Are Commercial Arbitration Awards Immune From Judicial Scrutiny?

Sophisticated commercial parties may arbitrate their disputes for a number of reasons. Under Ontario's Arbitration Act, R.S.O. 1990, c.17 (the “Act”), one of them is to protect the finality of the arbitrator's award. This goal is achieved by agreeing to limit the parties' right to appeal the award to the Courts. Where an appeal is available, judges respect the parties' choice to arbitrate and show deference to the arbitral award.

But where, in the Court's view, the arbitrator makes a fundamental legal error, is the policy of judicial deference warranted? A recent decision of the Ontario Superior Court, Tall Ships Landing Development Inc. v. Brockville (City), 2019 ONSC 6597, suggests not.

Of Waterfronts and Development

Tall Ships involved a project to develop property acquired by the appellant developer on the Brockville waterfront. The property was to be transformed into a mixed condominium tower and maritime discovery centre (“MDC”).

In a number of agreements with the City of Brockville (the “City”), the developer agreed to remediate the property and assume a number of roles in the construction of the MDC. The City then promised that the developer would qualify for tax credits based on the costs of remediation. The City further agreed that the developer would receive compensation for its work as a construction manager.

After the MDC was constructed, the developer would sell the structure to the City. The City would also pay the equivalent of the construction budget for the MDC, as well as fit-ups and exclusions.

In the end, the MDC turned out to be a more expensive project than anticipated.

Once the developer sold the MDC to the City, it submitted various claims for payment. These included claims for remediation, compensation for additional construction costs, and interest.

Upon refusal or delay by the City to make certain of these payments, the developer submitted the matter to arbitration as agreed to by the parties.

In three separate awards, the Arbitrator dismissed the developer's claims.

The developer appealed the arbitrator's rulings arguing, amongst other things, that the Arbitrator based his decisions on arguments and legal theories that the City had not advanced in arbitration. The developer argued that, in so doing, the Arbitrator committed an error of law.

The parties had agreed to a right to appeal the Arbitrator's decision on questions of law pursuant to section 45(2) of the Act, as well as pursuant to procedural fairness...