In Ontario Medical Association v Willis Canada Inc (2013 ONCA 745) the Ontario Court of Appeal has held that Ontario's domestic commercial arbitration statute precludes appeals from decisions that stay litigation proceedings in favour of arbitration, pursuant to the competence-competence principle. As the statutory provision in question has counterparts in the domestic commercial arbitration statutes of several other Canadian provinces and territories, the Ontario decision is likely to be significant throughout Canada.
The Ontario Medical Association (OMA) is an umbrella body that represents the interests of the Ontario medical profession. Aviva Canada Inc provides personal and commercial insurance. Willis Canada Inc is an insurance broker. In June 2004 Willis and Aviva entered into a written broker/agent agreement, pursuant to which Aviva was to provide insurance coverage to OMA members and Willis was to serve as broker. The agreement required Aviva to pay the OMA a sponsor fee equal to 2% of OMA's portfolio. The agreement provided that "any dispute between [the parties] arising out of this Agreement, but not specifically dealt with under the terms of this Agreement, shall be submitted to arbitration".
Although the OMA was not a signatory to the broker/agent agreement, it was a party to an addendum to it. The addendum's preamble stated that "THIS ADDENDUM is executed pursuant to and is attached to and forms part of the Broker/Agent Agreement for The Ontario Medical Association portfolio dated June, 2004 (the "Broker/Agent Agreement"). The Ontario Medical Association ("OMA") joins this Addendum for purposes of Clause 3 below exclusively". Clause 3 provided that the OMA joined the addendum as the beneficiary of Aviva's obligation to pay the sponsor fee. It also provided for a further fee and bonus to be paid by Aviva to the OMA.
The OMA subsequently alleged that Aviva had failed to pay the fees contemplated by the broker/agent agreement. The OMA commenced action against Willis and Aviva.
Aviva moved under Section 7 of the Ontario Arbitration Act 1991 (SO 1991, c 17) to have the action stayed and to have the dispute referred to arbitration pursuant to Clause 3 of the broker/agent agreement. Section 7(1) of that statute provides that "[i]f a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding". The OMA maintained that because it was not a party to the broker/agent agreement, it was not bound by its arbitration clause. The addendum joined the OMA only for the purposes of Clause 3, which excluded any reference to the broker/agent agreement's arbitration provision. Aviva maintained that, when the broker/agent agreement and the addendum were read fairly as a whole, the OMA was a party to the broker/agent agreement. As a result, its claim was governed by the arbitration clause.
The motion judge found for Aviva and granted a stay of the proceeding in favour of arbitration. He did so by applying the competence-competence principle, which gives precedence to the arbitration process and holds that arbitrators should be allowed to exercise their power to rule first on their own jurisdiction. He considered that there was an arguable case that the OMA and its claim were governed by the arbitration clause, and that the proper course was to refer the issue of jurisdiction to the arbitrator. The motion judge expressly did not decide whether the OMA was, in fact, a party to the arbitration agreement – instead leaving that issue to be decided by the arbitrator.
The OMA appealed to the Ontario Court of Appeal, arguing that on a proper interpretation of the contractual documents it was not bound by the broker/agent agreement to submit this dispute to arbitration. Aviva resisted on the merits, but also raised a preliminary objection that the OMA's appeal was precluded by Section 7(6) of the Ontario statute: "There is no appeal from the court's decision."
The competence-competence principle has been recognised and adopted in numerous Ontario cases. The OMA sought to distinguish those cases on grounds that they were decided under Ontario's International Commercial Arbitration Act, which is based on the UNCITRAL Model Law on International Commercial Arbitration. The OMA alleged that those authorities had no bearing in the present case, which arose exclusively under Ontario's domestic commercial arbitration statute. The Ontario Court of Appeal (per Justice Sharpe, Justices Hoy and Blair concurring) dismissed that argument, finding no basis in the language of the two legislative regimes to justify a different approach to the important issue of how disputes over arbitral jurisdiction should be resolved. The appeal court also identified multiple Ontario authorities that had also applied the competence-competence principle under the domestic statute in any event.
The OMA also sought to oust the competence-competence principle by arguing that its operation had been excluded by Section 7(1) of the Ontario Arbitration Act, 1991. According to the OMA, Section 7(1) required the court to decide the jurisdictional issue and not simply pass it along to the arbitrator since a stay is to be granted only if the proceeding is "in respect of a matter to be submitted to arbitration under the agreement".(1) The appeal court rejected this submission also: while the competence-competence principle permits a court to decide a jurisdictional challenge to arbitration where the challenge is based solely on a question of law, Section 7(1) could not be said to have excluded the principle's operation altogether.
