Executive Summary: Key Legal and Evidentiary Issues

• The arbitration agreement barred any appeal and allowed court review only under s. 46(1) of the Arbitration Act, 1991, which limited the court to questions of procedural fairness.
   
• At issue was whether two weeks was enough time for the Municipality to prepare for South Winds' contractual interpretation motion, a point the Municipality ultimately conceded in oral submissions.
   
• South Winds delivered its reply factum on the morning of the October 3, 2025 motion, and the court found this did not breach natural justice because the timetable was agreed and the Municipality did not object at the motion.
   
• Evidence of calculation errors in the certified costs was before the Arbitrator, so the court rejected the claim that she refused to hear it.
   
• No affidavits from South Winds' engineers were filed for the motion, which meant there was no evidence for the Municipality to cross-examine.
   
• Once the Arbitrator held that certified costs were binding on the Municipality absent allegations of fraud, evidence about how the costs came to be certified was irrelevant.
   

Facts of the case

The Corporation of the Municipality of Middlesex Center [spelled "Middlesex Centre" in the case citation] and South Winds Development Co. Inc., a developer, entered into a subdivision agreement and a cost sharing agreement (CSA) on October 18, 2017, for a residential subdivision in Kilworth, Ontario. Their dispute concerned the costs payable under the CSA for infrastructure services built as part of the development. The Municipal Engineer was dissatisfied with the supporting materials South Winds provided and declined to approve many of the costs certified by South Winds' engineers.

The parties had been in arbitration for over three years. In May 2025, they signed an arbitration agreement appointing their fourth arbitrator, whose ruling is the subject of this review. Because of unforeseen circumstances, a fifth arbitrator has since been appointed.

A three-week hearing was set to begin September 15, 2025, and was adjourned to September 19 so the parties could exchange more documents. In the lead-up to the hearing, the parties exchanged a hearing management plan, and the original three-week estimate grew to 11 weeks. Citing the expense, South Winds requested a case conference for September 19 and sought leave to bring a motion at the outset of the hearing on Monday, September 22. That motion asked the Arbitrator to interpret contractual terms potentially dispositive of many of the issues. If South Winds' interpretation was correct, the hearing would be dramatically shortened, witnesses could be avoided, and the remaining issues would be simplified.

The Municipality objected on grounds of unfairness and impossibility and argued the motion should not be heard at all. Alternatively, it asked for at least six weeks, preferably more, to prepare. After hearing both sides, the Arbitrator allowed the motion and found it complied with procedural fairness. On timing, the Municipality proposed dates already secured in December 2025, while South Winds proposed the last day of the existing three-week block. Two weeks was found to be sufficient, and the Arbitrator agreed with the Municipality that the motion should be heard before opening submissions. She ordered it to proceed on October 3, 2025. The parties agreed to a timetable, factums were exchanged, and affidavits were prepared and filed.

On November 5, the Arbitrator ruled in South Winds' favour. She found that costs certified by South Winds' engineers were not subject to approval by the Municipal Engineer absent allegations of fraud, and none had been made. As a result, all outstanding certified costs under the CSA had to be paid to South Winds, producing an award in its favour. The Municipality then asked the Arbitrator to correct her decision under s. 44 of the Arbitration Act, alleging an oversight and procedural injustices amounting to a denial of natural justice. That request was unsuccessful. Following that result, the Municipality applied to the Ontario Superior Court of Justice under s. 46(1) to set the award aside. It was heard June 3, 2026, before Moser J.

Policy and legislative provisions at issue

The arbitration agreement, dated May 22, 2025, required the Arbitrator to conduct the proceedings under a procedural protocol she would establish in consultation with the parties. It also allowed her to convene pre-hearing conferences on matters such as the nature and order of evidence and the duration of the hearing. Timetables were to be set by procedural order after hearing the parties. The Arbitrator could direct a party to do whatever was reasonably necessary for a final award to be made "fairly and efficiently." Subject to any agreements of the parties, she was also to determine the admissibility, relevance, materiality and weight of evidence. Each party had the right under clause 9 to cross-examine any witness called by an adverse party. Clause 34 made the Arbitrator's awards final and conclusive and not subject to appeal or review by any court except under s. 46(1) of the Arbitration Act, 1991.

Sections 19(1) and 19(2) of the Act require that parties be treated equally and fairly and that each have an opportunity to present its case and respond to the other's. The Municipality relied on s. 46(1), subparagraphs 6 and 7. These allow a court to set aside an award where the applicant was not treated equally and fairly or was not given an opportunity to present or respond to a case, and where the procedures followed did not comply with the Act.

The contractual provision at the centre of the underlying dispute was clause 6 of Schedule G to the CSA. According to the Municipality, it created a two-step process: South Winds' engineers certify the invoices, and the Municipal Engineer must then approve the expense.

