Sophisticated commercial parties often insert arbitration clauses into their contracts to avoid the expense, publicity, and delay of having to resolve disputes in court. When drafting such clauses, one issue the parties may wish to consider is whether the arbitrator’s decision should be subject to appeal to the courts, even on a question of law. In Weisz v. Four Seasons Holdings Inc. (2010), 103 O.R. (3d) 783 (S.C.J.), the Court provided a simple means by which contracting parties can ensure an arbitration of a dispute will be final – include the words “final and binding” in an arbitration clause. This will often be enough to exclude the right of appeal provided by section 45(1) of the Ontario Arbitration Act, 1991, S.O. 1991, c. 17.
In Weisz, Four Seasons Holdings Inc. brought a motion seeking leave to appeal an arbitration award and supplementary ruling. The arbitrator had awarded Four Seasons’ former executive, Mr. Randolph Weisz, damages for constructive dismissal based on his entitlement provided in the Change-in-Control Agreement (“CIC Agreement”) between Mr. Weisz and Four Seasons.
The CIC Agreement had been entered into during the course of Mr. Weisz’s employment, and granted Mr. Weisz certain protections in the event that there was both a change of control and a termination of employment. The CIC Agreement contained the following arbitration provision:
In the event Four Seasons and Weisz are not in agreement about the interpretation of any aspect of this agreement … Four Seasons and Weisz shall submit their disagreement to an independent arbitrator … whose decision shall be final and binding upon Four Seasons and Weisz. [Emphasis added.]
Four Seasons argued that the arbitrator had erred in law by concluding that Mr. Weisz had been constructively dismissed. Mr. Weisz asserted that because the arbitration provision provided that the arbitrator’s decision was “final and binding”, no appeal was available.
Justice Morawetz, relying on the conclusion of the Court of Appeal in Labourers’ International Union of North America, Local 183 v. Carpenters and Allied Workers, Local 27 (1997), 34 O.R. (3d) 472 (C.A.), held that the proviso that the arbitrator’s decision was “final and binding”, by implication, excluded the right of appeal. The language evidenced the parties’ intention to have their disputes settled privately, without resort to the courts.
Nonetheless, the words “final and binding” are not determinative. In McAshfalt Marine Transport Limited v. Liberty International Canada, [2005] O.J. No. 1424 (S.C.J.), Justice Dambrot stated that absent an explicit reference to excluding the right of appeal, a court will undertake a factual inquiry to determine the parties’ true intention. Justice Morawetz, following the same process, considered whether there were other terms in the CIC Agreement or extrinsic evidence that showed that the parties did not intend to completely bar the right of appeal.
Finding no extrinsic evidence to the contrary, Justice Morawetz gave effect to the words “final and binding” and concluded that Mr. Weisz and Four Seasons had implicitly excluded the right to appeal the arbitrator’s decision to the court. Leave to appeal was therefore denied. What sort of evidence could have rebutted the natural meaning of the words “final and binding” was not addressed.
Finally, it should be noted that the words “final and binding” cannot shield from judicial scrutiny an arbitration that followed a seriously flawed process. Section 46 of the Arbitration Act, 1991 preserves a variety of grounds to have an arbitration award set aside, and Section 3 provides that the parties cannot contract out of these protections.
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