In Singh v Modgill, 2022 ABQB 369, Justice Feasby denied the Applicants’ application to set aside and for permission to appeal an arbitral award pursuant to sections 44(2) and 45 of the Alberta Arbitration Act, RSA 2000, c A-43. On the eve of trial and after 15 years of litigation, the parties submitted their dispute to a mediation-arbitration process. The process was set out in a written agreement and provided that there would be no oral hearing and that the arbitrator was required to deliver an award within 5 days. Justice Feasby described this process as “quick and dirty”; the parties “designed a process that prioritized expediency”. The principle of party autonomy allowed the parties to choose a process that was a “departure from the norms of natural justice” and the Applicants could not now complain. He expressed the view that “the arbitrator was stuck with the process designed by the parties” and that now that the Applicants had received an unfavourable decision from the arbitrator, they had “buyer’s remorse”. An appeal or set aside application was not designed to “save the parties from themselves.”
The disputes – The parties had two disputes.
The Applicant Pushpinder Singh and Respondent Vishavdeep Modgill were friends, who agreed to form a joint venture to operate a trucking business. They incorporated K2 Trucking Inc. for this purpose and agreed to split the profits 50/50. Mr. Singh was responsible for K2’s accounting, however, he failed to prepare accounting records or report to Mr. Modgill in respect of K2’s profits. The key issues in this dispute (“the Trucking Dispute”) were: (1) how many trucks were part of the joint venture; and (2) what was K2’s profit?
In addition, Mr. Modgill purchased a residence in which Mr. Singh and Applicant Ramandeep Kaur resided, but could not purchase because they could not qualify for financing. The parties disputed their financial arrangements; the Applicants paid the Respondents regular installments that were either rent or reimbursement of mortgage payments. The key issues in this dispute (‘the Property Dispute”) were: who was the beneficial owner of the property; and (2) were there unpaid rent or mortgage amounts owing to the Respondents?
The Med/Arb – The parties were involved in litigation for 15 years and, with a trial date looming, agreed to a streamlined process to resolve it. They entered into a Med/Arb Agreement with the mediator/arbitrator dated September 20, 2021.
The Med/Arb Agreement provided that if the mediation was not successful, it would automatically convert to an arbitration. The arbitration clause stated as follows:
“To the extent the contemplated Mediation phase of the Med/Arb process does not result in resolution of all aspects to the Dispute, the Parties hereby commit to submitting whatever issues remain outstanding to the Dispute post-Mediation to an Arbitration proceeding. The Parties acknowledge and accept that time is of the essence, as is efficiency (time and cost) in completing appropriate submissions to be followed by the rendering of a final Award by the Arbitrator. It is agreed that any and all closing submissions will be delivered by opposing counsel immediately following the Mediation phase on October 8, 2021, with the Final Award by the Arbitrator to be circulated on or before October 13, 2021.”
Justice Feasby noted that the arbitration clause expressly provided time and costs constraints on the parties. He also concluded that the language, which provided for the delivery of “any and all closing submissions” immediately after the mediation phase, demonstrated the parties’ intention to proceed without an oral hearing, which was allowed under s. 26(1) of the Arbitration Act. The parties submitted written briefs of argument, together with supporting documentation that included pleadings, affidavits, transcripts, and selected productions.
The award rendered was only three-and-a-half pages long. The arbitrator explained that he was “specifically directed by counsel to limit the time expended providing the underlying analysis to my final determinations herein” and that “only brief reference is made to the evidence and certain applicable legal principles in the interests of both time and cost efficiencies.”
The arbitrator decided the Trucking Dispute despite, “seriously deficient accounting records” and ordered Mr. Singh to pay Mr. Modgill $100,000 for his share of the profits of K2. He also found in the Property Dispute that that the Applicants had beneficial ownership in the property and that they owed the Respondents $30,000 for shortfalls in rent/mortgage payments, even though he remarked that the accounting records were not “crystal clear”.
Shortly thereafter, the Applicants sought further explanation of some key matters, including how the damages amounts were determined and the arbitrator issued Supplemental Reasons on November 8, 2021, in which he offered some explanation for the amount he ordered the Applicants to pay. The arbitrator addressed the deficient accounting records, which he found were the responsibility of Applicant Mr. Singh; he noted that the Applicants’ own written submissions detailed the ways in which the evidence relating to the K2 trucking venture was lacking and stated:
“Now, ironically, more clarification and elaboration is sought in circumstances where Mr. Singh’s own counsel found little such clarity and Mr. Singh was responsible for serious deficiencies in record keeping and disclosure. Precision in any determination in such circumstances is, with respect, impossible.”
