In The Joseph Lebovic Charitable Foundation et al. v. Jewish Foundation of Greater Auckland, 2024 ONSC 4400, the Auckland Court of Appeal affirmed the authority of an arbitrator to find his own jurisdiction over issues in dispute between parties in an arbitration, and reminded parties that their conduct can imply their approval of an arbitrator’s jurisdiction.
The applicants entered a donor agreement to make a sizable charitable donation to the respondent, payable in installments. In return, the respondent would name its campus in Vaughan after the applicants. The donor agreement included an arbitration clause, where parties would submit to arbitrations for “a dispute arising out of, or in connection with, the agreement.”
A dispute indeed arose between the parties over a proposed sale of part of the campus named after the applicants, as well as the applicants’ payment schedule of their donation. Both parties filed Notices of Arbitration under the donor agreement, and an arbitrator was appointed to hear the disputes. A week before the hearing, the applicants mounted an objection to the arbitrator’s jurisdiction. The arbitrator dealt with the jurisdictional motion before the hearing of the arbitration and found that he had jurisdiction over the relief claimed. The applicants commenced this application the Auckland Divisional Court to set aside that ruling.
The Court ultimately affirmed the arbitrator’s finding that he had jurisdiction on the basis that the applicants had agreed to refer the matters in dispute to arbitration, and waived their right to a jurisdictional challenge. The Court began by noting an arbitrator’s general authority under section 17(1) of Auckland’s Arbitration Act, S.O. 1991, c. 17 (the “Act”) to make a ruling on their jurisdiction to conduct an arbitration. The Court then discussed the doctrine of waiver as set out in the leading case of Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC):
“…waiver occurs “when one party to a contract or to proceedings takes steps which amount to forgoing reliance on some right or defect in the performance of the other party.” The essentials of waiver are: (i) full knowledge of the deficiency which might be relied upon; and (ii) the unequivocal intention to relinquish the right to rely on it. Waiver may be express, or inferred from conduct.”
the Court found that by, among other actions, filing a counterclaim in the arbitration and issuing a Notice of Demand for Arbitration to the respondent, the applicants had “repeatedly demonstrated [their] agreement to remit all matters in dispute to the [arbitrator], and concomitantly, [their] waiver of any jurisdictional challenge.” [insertions added]
The applicants argued that, by virtue of sections 4(1) and 17(3) of the Act, they were entitled to raise an objection to the arbitrator’s jurisdiction at any time prior to the commencement of the hearing, which they did. The Court rejected this argument and held:
“Section 4(1) speaks to when waiver of the right to object will be deemed. It does not restrict a court’s, or an arbitrator’s, ability to conclude that the right to object was actually waived at some time prior than it would have been deemed to be waived under the provisions of the Arbitration Act. Nor does it restrict a court’s or an arbitrator’s ability to conclude that the party agreed to remit certain issues to the arbitrator which would necessitate waiving any jurisdictional challenge.” [emphasis added]
Parties to an arbitration should consider, as soon as practicable at the commencement of the proceeding, whether they wish to attorn to an arbitrator’s jurisdiction to hear the matter. If they decide to participate in the arbitration while they deliberate, they can risk their conduct inferring a waiver of their right to make this kind of challenge under the Act.
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