Reasoning and analysis

Justice Moser stressed the narrow scope of review under s. 46, relying on Court of Appeal authority including Tall Ships Development Inc. v. Brockville (City), 2022 ONCA 861, and Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254. A court may ask only whether the Arbitrator acted within the authority the agreement granted, not whether her decision was reasonable or correct. To determine the level of fairness owed, the court applied the factors from Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817, as recited in Nuroh v. TD General Insurance Co., 2025 ONSC 6997.

Applying those factors, the court described the process as akin to a summary judgment motion on contractual interpretation. What was at stake for the Municipality was how much it owed South Winds, not whether it owed money at all. Its status as a public body did not relieve it of its contractual obligations, citing Bank of Montreal v. Quebec (Attorney General), [1978] 1 S.C.R. 565. By signing the agreement, the Municipality had handed the choice of procedure to the Arbitrator. Relying on Optiva Inc. v. Tbaytel, 2022 ONCA 646, the court held that an arbitrator exercising that power does not breach procedural fairness. It also rejected the Municipality's argument that the parties, rather than the Arbitrator, had chosen the procedure, because the agreement's text said otherwise.

In oral submissions, the Municipality changed its position. It conceded it had enough time to prepare its legal argument on contractual interpretation and accepted the Arbitrator's interpretation of the CSA. Its remaining complaint was that the process used to reach the award amount was unfair. The court characterized this as "an appeal disguised as a review of procedural fairness" and an attempt to avoid the terms of the arbitration agreement.

Even apart from the concession, the court found the Municipality had sufficient time to prepare. It made fulsome oral submissions, filed well-crafted written argument and affidavits, and, as the Arbitrator noted in her s. 44 reasons, billed 273.4 hours and filed 1,000 pages of documents. Its factum raised no fairness concern about timing, and it did not seek an adjournment. A request that the court take judicial notice that it lacked time to summon witnesses was rejected as unsupported by evidence and not a proper subject of judicial notice.

The timetable for exchanging materials had been agreed in advance, and South Winds' reply factum was received on the morning of October 3. Because the Arbitrator had not yet reviewed it, South Winds gave up an hour of its allotted time so she could do so. In the reply, South Winds acknowledged a typographical error, conceded a nominal amount, and accepted one instance of double counting that the Municipality had raised. Its claim fell from $6,072,613.71 to $4,689,693.56, partly because approximately $1.3 million had already been agreed between the parties and could be removed from the motion. At the motion, the Municipality did not object. It acknowledged that the reply had been prepared in twelve hours and likened it to oral argument because it contained no pinpoint references. The court found no breach.

Turning to the refusal-to-hear claims, the court found that the Municipality's evidence of calculation errors was squarely before the Arbitrator. Its factum argued that South Winds' figures were overlapping, duplicative and unreliable. When the Arbitrator asked during oral submissions whether the parties could agree on the numbers, South Winds agreed and the Municipality said it needed instructions. The parties never conferred and provided no figures, so the Arbitrator used the numbers before her. That choice was the Municipality's prerogative, the court held, and it must live with it rather than recast the result as a fairness breach. A related complaint that the Municipality was given no opportunity to make submissions on the Municipal Auditor's request for documentation also failed. The Municipality had set out its position on the auditors' requirements in its factum, and its real objection was to the Arbitrator's decision on the issue.

The cross-examination argument failed on its factual premise. South Winds filed no affidavits from its engineers for the motion, so there was nothing to cross-examine. The court distinguished Nuroh, where a tribunal refused cross-examination of a key witness, and Mattamy (Downsview) Limited v. KSV Restructuring Inc. (Urbancorp), 2023 ONSC 3013, where the arbitrator refused to admit evidence on a new issue even though the other side consented. Moser J. also noted that the Municipality had one of South Winds' engineers on its own witness list for the full hearing. It did not file an affidavit from him for the motion but has since prepared one, and there was no evidence explaining why it was not prepared earlier. Citing National Ballet of Canada v. Glasco (2000), 49 O.R. (3d) 230, the court observed that refusing cross-examination breaches natural justice only where it interferes with a party's ability to address key issues or essential elements of its case. In any case, the question was the meaning of the contractual language, so cross-examination about how the costs were certified would have been irrelevant.

Finally, the court found that the Arbitrator had identified, analyzed and rejected the Municipality's framing and access-to-justice arguments. These included the claim that South Winds used the threat of a protracted hearing as a tactic and the objection to the form and substance of South Winds' evidence. The Municipality put forward a well-formulated argument. It did not request an adjournment on October 3 or seek a future date to file or call further evidence, and it lost. The court rejected the suggestion that the Arbitrator mistakenly took the certifications at face value, finding that she did so intentionally.

Ruling and overall outcome

The application was dismissed. South Winds was the successful party, and the Arbitrator's Ruling and award stand. The decision does not state the final amount of the arbitral award. It notes only that South Winds' amended claim in its reply factum was $4,689,693.56. No costs were quantified on the application. The court encouraged the parties to agree on costs. Failing agreement, each party may file written submissions of no more than three double-spaced pages, with a bill of costs, within 30 days of the September 10, 2026 release date. If no submissions are received, the court will assume costs have been resolved between the parties. No exact monetary amount can therefore be determined from this decision.