The Applicants sought permission to appeal and applies to set aside the award.
The application for permission to appeal – Justice Feasby noted that the arbitration agreement was silent on appeal rights. Therefore, s. 44(2) of the Arbitration Act allowed an appeal, with permission of the court, on a question of law. The Applicants raised issues concerning the conduct of the arbitration and contractual interpretation, neither of which he found raised questions of law.
First, with respect to the complaints about the conduct of the arbitration, Justice Feasby described them as complaints: (1) that the arbitration process was so flawed that it could not proceed and that the arbitrator should have rejected his mandate in the Med/Arb Agreement (paras.39 to 42); and (2) that the arbitrator failed to require the Respondents to meet their burden of proof because there was not sufficient evidence to support his findings (paras. 43 to 46). Justice Feasby noted that the whole point of the Arbitration Act is that, subject to limitations, parties may craft their own dispute resolution process:
“ The arbitrator candidly stated the shortcomings in the evidence before him. The arbitrator nevertheless made findings of fact because his mandate from the parties was to make a decision quickly based on what was before him. Given the deficiencies in the accounting records and the fact that Mr. Singh was responsible for maintaining those records, the arbitrator made findings unfavourable to Mr. Singh. Though not stated to be an adverse inference, the effect is much the same. The grounds raised by the applicants are, at most, questions of mixed fact and law with no extricable question of law suitable for appeal.”
Second, Justice Feasby dismissed the complaints about the arbitrator’s interpretation of the contract as matters of mixed fact and law, relying upon Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53.
Permission to appeal was denied.
The set aside application – The Applicants argued that the award should be set aside pursuant to s. 45(1)(f) and (h) of the Arbitration Act on the basis that they were “treated manifestly unfairly or unequally”, “were not given an opportunity to present a case or respond to another party’s case”, and there was a “reasonable apprehension of bias” on the part of the arbitrator. In sum, they argued that they were denied natural justice because the arbitrator had failed to demonstrate an understanding or appreciation of evidence the Applicants considered important.
Justice Feasby found that this was, in effect, an attempt to use the set aside application as an appeal on the facts, which would, “denude the limited appeal provisions of their meaning.”
Further, the real issue was fairness. In this case, the parties were of relatively equal bargaining power and were represented by counsel throughout. This was important context because the parties chose a process that was a departure from the norms of natural justice. And they did have an opportunity and did present their case.
The set aside application was dismissed.
First, Justice Freasby emphasized that party autonomy permits parties to choose to depart from principles of natural justice and that there may be good reasons for doing so:
“ Mediation-Arbitration has become more common in recent years and performs an important function for those seeking expeditious and cost-effective resolution of disputes without all the formalities and procedural protections found in more robust forms of arbitration or in the courts. For a discussion of mediation-arbitration, including natural justice concerns, see David C. Elliott, “Med/Arb: Fraught with Danger or Ripe with Opportunity?” (1995) 34 Alta L Rev 163.
 The Arbitration Act is based on the principle of party autonomy and, absent clear language, should not be interpreted as prohibiting parties from choosing mediation-arbitration or what I have called a quick and dirty process to resolve disputes.
 The applicants have pointed to authorities that emphasize the duty of arbitrators and arbitral tribunals to adhere to the principles of natural justice and implement fair procedures… In particular, the applicants cite Justice O’Brien in Jardine Lloyd Thompson Canada Inc v SJO Catlin, 2006 ABCA 18 at para 42 opining that “arbitration litigation is not some lesser form of litigation than that being conducted in the courts.”
Justice Feasby concluded that arbitration litigation is not some lesser form of litigation than courtroom litigation – unless that is what the parties bargained for.
Second, Justice Feasby referred to Esfahani v Samimi, 2022 ABCA 178, which held that an application for permission to appeal should not be scheduled to be heard with the appeal. (This case was the subject of a recent Case Note: Alberta – Appeal process under s. 44(2) of the Arbitration Act clarified – #623. In this case, the parties proceeded on the basis that the leave application and the set-aside application could be heard at the same time.