



COURT OF APPEAL FOR ONTARIO

CITATION: 6524443 Canada Inc. v. Toronto (City), 2017 ONCA
    486

DATE: 20170613

DOCKET: C63101

LaForme, van Rensburg and Huscroft JJ.A.

IN THE MATTER OF the
Arbitration
    Act, 1991,
S.O. 1991, c. 17

AND IN THE MATTER OF an
    Arbitration Award dated September 8, 2015

AND IN THE MATTER OF an
    Arbitration between the City

of Toronto and 652443 Canada
    Inc.

AND IN THE MATTER OF Clause 7(c)
    of a Ground Lease from the Municipality of Metropolitan Toronto to Upper Canada
    Place Limited dated as of the 1st day of December, 1971  Bloor and Yonge
    Streets, Toronto.

BETWEEN

6524443 Canada Inc.

Appellant (Appellant)

and

City of Toronto

Respondent (Respondent)

Ronald G. Slaght Q.C. and Scott Rollwagen, for the
    appellant

Cynthia B. Kuehl and Christopher T. Shorey, for the
    respondent

Heard: May 17, 2017

On appeal from the order of Justice Barbara Conway of the
    Superior Court of Justice, dated November 23, 2016, with reasons reported at
    2016 ONSC 7147.

REASONS FOR DECISION

Introduction

[1]

The respondent landlord, City of Toronto (the City) and the appellant
    tenant, 6524443 Canada Inc. (Brookfield) are parties to a 99-year ground
    lease dated December 1, 1971, for the Hudsons Bay Centre at Yonge and Bloor
    Streets in Toronto (the Lease).

[2]

The Lease provided for the annual rent for the initial rental period of
    40 years. The Fair Market Rental for the second rental period (December 1,
    2011 to November 30, 2037) was to be agreed between the parties, failing which
    either party could submit the issue to arbitration. Article 7 of the Lease sets
    out the procedure for the arbitration and provides at Sub-Article 7(c):

The decision of the arbitrators shall be subject to appeal in
    accordance with the provisions of The Arbitrations Act, R.S.O. 1970, as
    amended, or any successor Act.

[3]

The City provided notice of arbitration to Brookfield on November 30,
    2011. The parties negotiated and entered into an agreement, the Terms of
    Appointment of Arbitral Tribunal and Arbitration Agreement dated July 13, 2013
    (the Arbitration Agreement). The Arbitration Agreement named the three
    arbitrators and set out a detailed procedure for the arbitration. Section 10 of
    the Arbitration Agreement provides for an appeal as follows:

The decision of the arbitrators shall be subject to appeal in
    accordance with the provisions of the
Arbitration Act, 1991
, S.O.
    1991, c. 17 as amended, or any successor Act.

[4]

The arbitration proceeded over 68 days between June 2014 and July 2015.
    The arbitration award (the Award) was rendered September 8, 2015.

[5]

Brookfield served and filed a notice of appeal in the Superior Court,
    alleging numerous errors in the Awards determination of the Fair Market Rental
    for the property, and a denial of natural justice. The City responded with a
    motion to quash, asserting that, as s. 10 of the Arbitration Agreement provided
    for an appeal of the Award in accordance with the
Arbitration Act, 1991
,
    S.O. 1991, c. 17, there was no right of appeal, except on a question of law,
    with leave. Brookfield relied on the Lease and affidavit evidence to argue that
    broader rights of appeal had been agreed between the parties.

[6]

The motion judge refused to consider the affidavit evidence, and held:
    (i) the Arbitration Agreement was a stand-alone agreement that provided only
    for appeals on questions of law, with leave; (ii) even if the Lease were
    considered, it did not provide for broader rights of appeal; and (iii)
    Brookfields notice of appeal raised only questions of fact or mixed fact and
    law. She therefore quashed the appeal.

[7]

Brookfield appeals the order. For the reasons that follow, we dismiss
    the appeal.

Issues on Appeal

[8]

The central issue on appeal is whether the motion judge erred in
    concluding that the only right of appeal from the Award is on a question of
    law, with leave.

[9]

The appellant submits the motion judge erred in refusing to admit
    affidavit evidence as part of the factual matrix in interpreting the parties
    agreement. The appellant also asserts that the motion judge erred in concluding
    that the parties rights of appeal were governed by the Arbitration Agreement
    as a stand-alone agreement, and in failing to give effect to article 7(c) of
    the Lease, which the appellant says affords the right to appeal the Award on
    questions of fact and mixed fact and law.

[10]

At the hearing of the appeal, the appellant abandoned its further
    argument that the motion judge erred in concluding its notice of appeal did not
    raise any question of law.

ANALYSIS

(1)

Standard of Review

[11]

The interpretation of the Arbitration Agreement involved questions of
    mixed fact and law. The motion judges interpretation of the Agreement is,
    therefore, reviewable on a standard of reasonableness:
Sattva Capital Corp.
    v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 SCR 633, at paras. 50 and
    106. Her interpretation involved, as an integral part of the interpretation
    process, consideration of the meaning of the provisions of the relevant
    arbitration statutes. This was not however an extricable legal issue, that
    would be reviewable on a standard of correctness. As the appellant asserted in
    argument, the issue before the motion judge was two competing interpretations
    of s. 10 of the Arbitration Agreement. In any event, the disposition of this
    appeal does not turn on the standard of review. As we explain, we see no error
    in the motion judges analysis.

(2)

Did the Motion Judge Err in Refusing to Consider the Affidavit Evidence?

[12]

First, we address the appellants argument that the motion judge erred
    in refusing to admit, as part of the factual matrix, the affidavit evidence
    of counsel for the parties. That evidence described the chronology and manner
    in which the Arbitration Agreement was prepared, and their competing views as
    to what was intended in relation to appeal rights.

