leave to appeal. BIM also submitted that Justice Binnie’s dissent and the difference in the damages he would have awarded highlighted the existence of consequential questions of law.
The application judge dismissed BIM’s request for leave to appeal, holding that the arbitration agreement expressly precluded a right to appeal for two reasons: first, by incorporating the ICC Arbitration Rules, the parties included the rule stating that the parties agreed to carry out any award and waived any form of recourse; and second, by determining that the words “finally settled” meant the same as “final and binding” in arbitration clauses. On this basis, the application judge dismissed the application for leave to appeal without needing to consider whether BIM’s submissions met the test for leave to appeal set out in section 45(1) of the Arbitration Act.
Before BIM’s appeal was heard, the respondent, TEBC moved to quash BIM’s appeal. They argued that BIM had no right to appeal to the Ontario Court of Appeal after a judge denied leave to appeal at the Superior Court level. This motion to quash was heard first and was dismissed.
The Court then moved to BIM’s substantive appeal of the application judge’s dismissal of their application for leave to appeal, arguing that the application judge’s interpretation of the arbitration agreement was subject to appellate review on a standard of correctness. BIM’s argument that the judge’s interpretation was incorrect and tainted with extricable legal error was premised on the assertion that the application judge misconstrued and misapplied two principles of contractual interpretation: 1) the principle that presumes consistent expression; and 2) the principle that apparently inconsistent terms are to be reconciled in accordance with the priority the parties had agreed.
(1) The presumption of consistent expression: a contractual principle which presumes that the use of the same words means the same thing, while the use of different words indicates an intention to mean something different. BIM submitted that because the arbitration agreement used the wording “finally settled” as opposed to “final and binding”, the presumption of consistent expression should be applied and this verbiage should not be interpreted to preclude appeals. They argued that the use of “finally settled” meant that the parties meant something other than “final and binding” which is common in agreements of this nature and has been the subject of many previous decisions before the Court.
(2) Inconsistent terms are to be reconciled in accordance with their priority: BIM argued that the application judge failed to apply priority of documents correctly, and in doing so used documents that were lower in priority to reach its determination.
TEBC maintained that the application judge’s decision should be upheld on the basis that the arbitration agreement precluded a right to appeal, and that in any event, BIM’s proposed grounds did not meet the test for leave to appeal.
Justice of Appeal Benjamin Zarnett wrote the decision of the court. In it, he provides reasons not only for dismissing the appeal, but also for dismissing TEBC’s motion to quash.
The Court dismissed the respondent’s motion to quash because the appellant’s appeal fell within a narrow category in which a party may appeal a Superior Court judge’s refusal to grant leave to appeal. Zarnett J.A. used Denison Mines Ltd. v. Ontario Hydro, 56 O.R. (3d) 181 as the governing precedent for this issue. Denison provides an exception to the general rule that the Arbitration Act does not provide for an appeal to the Ontario Court of Appeal after leave to appeal is refused by a Superior Court judge: “where the appeal from the refusal to grant leave to appeal is premised on a submission that the judge refusing leave to appeal mistakenly declined jurisdiction to consider whether leave was warranted.” [emphasis added]
The application judge refused BIM leave to appeal because he interpreted the arbitration agreement as precluding appeals; because of this, he did not consider the grounds on which BIM sought leave to appeal and whether they were deserving of it. It is for this reason that the Court dismissed TEBC’s motion to quash.
However, even though the Court held that this was one of a narrow category of cases where a party could appeal to the Ontario Court of Appeal after a refusal from a Superior Court judge to assert jurisdiction, it ultimately dismissed BIM’s appeal. Zarnett J.A. did not accept BIM’s argument that “finally settled” meant something different than “final and binding.” In fact, when he applied the presumption of consistent expression, he found that the use of the word “final” in both “finally settled” and “final and binding” implied intent that the phrases should be interpreted to mean the same thing, and therefore the arbitration agreement precluded appeals, as the application judge held.
On the issue of priority, Zarnett J.A. held that BIM’s argument presupposed that the provisions were inconsistent, but this was not the case. An interpretation of both these provisions led to a determination that precluded an appeal of an arbitral award.
There are two important takeaways from this case for both lawyers and parties to arbitration agreements. First, the Court identifies the only scenarios under which a party may appeal an arbitral award on a question of law. Second, the decision provides insight into the Court’s approach in interpreting arbitration agreements, providing lawyers and judges with valuable guidance how the wording used in an arbitration agreement can impact a party’s right to appeal an arbitral award.