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Colin’s 2024 Hot Topic: ONCA weighs in on Bias in Aroma – #888

In Aroma Franchise Company, Inc. v Aroma Espresso Bar Canada Inc., 2024 ONCA 839, the Court overturned a decision of the Ontario Superior Court of Justice, which had set aside two international arbitration awards on the basis of the existence of a reasonable apprehension of bias on the part of the Arbitrator.  Undoubtedly, this was the arbitration case of 2024.  The first instance decision and related proceedings have previously been canvassed by Arbitration Matters (see Ontario – Multiple arbitral appointments give rise to reasonable apprehension of bias – #734 – Arbitration Matters, Lisa Reflects (2023): Aroma – the blockbuster case of 2023? – #804 – Arbitration Matters, and Ontario – Arbitrator no jurisdiction to hear challenge for bias after partial final award – #691 – Arbitration Matters). It is a multiple appointments case. It arose out of a decision by the Arbitrator to take on a second appointment by the same counsel acting in the Aroma arbitration that was only disclosed by accident with the issuance of the final award.  The first Instance decision generated buzz in the arbitration community for, among other things: (1) the Judge below finding it was a “bad look” for the Arbitrator to have accepted an appointment in another arbitration part way through the Aroma arbitration by the same lead counsel in both matters; (2) the Judge considering relevant the parties’ pre-appointment communications on the criteria for the arbitrator to be appointed; and (3) the unresolved question of the impact, if any, of an arbitrator’s financial interest in appointments. It is the second issue that has received the most commentary on this decision.

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Jonathan’s 2024 Hot Topic – The “overwhelming principle” applied – #886

In Creative Energy Vancouver Platforms Inc. v. Concord Pacific Developments Ltd., 2024 BCCA 128, the Court granted leave to appeal an award on the basis that there was arguable merit to the position that a panel of arbitrators had erred in law by allowing the factual matrix and post-contractual conduct to overwhelm a contract—effectively creating a new agreement.  A vendor and purchaser arbitrated the application of a zoning by-law to a land purchase agreement:  higher density under the by-law equated to higher compensation owing to the vendor.  The arbitral tribunal ruled in the vendor’s favour.  On preliminary review at the leave to appeal stage, the Court found it arguable that the tribunal had erred in law by interpreting the factual matrix in a manner that was isolated from the words of the purchase agreement.  The Court said that resolution on appeal would require careful consideration of the tribunal’s reasoning and the evidentiary record.  Arguments on the merits of the appeal have recently taken place and a decision from a division of the Court is pending.

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Jim’s 2024 Hot Topic – The duty of good faith in domestic arbitration – #885

Rather than picking a specific case for a Holiday Hash-over I’ve opted for a broader theme: since arbitration is contractual, to what extent do/should the principles set out in the SCC’s 2014 decision in Bhasin v. Hrynew  2014 SCC 71 (“Bhasin”) and its descendants apply to a Canadian domestic arbitration and what practical difference might it make?

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Josh’s 2024 Hot Topic – Consensual arbitration appeal mechanisms – #884

This year, in a landmark decision, McLaren Automotive Incorporated c.9727272 Canada Inc, 2024 QCCS 3457, the Québec Superior Court rendered a first-ever ruling that considered the validity of an arbitration appeal mechanism whereby the parties’ arbitration agreement allowed the appeal of an award to a different arbitrator. As reported in Arbitration Matters case note no. 864 (“Parties May Agree Upon an Arbitral Mechanism”), the Court found that such a mechanism does not offend public order principles set out in art. 622(3) of the Québec Code of Civil Procedure (“CCP”). Therefore, it found that Québec law does not prevent the parties from agreeing to an appeal mechanism in their arbitration agreement, even though it is not provided for in Québec arbitration law, which is based on the UNCITRAL Model Law.

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Alberta – Arbitrator’s Resignation does not terminate arbitration – #882

In Belanger v Pokol, 2024 ABKB 646, the Court dismissed an application by a party to the dispute to “be released from arbitration.” The Applicant argued that the resignation of the arbitrator following allegations of reasonable apprehension of bias effectively terminated the arbitration. The Court found that since the arbitration agreement provided for the appointment of a substitute arbitrator in the event of the arbitrator’s resignation, the arbitration was not terminated, and the parties were bound to continue. He ordered the parties to attempt to agree on a new arbitrator, failing which either party could apply to the Court to have one appointed.

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B.C. – Arbitrator Properly Appointed Despite No Signed Agreement – #881

In Pomerleau Inc. v 4HD Construction Ltd., 2024 BCSC 1973, the Court addressed two petitions. The first, by 4HD (the claimant/respondent by counterclaim in the arbitration), sought a ruling that the arbitrator had not, in fact, been appointed and declaring the award to be void or, alternatively, an order that the arbitrator be removed as arbitrator and the award set aside on the basis of a reasonable apprehension of bias. The second, by Pomerleau (the respondent/counterclaimant in the arbitration), sought recognition and enforcement of the award. The Court dismissed the first petition and granted the second. The arbitrator ruled that he had been appointed based on an email sent to him by 4HD advising him that he had been jointly selected as arbitrator and the had parties participated in the arbitration, even though no arbitration agreement was ever signed. The arbitrator issued an award dismissing the claims based on the claimant’s failure to prosecute the arbitration. The Court found that the arbitrator was correct that he had been properly appointed. The fact that the arbitrator was owed outstanding fees (only a few thousand dollars) by the claimant at the time he ruled on his appointment was insufficient to give rise to a reasonable apprehension of bias to justify setting aside the award.

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Ontario – Order of competence-competence analysis on stay motion challenged – #880

In Lochan v Binance Holdings Limited, 2024 ONCA 784 (“Binance”), the Court considered the appeal of the Motion Judge’s finding that an arbitration clause in a crypto trading agreement was void because it was contrary to public policy and unconscionable. The arbitration clause was part of a standard form contract between the appellant and crypto users. It provided that the appellant could change any part of the arbitration agreement, including the forum and governing law, and that users agreed to any amendments. On appeal, the appellant argued that the Motion Judge had failed to first consider the competence-competence principle in his analysis. The Court dismissed the appeal, finding that the Motion Judge had followed the approach of the Supreme Court of Canada in Dell Computer Corp. v Union des consommateurs, 2007 SCC 34 (“Dell”) and Uber Technologies Inc. v Heller, 2020 SCC 16 (“Uber”) when he considered the competence-competence principle before he considered if an exception to that principle applied to allow the court to consider if the clause was unenforceable.

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Ontario – Court weighs in on standard of review post-Vavilov (and decides) – #879

In Burwell v. Wozniak, 2024 ONSC 1234, the Court grappled with the appropriate standard of review to apply to arbitral awards.  The heart of the underlying dispute was whether the appellant Burwell’s promise of shares in his company was sufficient to establish an estoppel against him in favour of his former partner,  Wozniak. This case is noteworthy because most cases since Vavilov have not weighed in on the issue and have simply said that, regardless of the standard of review, the appellant does not meet it.

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