[13]

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 partys subjective intentions:
Sattva
, at
    paras. 47, 58 and 59;
The Canada Trust Company v. Browne
, 2012 ONCA
    862, 115 O.R. (3d) 287, at para. 71. The motion judge characterized the
    affidavits in this case as evidence of the parties negotiations and of their
    subjective intentions with respect to the scope of their appeal rights, and she
    struck the affidavits.

[14]

The affidavits did not, as the appellant submits, offer evidence of the
    parties mutual objectives, in the sense referred to in
Langley Lo-Cost
    Builders Ltd. v. 474835 Ltd.
, 2000 BCCA 365, 76 B.C.L.R. (3d) 278. In that
    case, the B.C. Court of Appeal emphasized that negotiations between the parties
    are not relevant in determining the meaning of the language they used. Instead,
    the fact that the parties were in negotiations, and the reasons for the
    negotiations, including the commercial objectives of the parties, may be part
    of the factual matrix: at para. 29. Commercial objectives of the parties must
    be understood to mean what the parties
together
were seeking to
    achieve in their negotiations (such as, here, the conclusion of an Arbitration
    Agreement). It is not simply another way of referring to one partys subjective
    intentions, evidence of which is clearly inadmissible.

[15]

Further, we reject the appellants assertion that the affidavit evidence
    was admissible as "objective evidence as to what the parties were talking
    about.''  This characterization does not assist the appellant or make such
    evidence relevant or admissible. The motion judges characterization of the
    affidavit evidence of counsel for the parties as evidence of the parties
    subjective intentions, and her decision to strike the affidavits, were
    reasonable and based on the correct legal principles. We therefore do not give
    effect to this ground of appeal.

(3)

Interpreting the Parties Agreement about Appeal Rights

[16]

We turn to the appellants argument respecting the interpretation of the
    Arbitration Agreement, the Lease, and the parties rights of appeal from the
    Award.

[17]

The motion judge concluded at para. 26 of her reasons:

Whether the Arbitration Agreement is interpreted as a
    stand-alone agreement or with reference to the terms of the Lease, the result
    is the same  the parties are entitled to appeal the Award in accordance with
    the 1991 Act, and may appeal only on questions of law with leave of the court.

[18]

Under the 1991 Act, if the arbitration agreement does not deal with
    appeals on questions of law, a party may appeal on a question of law with
    leave: s. 45(1). Section 45(3) provides for an appeal on a question of fact or
    on a question of mixed fact and law if the arbitration agreement so provides.
    Brookfield contends that the motion judge erred in rejecting its argument that article
    7(c) of the Lease, in referring to the
Arbitrations Act
, R.S.O. 1970,
    c. 25, conferred broad rights of appeal from an arbitration award (including on
    questions of fact and mixed fact and law). It argues these rights were carried
    through to, or informed the interpretation of, the Arbitration Agreement.

[19]

We reject this argument.

[20]

First, the motion judge reasonably concluded that the Arbitration
    Agreement was intended to be a stand-alone agreement governing the arbitration
    and any rights of appeal from the Award. As such, she did not have to consider
    the provisions of the Lease or the 1970 Act.

[21]

The Lease provisions concerning arbitration are very brief, consisting
    of four clauses. The parties chose to enter into a detailed Arbitration
    Agreement, which included a comprehensive procedure for the arbitration, that
    in certain respects differs from what was provided for under the Lease (for
    example, in the manner of appointment of the arbitrators). There is no reason
    to conclude that, having set out in some detail the procedure for the
    arbitration, including addressing an appeal from the Award, the parties assumed
    that any provision of the Lease respecting the arbitration would continue to
    apply, especially where inconsistent with the Arbitration Agreement. And there
    is no merit to the appellants argument that, because the Arbitration Agreement
    referred to article 1(d) of the Lease, it must have intended the arbitration to
    be governed by the terms of the Lease. This is simply a recital of the
    circumstances in which the arbitration is taking place  for the determination
    of Fair Market Rental for the Second Rental Period as those terms are defined
    in the Lease. We agree with the motion judge that there is no need to refer
    back to the Lease in order to interpret any of the terms of the Arbitration
    Agreement.

[22]

Second, even if the arbitration provisions of the Lease were considered,
    the motion judge reasonably concluded the result would be the same. Article 7(c)
    refers to the decision of the arbitrators being subject to appeal in
    accordance with the provisions of [the 1970 Act],
or any successor Act

    (emphasis added). By its terms the Lease anticipated an appeal would be
    governed by the arbitration legislation in force at the time of the
    arbitration. We see no merit in the appellants argument that the reference to the
    1970 Act addressed substantive rights to appeal an arbitrators award, while
    any successor Act would only apply to the arbitration procedure. Both the
    Lease and the Arbitration Agreement provide for the parties appeal rights to
    be governed by the 1991 Act.

[23]

Finally, we agree with the motion judge that, if the parties intended to
    have broader rights of appeal, they would have so provided explicitly in the
    Arbitration Agreement. The parties were represented by experienced counsel who,
    as the motion judge noted are presumed to know that the 1991 Act requires the
    agreement to specify whether the parties have the right to appeal questions of
    law, fact or mixed fact and law, failing which they are entitled to appeal only
    on questions of law, with leave. The parties chose to enter into the
    Arbitration Agreement which included a specific appeal provision that
    referenced the 1991 Act, without saying anything more.

DISPOSITION

[24]

For these reasons, the appeal is dismissed. Costs to the City in the
    amount agreed between the parties, $12,000, inclusive of disbursements and HST.

H.S.
    LaForme J.A.

K. van Rensburg J.A.

Grant Huscroft J.A.


