It is common for commercial agreements to contain clauses requiring disputes between the parties to be settled by arbitration. Such clauses also often direct how the parties will select an arbitrator. For example, such a clause might provide that the parties will agree on the arbitrator or, failing such agreement, each appoint an arbitrator who will then jointly appoint a third arbitrator.
In some instances, parties may need to have recourse to the Arbitration Act 1991, which applies to arbitrations conducted under an agreement by which parties have agreed to submit a dispute to arbitration.
Under Certain Circumstances, the Arbitration Act 1991, Provides for the Appointment of an Arbitrator
Section 10 of the Arbitration Act, 1991, provides that a court may appoint an “arbitral tribunal” on the application of a party if (a) “the arbitration agreement provides no procedure for appointing the arbitral tribunal” or (b) “a person with power to appoint the arbitral tribunal has not done so after a party has given the person seven days notice to do so.” An arbitral tribunal may have one or more arbitrators (per section 9).
The Court of Appeal recently considered whether a Court Order made under section 10 is subject to appeal.
Case Involved A Dispute Resolution Process in a Shared Facilities Agreement
The case of Toronto Standard Condominium Corporation No. 2299 v. Distillery SE Development Corp concerned parties to a Shared Facilities Agreement that included terms outlining a dispute resolution process. Specifically, the agreement indicated that disputes were to be finally resolved by binding arbitration. The clause also indicated that the parties could agree on a single arbitrator or each appoint an arbitrator who would agree to appoint a single arbitrator.
After disputes arose under the agreement, Toronto Standard Condominium Corporation No. 2299 (the “Condo Corp.”) and Distillery SE Development Corp. (the “Distillery”) agreed in 2018 upon the party to act as arbitrator, although the arbitration did not proceed at the time. Thereafter, in 2022, the Condo Corp. served a “fresh” notice of arbitration. This prompted a dispute over who would act as arbitrators and the scope of the arbitration.
The matter went to the Superior Court of Justice on an application for an order appointing the arbitrator and confirming that all matters raised in the notice of arbitration were within his jurisdiction. Distillery sought to quash the notice, arguing that the initial agreement to appoint an arbitrator had been repudiated by Condo Corp. The application judge appointed the arbitrator and confirmed it was within the arbitrator’s power to determine his jurisdiction and mandate. Distillery appealed.
Among other things, Distillery argued on appeal that the application judged had erred in failing to find that the initial agreement to appoint the arbitrator had been repudiated. The Condo Corp. sought to quash the appeal because there was no right to appeal the application judge’s order appointing the arbitrator.
Court Dismissed Appeal After Finding It Had No Jurisdiction To Hear It
The Court of Appeal first considered whether or not an appeal was available to Distillery, ultimately finding that it was not.
To that end, the Court referenced section 10(2) of the Arbitration Act, 1991, which states, “There is no appeal from the court’s appointment of the arbitral tribunal.” Notwithstanding this wording, Distillery argued that the section did not apply because the order it was appealing had not been made under section 10(1). It made several arguments in this regard.
Court Finds Rule Is Not The Source of a Court’s Authority To Appoint An Arbitrator
First, Distillery argued that the notice of arbitration issued by Condo Corp. had not referenced section 10(1) and had not been cited by the application judge as authority for the order in question. Distillery argued that the order had been made instead under r. 14.05(3)(d) of the Rules of Civil Procedure, which permits a court on application to determine rights under a contract. The Court of Appeal observed, however, that the notice of application issued by Condo Corp. had stated it was made under the Arbitration Act, 1991, and section 10 of that statute is “the only arguably applicable provision of the Act that contemplates the court appointing an arbitrator.” Further, it noted that r. 14.05 did not confer jurisdiction but instead set out a “permissible procedure” for determining matters that fall within the jurisdiction of the Superior Court.
Court Finds The Refusal Of A Party To Follow Through With An Agreement To Appoint An Arbitrator
Second, Distillery argued that the order in question could not have been made under sections 10(1)(a) or (b) of the Arbitration Act, 1991 since the circumstances set out in those provisions were inapplicable.
The Court of Appeal ultimately found that section 10(1)(b) applied. It noted that the section was available “where parties jointly have the power to appoint an arbitrator and either fail to agree, or they reach an agreement, but one then refuses to follow through on it.” The Court observed that the phrase “person with power to appoint an arbitrator” clearly extended “to a person whose power resides in the requirement for their agreement to an appointment.”
As the Court of Appeal indicated, this approach was consistent with the context and purpose of the Arbitration Act 1991. Section 6 of that statute prohibits court intervention in arbitrations except “[t]o assist the conducting of arbitrations” and “[t]o ensure that arbitration agreements conduct arbitrations.” As the Court indicated, such purposes were advanced by its interpretation of section 10(1)(b).
In addition, the Court of Appeal stated that the Arbitration Act 1991 contemplated a “limited” role for the Court. As such, an interpretation of section 10(1) “that permits the court to meaningfully respond to a log jam in an appointment of an arbitrator is consistent with that limited role.”
Distillery also argued that the court’s power to appoint an arbitrator was simply part of its “general jurisdiction to enforce an agreement;” however, the Court rejected this. It found that there was no “free-standing jurisdiction, outside the Act, for the court to appoint an arbitrator.” This was because the statute prohibited court intervention except in accordance with that statute.
The Court thus dismissed the appeal.
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