Alberta – Alberta never bound by Sattva and Teal Cedar – #705

In Esfahani v Samimi, 2022 ABKB 795, the parties’ marriage broke down and they agreed that certain issues would be decided by way of arbitration and other matters by litigation. The Arbitrator issued an award, which Husband appealed and sought to set aside pursuant to s. 44(1) (appeals) of the Alberta Arbitration Act, RSA 2000, c A-43, but not s. 45 (set asides) of the Act. Ultimately, Justice Marion dismissed the appeal and declined to set aside the award, but varied and remitted certain issues back to the Arbitrator. This Case Note focusses on the following two issues:

1. The standard of review on appeal on a question of law. This is one of the most extensive analyses I have seen on this issue post-Vavilov and is worth a read – see also Christie Building Holding Company, Limited v. Shelter Canadian Properties Limited, 2022 MBKB 239 for another. In summary, Alberta was never bound by Sattva and Teal Cedar. Its arbitration legislation was based upon a different model than the B.C. Act, which applied in those cases. The appellate standard of review as set out in Vavilov applies in Alberta and is consistent with interpretation of the language and purpose of the Act

2. Whether issues of procedural fairness can be raised on appeal, or whether they can only be raised on a set-aside application. In summary, questions of procedural fairness and natural justice have often been treated as questions of law.

The appeal – Husband both appealed and sought to set aside the Arbitrator’s award pursuant to s. 44(1) (appeals) of the Alberta Arbitration Act, RSA 2000, c A-43, but did not rely upon s. 45 (set asides) of the Act. The grounds included that the Arbitrator had failed to apply principles of procedural fairness and other alleged errors of fact, law, and mixed fact and law. The appeal also raised other issues not addressed in this Case Note, including the appropriate record and the test for adducing fresh evidence on appeal. 

Issue 1: Standard of review on appeal

Statutory interpretation considerations – Justice Marion found that the appellate standard of review applied based upon an interpretation of s. 44(1) of the Act. The modern approach to statutory interpretation requires the court to consider the words of the statute in their entire context and their grammatical and ordinary sense harmoniously with the scheme and object of the Act and the intention of the Legislature. In Alberta, the intention was to limit judicial intervention and promote finality to overcome the broad discretion courts had under early arbitration legislation based upon the English Arbitration Act, 1889 (UK) 49 – which had no appeal rights,  Amendments in the 1980s and 1990s, including the draft Uniform Act and a new Alberta Act, narrowed that court discretion to allow appeals on questions of law to ensure that awards were not “wrong in law”, unless the parties opted out of such rights and to allow appeals on questions of fact or mixed law and fact, if the parties agreed. 

In addition, Justice Marion found that the text of the current Act is consistent with an appellate standard of review:

“[50] For example, section 17(2) of the Act provides that the arbitral tribunal may determine any question of law that arises during the arbitration. But section 8(2) of the Act provides that the arbitral tribunal may also ask the court to determine a question of law that arises during the arbitration. The latter would not be necessary unless the legislative intention was that the arbitrator is to apply the correct law, even if it would delay or make the process more expensive.

[51] Further, the Act expressly provides that arbitrators are not bound to follow the rules or laws pertaining to evidence (Act, section 21), but the default is that they do not have the same freedom with the application of the law, as they are required to decide matters in dispute “in accordance with law, including equity” (Act, section 31) or the applicable laws of another jurisdiction (Act, section 32). Again, this indicates a legislative intention which gives priority to the correct application of law in arbitrations under the Act.

[54] Finally, section 44 of the Act uses the term “appeal”. Section 44(1) allows arbitration parties to voluntarily agree to appeals, including on questions of law. Further, section 44(2) provides for appeals on questions of law (with permission), and this cannot be excluded by agreement under section 3 of the Act. These provisions arguably imply that the Legislature intended the courts to have a residual jurisdiction to interfere on questions of law on a less deferential standard.”

The effect of Sattva and Teal Cedar – Justice Marion noted that before Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53 (“Sattva”), Alberta courts were inconsistent in applying a standard of review on appeals (administrative law standard versus appellate standard). Since Sattva, the Alberta Court of Appeal has not directly considered the standard of review. Therefore, Justice Marion was free to draw his own conclusion and found that Sattva was not binding in respect of s. 44 appeals in Alberta because:

“(a) Sattva and Teal Cedar were limited to an interpretation of the BC 1996 Act, not the Act, and the generalized statements made in Sattva and Teal Cedar must be viewed in this light;

(b) The BC 1996 Act was a later version of British Columbia’s Commercial Arbitration Act first passed in 1986 and implementing the 1982 Report on Arbitration by the British Columbia Law Reform Commission. It has been described as a “thorough renovation and modernization of the existing domestic arbitration regime”… However, the Alberta Act followed a different model – the Model Law, but with some departures. It cannot simply be assumed that the legislative intent, based on different underlying legislative models, is the same in the two provinces;