Despite these comments on the merits of the OMA's position, the appeal court preferred to dispose of the case on the basis of Aviva's preliminary objection. Although Section 7(6) of the Ontario statute precludes an appeal "from the court's decision", it does not specify which types of decision are contemplated. Does the provision preclude an appeal only where the court actually decides the jurisdictional issue (as argued by the OMA)? Or is an order that refers the matter to arbitration pursuant to the competence-competence principle also a decision for the purposes of Section 7(6) (as argued by Aviva)? The appeal court noted that the existing case law had distinguished two categories of decision for the purposes of Section 7(6):
- If the motion judge determines that the arbitration clause does apply, then the order falls within Section 7 and any appeal from it is barred by Section 7(6).(2)
- If the motion judge decides that the matter is not subject to arbitration because one of the parties is not a party to the arbitration agreement or because the dispute falls outside the reach of the arbitration clause and refuses the stay, no order under Section 7(1) is made and therefore an appeal is not barred by Section 7(6).(3)
The appeal court regarded the present case as involving a third category of decision – namely, where a motion judge grants a stay but refuses to determine the ultimate issue of an arbitrator's jurisdiction to deal with a dispute. The appeal court considered that Section 7(6) reflected the important policy consideration that contests over the arbitrability of a given dispute should not become bogged down by appeals. The obvious legislative intent was to promote an expeditious determination of the forum in which the dispute could be resolved. It would frustrate that policy to permit the OMA's appeal to proceed. Despite a natural bias against decisions that are incapable of appeal, here the need for finality and expeditious resolution trumped reviewability. The appeal court also noted that the grant of a stay and a remittal to arbitration did not eliminate the possibility of judicial scrutiny of the jurisdictional issue: the Ontario statute still provided for review of a preliminary ruling on jurisdiction and for the setting aside of an award that strays beyond what is covered by the arbitration agreement.
The appeal court therefore held that Section 7(6) barred the OMA's appeal and dismissed it.
The appeal judgment offers helpful guidance on three fronts.
First, it explains and reconciles several lines of Canadian authority on what types of stay decisions under Section 7 may be appealed. Although the statutory provision at issue involved provincial legislation, it mirrored the language of the uniform Arbitration Act originally developed in 1990 by the Uniform Law Conference of Canada (ULCC) for implementation across Canada. So far, the ULCC's uniform statute has been taken up in in six Canadian jurisdictions: Alberta, Manitoba, Ontario, New Brunswick, Nova Scotia, and Saskatchewan. As a result, the Ontario Court of Appeal's commentary will undoubtedly influence how the counterpart provisions are approached in other jurisdictions as well.
Second, the judgment continues to restrict the opportunity for litigation over jurisdictional questions of arbitrability in domestic matters. According to the Ontario Court of Appeal, appeals are precluded in two of the three categories of case it recognised. Only in situations where the motion judge decides that the matter is not subject to arbitration will an appeal lie. Given the appeal court's robust endorsement of the competence-competence principle, one might expect cases in this third category to be a dying breed.
Third, the judgment confirms a growing judicial willingness to look for unifying themes in Canada's domestic and international commercial arbitration regimes. The appeal court gave short shrift to the OMA's submission that competence-competence's operation is confined to international commercial arbitration, finding no basis to differentiate between domestic and international arbitration on this point. On the one hand, the two regimes do raise distinct policy considerations and those differences should continue to be recognised. On the other hand, as the appeal judgment forcefully reminds us, it is unnecessary and undesirable to treat domestic and international arbitration in isolation.
For further information on this topic please contact Angus M Gunn at Borden Ladner Gervais LLP by telephone (+1 604 640 4084), fax (+1 604 622 5915) or email (email@example.com). The Borden Ladner Gervais LLP website can be accessed at www.blg.com.
(2) See Radewych v Brookfield Homes (Ontario) Ltd, 2007 ONCA 721, SLMSoft.com Inc v First Ontario Credit Union Ltd (2003), 172 OAC 201 (CA), and Lamb v AlanRidge Homes Ltd (2009), ABCA 343, 464 AR 46.
(3) See Huras v Primerica Financial Services Ltd (2000), 137 OAC 79 (CA), Brown v Murphy (2002), 59 OR (3d) 404 (CA), Griffin v Dell Canada Inc, 2010 ONCA 29, 98 OR (3d) 481, Opron Maritimes Construction Ltd v Irving Oil Ltd, 2011 NBCA 60, 386 NBR (2d) 1, AG Clark Holdings Ltd v HOOPP Realty Inc, 2013 ABCA 101, 82 Alta LR (5th) 286 and Hopkins v Ventura Custom Homes Ltd, 2013 MBCA 67, 294 Man R (2d) 168.