Courts Have Limited Ability To Interfere With Arbitration Awards
In Mensula Bancorp Inc. v. Halton Condominium Corporation No. 137, 2022 ONCA 769, the Court of Appeal considered the application of s. 46(1)3 of the Arbitration Act, 1991, S.O. 1991, c. 17 (“the Act”), and when a court may interfere with an arbitration award.
Background
The appellant, Halton Condominium Corporation No. 137 (“HCC 137”), and the respondent, Mensula Bancorp Inc. (“Mensula”), disagreed about access to Mensula’s parking units that are located on one of the levels of HCC 137 condominium’s parking garage. Specifically, HCC 137 and Mensula disagreed about whether Mensula’s employees and other invitees were entitled to access the parking units by walking through the lobby and hallways of the residential condominium building or only through an external staircase. The parties proceeded to arbitration as required by application of section 132(4) of the Condominium Act, 1998. The arbitrator found in favour of HCC 137, and there was no right of appeal from the arbitrator’s decision.
Mensula successfully applied to the Superior Court of Justice to set aside the arbitrator’s award under s. 46(1)3 of the Act, which outlines one of the grounds for a court to set aside an arbitral award:
46(1) 3. The award deals with a dispute that the arbitration agreement does not cover or contains a decision on a matter that is beyond the scope of the agreement.
The application judge held that the arbitrator had “in effect” amended the condominium’s declaration, by coming to a conclusion that was not based on the text of the declaration and which used surrounding circumstances beyond their proper limits in the interpretive process. The application judge held that although the issue of Mensula’s access to the parking units was properly before the arbitrator, the arbitrator could only decide that issue by interpreting the condominium’s declaration, and not by amending it.
Analysis
The Court of Appeal cited Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254, 145 O.R. (3d) 481, leave to appeal refused, [2019] S.C.C.A. No. 202, where the court had stated that s. 46(1)3 of the Act provides a narrow basis upon which a court may interfere with an arbitration award. Section 46(1)3 of the Act does not create a right of appeal, nor does it contemplate a review of the correctness or reasonableness of the arbitrator’s decision. This section requires that the court not interfere with the arbitrator’s award as long as the issue decided was properly before the arbitrator.
There were three issues before the arbitrator. The issue that was relevant to the appeal was whether Mensula ought to have access to the common elements of the condominium and, if so, the scope of that access. The arbitrator described the parties’ positions as involving the interpretation of the declaration. In coming to his decision and deciding the issues before him, the arbitrator interpreted the condominium declaration. The arbitrator ultimately found by interpreting the declaration that Mensula had access only through the east end stairwell.
The Court of Appeal stated that whether the arbitrator interpreted the condominium’s declaration correctly or reasonably was irrelevant. The Court of Appeal found that the Arbitrator interpreted the declaration, which was clearly within his jurisdiction to do.
The Court of Appeal elaborated that limited scope for judicial intervention exists under s. 46(1)3 of the Act, and that the provision allows only for limited review for jurisdictional error. It does not authorize review of the substance of the award. It is not an appeal route, and the correctness or reasonableness of the arbitrator’s decision is irrelevant. The Court of Appeal also noted that at no point did the arbitrator expressly say he was correcting or amending the declaration.
The Court of Appeal held that the application judge had erred in reviewing the substance of the arbitrator’s award and considering whether a proper interpretive analysis could justify it. In doing so, the application judge had confused the correctness or reasonableness of the arbitrator’s interpretation with whether the arbitrator had answered a question that was not before to him, or dealt with a matter beyond the scope of the arbitration agreement.
Conclusion
The appeal was allowed and the award of the arbitrator restored.
Takeaway
So long as the arbitrator remains within their jurisdiction in deciding the issues before him or her, the court cannot interfere with the arbitrator’s award under s. 46(1)3 of the Arbitration Act. This is true even if the decision itself is incorrect or unreasonable. Parties seeking to arbitrate a matter should be careful in the issues that are put before the arbitrator, and should not rely on s. 46(1)3 for judicial intervention of an arbitral award that is incorrect or unreasonable, but is nonetheless within the scope of the arbitration agreement.