Arbitrator can conduct summary judgment motion absent party consent: Ontario Court of Appeal

Through arbitration, parties can choose how to resolve disputes on their own terms. However, sometimes those terms can play out differently from a party’s understanding of how its case would play out. In the recent decision of Optiva Inc. v. Tbaytel, the Court of Appeal held that an arbitration agreement between parties gave their arbitrator jurisdiction to proceed by way of summary judgment without the consent of one of the parties¹.

What you need to know

• The Court of Appeal affirmed that the arbitrator had the ability to proceed by way of summary judgment without the consent of one of the parties.
• While a party may have a right to a “hearing”, that does not necessarily include the right to present or cross-examine live evidence before the arbitrator. The manner in which evidence is presented at a hearing is ultimately a procedural question, and a party has no right to present its evidence in a particular manner.
• The arbitration agreement contained a clause stating the arbitrator had jurisdiction to “consider and rule upon all motions during the [a]rbitration”. It remains to be seen if the power to proceed by summary judgment will exist where arbitration agreements are silent on the matter of motions. The Court of Appeal’s ruling does continue to affirm that Ontario courts defer to the parties’ decision to enter into arbitration and confirms that, absent language to the contrary, arbitrators have broad jurisdiction over their procedure.

The details

Arbitrator’s finding that he had jurisdiction to proceed by way of summary judgment 

In 2016, Tbaytel, a telecommunications service provider, was upgrading its systems. It engaged Optiva Inc. to provide a new software package under an $8.5 million contract. The aim was to finish the project by July 2018. However, issues soon arose and Tbaytel terminated the contract in March, alleging that Optiva had breached the contract.

In the contract, the parties had agreed to resolve disputes arising out of, or in connection with, the contract by arbitration. The parties entered into an arbitration agreement, naming the arbitrator and describing the powers of the arbitrator.

During the arbitration, Tbaytel sought to proceed by way of summary judgment for some of its claims against Optiva. Optiva objected, arguing that the arbitrator lacked jurisdiction to do so absent the consent of both parties. The arbitrator ruled that he had jurisdiction, pursuant to the Arbitration Act, 1991, S.O. 1991, c. 1 (the Act) and the arbitration agreement. He heard Tbaytel’s summary judgment motion over two days and agreed that summary judgment should be granted on some of the claims advanced. The arbitrator affirmed Tbaytel’s right to terminate the agreement and awarded damages.

The Court of Appeal’s decision

The Court of Appeal held that the application judge properly found that the arbitrator could proceed by way of summary judgment and dismissed the appeal².

In assessing this issue, the Court relied on the fact that both parties were “sophisticated commercial actors” and had agreed to a private arbitration governed by the arbitration agreement. The Court reaffirmed its position that there is a “very limited role for judicial oversight” in the conduct or outcome of such an arbitration³.

The arbitration agreement gave the arbitrator broad powers to conduct the arbitration. Section 8 provided that the arbitrator had jurisdiction “to consider and rule upon all motions during the Arbitration” (emphasis added). It then provided a non-exhaustive list of what those powers include, such as order production of documents, ruling upon refusals and objections arising from oral discovery, and giving directions to control the proceedings. The list did not expressly include the power to order summary judgment.

The Court of Appeal held that while there is no specific reference to a summary judgment procedure in the arbitration agreement, the agreement was “far from silent” on the arbitrator’s authority to decide on the procedures to be followed in the course of the arbitration, relying on section 8. The parties agreed to give the arbitrator a broad and sweeping range of powers to decide the evidentiary and procedural elements of the arbitration⁴.

Optiva argued that section 26 of the Act gave it a right to a “hearing” for the presentation of evidence. Section 26 states that an arbitral tribunal “may conduct the arbitration on the basis of documents or may hold hearings for the presentation of evidence and for oral argument; however, the tribunal shall hold a hearing if a party requests it”. Optiva argued that under this provision it had the right to present viva voce direct evidence, cross-examine live evidence before the arbitrator and make oral argument. Any departure from that kind of hearing, Optiva argued, requires consent of all parties. The Court of Appeal disagreed. The term “hearing” is broad and can include, for example, applications and motions. The manner in which evidence is presented at a hearing is a procedural question, and a party has no right to present its evidence in a particular manner⁵.

Ultimately, the Court of Appeal put a lot of weight on Optiva’s agreement that the arbitrator could determine the procedures governing the arbitration. It was not denied an opportunity to present its evidence. There was nothing inherently unfair about the process chosen by the arbitrator.

Conclusion

This case demonstrates the risks that parties take by agreeing to a broad arbitration agreement that may lead to arbitral procedures they did not contemplate and do not agree with. Although Optiva did not directly consent to the use of summary judgment during arbitration, it effectively did provide consent by signing a broadly worded arbitration agreement, in the view of the Court. If parties wish to adopt a certain procedure, they should specify it in their arbitration agreement or opt into a set of established arbitral rules that provide predictability.

Whether Optiva gives rise to a trend towards more use of summary judgments in arbitration proceedings remains to be seen.