Arbitration provides a quick method for dispute resolution without the time and expense of going to court. In fact, many parties include such provisions in their contracts.
As McMillan Associates Gemma Healy-Murphy, Connor Campbell and articling student Srinidhi Akkur explain, arbitration provisions are often written as “step clauses” in order to create a level of certainty regarding the resolution process.
“Certainty is achieved by ensuring that each stage specified within a step clause has the mechanics clearly laid out.”
However, drafting certainty into those provisions can be problematic when there is ambiguity and lack of detail, they say. This not only leads to surprises but to issues surrounding who should interpret the clauses themselves.
The recent dispute, Cruickshank Construction Ltd. vs. the City of Kingston, is illustrative. Both parties had agreed to an arbitration clause in their contract, along with several procedural and notice requirements.
However, when Cruickshank applied to the Ontario Superior Court for arbitration on a specific claim, Kingston responded by asking the court if Cruickshank’s request had validity and if an arbitrator even had the necessary jurisdiction.
As seen in other past cases dealing with the jurisdiction of arbitrators, Court Justice Meyer sided with the arbitration process.
As Rachel Howe writes in arbitrationmatters.com, Justice Meyers held that “Kingston had no grounds under the Arbitration Act to move to prevent an arbitration. Arbitrators are able to rule on their own jurisdiction under s. 17(1) of the Arbitration Act and, more to the point, Kingston’s claim was not a matter of jurisdiction.”
Specifically, the court ruled, “there are narrow circumstances when a court may rule on an arbitrator’s jurisdiction if it turns on a neat issue of law that is ripe for determination. Or the court might decline to stay civil litigation in favour of arbitration because the merits are amenable to summary judgment. This case does not fit into those or any of the other circumstances in which the court may intervene.”
It’s not the first time that a party has tried to short-circuit the arbitration process by questioning an arbitrator’s jurisdiction, as was covered in this column in November.
Gowling WLG Partner Sahil Shoor and articling student Michael Piaseczny also note from the 2019 Supreme Court of Canada ruling, Telus Communication Inc. vs. Wellman, that “contracted parties should not be encouraged to sue to avoid letting an arbitrator decide the merits of a claim.”
Here, the Supreme Court “clarified the importance for courts to adopt a more ‘hands off’ approach to arbitration,” they write. They note the court’s suggestion that abiding to a valid arbitration agreement “goes hand in hand with the principle of limited court intervention in arbitration matters.”
While defending the arbitrator’s ability to rule on their own jurisdiction and then decide the issues before them, the court cited subsection six of the Arbitration Act, limiting court intervention to: assisting the conducting of arbitrations; ensuring arbitrations are conducted in accordance with arbitration agreements; preventing unequal or unfair treatment of parties to arbitration agreements; and enforcing awards.
Justice Meyers followed this up, commenting, “Few things are more inefficient in civil litigation than a multiplicity of proceedings. Multiple lawsuits on the same issues cause duplication of work. They multiply costs needlessly. They run the risk of inconsistent verdicts and thereby undermine the finality of the result. Multiplicity of lawsuits is so obviously inefficient that s. 138 of the Courts of Justice Act, RSO 1990 c C.43, specifically directs courts to avoid multiplicity of proceedings as far as possible.”
As Healy-Murphy, Campbell and Akkur suggest, contracted parties can’t have it both ways. Arbitration provisions in a contract need to be followed, not disputed.
“Parties are not free to ignore arbitration agreements and attempts to litigate around an arbitration agreement are likely to be scrutinized closely by the courts. Where a dispute arguably falls within the arbitrator’s jurisdiction and is heavily fact-laden, the parties should look to the arbitrator for the necessary determinations and not the court.”
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to firstname.lastname@example.org.