In 6524443 Canada Inc. v. Toronto (City), 2017 ONCA 486, the Court of Appeal for Ontario considered whether the appellant’s only right of appeal from an arbitration award was on a question of law, with leave. The Court interpreted the arbitration agreement between the parties and declined to consider both affidavit evidence regarding the formation of the arbitration agreement and other contractual documents, finding that the parties intended for the arbitration agreement to be a stand-alone agreement and that the affidavit evidence did not form part of the objective factual matrix.

Background

The appellant tenant entered into a 99-year ground lease with the City of Toronto, the landlord. The lease provided for a set rental fee for the first 40 years, and that the rental fee for the second rental period would be agreed between the parties or determined by arbitration. After failing to agree on the rental fee, the parties entered into an arbitration agreement. The arbitrators rendered an award setting out the fair market rental fee for the second rental period.

The arbitration agreement provides that the arbitrators’ decision is subject to appeal in accordance with the Arbitration Act, 1991, S.O. 1991, c. 17. Under the 1991 Act, if the arbitration agreement does not deal with appeals on questions of law, a party may appeal only on a question of law, with leave, and a party may appeal on a question of fact or on a question of mixed fact and law “if the arbitration agreement so provides”. The lease, which was entered into over 40 years ago, provides that the arbitrators’ decision is subject to appeal in accordance with the provisions of “The Arbitrations Act, R.S.O. 1970, as amended, or any successor Act”.

The tenant appealed the arbitrators’ award to the Ontario Superior Court of Justice. The City of Toronto successfully moved to quash this appeal. The motion judge held that under the arbitration agreement and the 1991 Act, the tenant had no right to appeal, except on a question law, with leave. The tenant appealed the order arguing that the motion judge failed to consider, as part of the “factual matrix”, the affidavit evidence of counsel for the parties and failed to consider the terms of the lease. The Court rejected both arguments and dismissed the appeal.

The Factual Matrix Does Not Include Evidence of Negotiations

The Court held that the Motion Judge correctly observed that evidence with respect to the factual matrix “includes objective evidence of the background facts known to the parties at the time of execution of the contract, but does not include evidence of negotiations and of a party’s subjective intentions”. The affidavits did not offer any evidence of the parties’ mutual objectives, but rather, described the chronology and manner in which the arbitration agreement was prepared along with counsels’ competing views as to what was intended in relation to appeal rights. The Court therefore agreed with the motion judge’s characterization of the affidavit evidence as evidence of the parties subjective intentions.

The Parties Intended the Arbitration Agreement to be a Stand-Alone Document

The Court further held that the arbitration agreement was intended to be a stand-alone document, and that the provisions of the lease did not apply. The parties set out the arbitration procedure in the arbitration agreement, including addressing an appeal from an arbitration award. The Court held that there was no reason for the parties to assume that any provisions of the lease respecting the arbitration would apply, especially where inconsistent with the arbitration agreement. Moreover, the Court concluded that if the parties intended to have broader rights of appeal, they would have provided for them explicitly in the arbitration agreement.

Further, the Court noted that even if the arbitration provisions in the lease were considered, the motion judge reasonably concluded that the result would be the same. The Court found that the lease provides that an arbitration proceeding would be governed by the 1970 Act, or any successor Act. Accordingly, both the lease and the arbitration agreement provide for the parties’ appeal rights to be governed by the 1991 Act.