(c) The appeal provisions under the BC 1996 Act are different than under the Alberta Act. The BC 1996 Act had a more restrictive and deferential test for leave to appeal than the Act: BC 1996 Act, s 31(2). Further, the BC 1996 Act only permitted appeals (whether by agreement or with leave), on questions of law, unless it was a family law dispute. The Act contemplates an appeal right on questions of law, fact or mixed fact and law (the latter two only if in the arbitration agreement). The broader scope of potential appeal in the Act may affect whether the Legislature intended to adopt an appellate standard of review versus an administrative law standard, or something else. The standard of review for question of fact or mixed fact and law were not before the Supreme Court of Canada in Sattva or Teal Cedar, but they are before me in this case; and

(d) Sattva and Teal Cedar appear to be applicable only to commercial arbitration, which was a concept specifically dealt with in the BC 1996 Act. That is, the BC 1996 Act differentiated treatment between arbitrations involving commercial agreements and arbitrations related to family disputes. As noted above, the Act applies to all domestic arbitration agreements in Alberta, which could involve or affect a multitude of other potential participants or stakeholders to whom the correct application of the law will be important. In my view, the Act must be interpreted having regard to all arbitrations to which it might apply. The inclusion of non-commercial arbitrations in the appeal provisions in the Act further weakens the persuasiveness of Sattva and Teal Cedar and weakens the argument for a deferential standard on legal issues.

Therefore, Justice Marion found that before Canada (Minister of Citizenship and Immigration v Vavilov, 2019 SCC 65 (“Vavilov”), Alberta law required the appellate standard of review as set out in Alberta (Public Works, Supply, and Services) v Nilsson, 1999 ABQB 440  at para. 32.

The effect of VavilovJustice Marion noted that the Supreme Court of Canada did not specifically address statutory arbitration appeals in Vavilov,  but stated that there was, “no convincing reason to presume that legislatures mean something entirely different  when they use the word ‘appeal’” in an administrative law statute than in any other context and that because some legislation contains both an appeal right and a judicial review right, the appeal right would be redundant if the standards were the same. This has led to uncertainty because provincial appellate courts have not yet addressed the issue and Wastech Services Ltd. v Greater Vancouver Sewerage and Draining District, 2021 SCC 7, only added to the confusion.

Justice Marion reviewed the cases to date in various provinces and ultimately concluded that he was persuaded by the decision of Northwest Utilities (NWT) Limited v Hay Rivert (Town Of), 2021 NWTCA 1 :

“[75] The Court examined the reasons given in Vavilov to determine whether the same reasoning would apply to a statutory appeal from an arbitrator’s decision such that Vavilov is to be applied to commercial arbitration appeals. The Court relied on Vavilov for the point that the existence of the statutory appeal mechanism was an indication of legislative intent to employ the appellate standard of review, as well as the logic that an appeal should mean the same in the commercial context as in the administrative law context: Northland Utilities at paras 38-40. It concluded that the revised standard of review framework described in Vavilov applied as a result of the right of appeal given by the statute: Northland Utilities at para 44.

Finally, Justice Marion found that this standard of review promotes the purposes of the Act and is consistent with the other provisions of the Act, which limit judicial intervention.

Issue 2: Procedural (un)fairness as a ground for appeal

Justice Marion noted that the appeal and set aside provisions of the Act serve different objectives, but that the Alberta Court of Appeal has consistently held that questions of procedural fairness are questions of law in the context of other statutory regimes which provide an appeal right. However, this does not mean that an appellant can circumvent the deference owed to arbitrators on procedural matters. In other words, it is appropriate for a court to give deference to the procedural choices of the arbitrator, subject to the requirement that the parties are to be treated equally and fairly [s. 19], and that they have the opportunity to present their case [s. 45(1)(f)]. There is no indication that the Legislature intended fairness to be treated differently simply because of the remedy chosen by the party challenging the award.

Update: Application for leave to appeal denied: 2023 ABCA 220

Editor’s Notes:

First, kudos to our very own Contributor James Plotkin, whose article was cited by Justice Marion at para. 70: James Plotkin and Mark Mancini, “Inspired by Vavilov, Made for Arbitration: Why the Appellate Standard of Review Framework Should Apply to Appeals from Arbitral Awards” (2021) 2:1 Can J Com Arb!

Second, many of the arguments made by Justice Marion when comparing the Alberta Act to the old 1996 B.C. Arbitration Act likely also apply to the new B.C. Arbitration Act, SBC 2020, c. 2

Third, to address the last point made by Justice Marion that, there is no indication that the Legislature intended fairness to be treated differently simply because of the remedy chosen by the party challenging the award, I ask why not?