Executive Summary: Key Legal and Evidentiary Issues

• An Ontario Superior Court application sought to set aside and appeal a construction arbitration award under sections 45 and 46 of the Arbitration Act, 1991.
   
• Tedescon Infrastructure Ltd. argued that the arbitrator exceeded the scope of the arbitration agreement and breached his duty of procedural fairness through calculation errors.
   
• Both parties disputed whether the phrase "final and binding" in their Agreement to Arbitrate excluded any statutory right of appeal.
   
• Central to the dispute was whether Tedescon's refusal to remobilize to the worksite in 2023 amounted to repudiation of the contract or a justified work stoppage.
   
• The court considered whether the arbitrator's finding of repudiation rested on an extricable question of law reviewable on appeal.
   
• Damages calculations for unpaid holdbacks, disallowed extras, and delay costs were contested throughout the arbitration and the subsequent court applications.
   

Facts of the case

Tedescon Infrastructure Ltd. and the County of Simcoe were parties to a 2020 unit-rate contract, valued at approximately $10 million, for the reconstruction of roughly 2 km of Simcoe Road 21. The County appointed Tatham Engineering as project designer and contract administrator. During the project, Tedescon submitted claims for compensation and time extensions arising from delays and change orders, many of which Tatham rejected. Tedescon initiated arbitration of these disputes on March 10, 2022, and the parties appointed Duncan Glaholt as arbitrator on April 11, 2022, while the project continued in parallel.

On April 6, 2023, Tedescon served notice of default on the County alleging 80 breaches of the agreement and a lack of impartiality by the contract administrator. On April 17, 2023, Tedescon gave notice that it was suspending work under General Condition 7.10 (GC 7.10) of the contract until the County resolved the alleged breaches. The County responded on April 19, 2023, demanding remobilization by May 1, 2023, and warning that failure to return would be treated as abandonment. Tedescon did not return by that date. On June 19, 2023, the County declared the contract abandoned, and on June 30, 2023, it engaged Georgian Paving to complete the work.

The arbitrator issued a Partial Award and a Final Award, later amended after multiple rounds of post-hearing submissions concerning calculation disputes. The arbitrator found that Tedescon had a right to suspend work under GC 7.10 due to Tatham's biased treatment of the County, yet also found that Tedescon's continued refusal to remobilize amounted to abandonment and repudiation of the contract. After apportioning 25% responsibility for the abandonment to the County and setting off amounts owed to Tedescon, the arbitrator awarded the County a net sum of $511,243.13, inclusive of HST, along with $6,000 related to an adjournment, with each party bearing its own arbitration costs.

Policy and legislative provisions at issue

The applications turned on sections 45 and 46 of the Arbitration Act, 1991. Tedescon relied on Ground 3 of section 46(1), that the award decided a matter beyond the scope of the arbitration agreement, and Ground 6, that it was not treated equally and fairly. Tedescon also sought leave to appeal under section 45(1) on a question of law, while the County cross-applied for leave to appeal on the basis that the arbitrator erred in crediting Tedescon for work performed despite its abandonment finding.

The road works contract's General Conditions (OPSS.MUNI 100) were also central. GC 7.10 permitted Tedescon to suspend work in specified circumstances, while GC 3.14 addressed arbitration procedure. GC 3.14.01.03 stated that "The parties shall be bound by the decision of the arbitrator", and GC 3.14.01.04 incorporated the Arbitration Act's rules except where modified by GC 3.14 itself. GC 3.14.02.01 referenced a limited right of appeal tied to jurisdictional error or arbitrator disqualification. Separately, the Agreement to Arbitrate stated that the parties agreed to resolve their dispute by "final and binding" arbitration, a phrase the County argued excluded any right of appeal under section 45(1).

Reasoning and analysis

The court rejected Tedescon's section 46 grounds. On jurisdiction, it held that Ground 3 could not be used to review the substance or merits of the arbitrator's reasoning, only whether the arbitrator decided a dispute the parties actually submitted for arbitration; Tedescon's complaints about accounting methodology did not raise a true jurisdictional issue. On fairness, the court found that while the arbitrator's repeated corrections and calculation disputes were frustrating, his lengthy and detailed reasons did not reveal the opacity or confusion necessary to establish a breach of natural justice.

On the availability of an appeal, the court held that the "final and binding" language in the Agreement to Arbitrate implicitly excluded the statutory right of appeal under section 45(1), even though the underlying General Conditions were silent on the point. The court reasoned that the parties' 2022 arbitration agreement was intended to govern a typical construction payment dispute and that the parties never renegotiated this language even after the 2023 abandonment issue arose.

Despite dismissing both applications on this basis, the court went on to explain how it would have ruled had an appeal been available. It found that the arbitrator made an extricable error of law by concluding Tedescon had repudiated the contract. The court reasoned that repudiation through a refusal to work requires that the refusal be unjustified, yet the arbitrator had already found that Tedescon's work stoppage under GC 7.10 was justified by Tatham's biased administration. The court held this internal inconsistency meant the arbitrator failed to consider a required element of the legal test for repudiation. Had leave to appeal been available, the court indicated it would have set aside the County's damages award and instead awarded Tedescon $2,598,518.75, comprising $1,046,723.29 for unpaid extras, $468,806.41 for delay costs, and $1,082,989.05 for unpaid holdbacks. The court also found it would have granted the County leave to appeal on the same repudiation issue but would have dismissed that appeal, and would not have granted leave on the calculation issues, since damages accounting was a question of fact rather than law.

Ruling and overall outcome

Both Tedescon's application to set aside the award and its application for leave to appeal, along with the County's cross-application for leave to appeal, were dismissed. The court concluded that the "final and binding" wording in the Agreement to Arbitrate precluded any recourse to appeal under section 45(1), and that no basis existed under section 46 to set aside the award for jurisdictional overreach or unfairness. As a result, the arbitrator's award standing in the County's favour for a net amount of $511,243.13, inclusive of HST, plus $6,000 related to an adjournment, remained in place, with each party responsible for its own arbitration costs. The court left open the question of costs for the applications themselves, inviting submissions within 20 days of the decision.