Alberta – Court of Appeal to clarify its jurisdiction in arbitration matters – #689

In Schafer v Schafer, 2022 ABCA 358, Justice Pentelchuk ordered further briefing on the court’s jurisdiction to hear an appeal from an order of the Alberta Court of King’s Bench refusing permission to appeal under section 44(2) of the Arbitration Act, RSA 2000, c A-43 (the “Arbitration Act”). Although the amounts in dispute were relatively small, the case engaged several foundational questions. The first involved the overlapping, and sometimes dissonant, statutory jurisdiction of the Court of Appeal in matters ancillary to arbitration. Second, Justice Pentelchuk saw merit in providing interpretive guidance to parties and counsel on the appeal rights which flow from the arbitration agreement signed by the parties, which was said to be “standard” in family law arbitration in Alberta. She accordingly granted permission to brief the issue of jurisdiction to a panel of the Court of Appeal, in order to provide clarity in situations where the Judicature Act, Rules of Court, and Arbitration Act intersect. Justice Pentelchuk also asked the parties to address whether the arbitration agreement was a standard form agreement (which could make its interpretation an issue of law rather than mixed law and fact), and apply to adduce fresh evidence on that question, if necessary.

The arbitration – The parties are a separated married couple. They entered into an arbitration agreement in August 2019 to determine issues relating to parenting, child support, spousal support, and property division. After a sole arbitrator issued an interim award on parenting issues, the Husband challenged the jurisdiction of the arbitrator to continue to act on those matters. The arbitrator upheld her jurisdiction in a September 2021 award, followed by a December 2021 $2000 costs award against the Husband with respect to the unsuccessful jurisdictional challenge.

In January 2022, the Husband sought to appeal the cost award to the Court of King’s Bench.

The ABKB appeal – The chambers judge reviewed the arbitration agreement, excerpted in part at para. 11 of Justice Pentelchuk’s order, in which the parties had agreed, under the heading “Remedies Pursuant to the Arbitration Act”, that “[a]ny award may be subject to Remedies under the Arbitration Act…in accordance with subsection 44 and/or 45 of the Arbitration Act”.

Section 44 of the Arbitration Act provides, in relevant part:

“(1) If the arbitration agreement so provides, a party may appeal an award to the court on a question of law, on a question of fact or on a question of mixed law and fact.

(2) If the arbitration agreement does not provide that the parties may appeal an award to the court on a question of law, a party may, with the permission of the court, appeal an award to the court on a question of law.

(2.1) The court shall grant the permission referred to in subsection (2) only if it is satisfied that

  1. the importance to the parties of the matters at stake in the arbitration justifies an appeal, and
  2. the determination of the question of law at issue will significantly affect the rights of the parties.

(3) Notwithstanding subsections (1) and (2), a party may not appeal an award to the court on a question of law that the parties expressly referred to the arbitral tribunal for decision”

Because the parties’ arbitration agreement did not provide the express language required by subsection 44(1) of the Arbitration Act, the chambers judge concluded that subsection 44(2) applied and the Husband could appeal the award only on a question of law, and only with leave. The chambers judge then struck the Husband’s Notice of Appeal on the ground that permission to appeal was required, but had not been sought in the 30-day window required under section 46(1) of the Arbitration Act.

The Husband then applied for directions from a single justice of the Court of Appeal as to whether he required permission to appeal the chambers judge’s refusal of permission to appeal, and sought such permission if required.

The leave issue before the Court of Appeal – Justice Pentelchuk began, at para. 15, by underlining that the Court of Appeal derives its jurisdiction exclusively from legislation. The foundation of the Court of Appeal’s jurisdiction is the general grant in section 3 of the Judicature Act, RSA 2000, c J-2. The Alberta Rules of Court, Alta Reg 124/2010 (the “Rules”) overlay the Judicature Act, requiring permission to appeal certain matters.

The Arbitration Act, in contrast to the Judicature Act, narrowly limits appeal rights. This is in line with the purpose of arbitration to produce final awards efficiently and with minimal judicial involvement. To that end, pursuant to section 48, further appeals of a Court of King’s Bench decision on an appeal of an arbitral award under section 44 of the Arbitration Act can proceed only with the permission of a justice of the Court of Appeal.

In 719491 Alberta Inc v Canada Life Assurance Company, 2021 ABCA 419 (“719 Alberta Inc”), the Court of Appeal confirmed that the Arbitration Act does not grant “jurisdiction to hear an appeal from a refusal by the Court of [King’s] Bench to grant permission to appeal under s 44(2) of the Arbitration Act.” This is consistent with a long line of cases, explored in depth in paras. 17-46 of 719 Alberta Inc., in support of the proposition that a refusal of permission to appeal by an intermediate court cannot itself be appealed. Justice Pentelchuk explained at para. 21 that if an appeal lies from a refusal to grant leave to appeal, it must also lie from a grant of permission – the result would multiply proceedings and frustrate “[t]he purpose of requiring parties to seek permission to appeal.

Justice Pentelchuk went on, in para. 22, to suggest that “[o]ne might draw the inference that if no appeal lies from a refusal to grant permission to appeal, no jurisdiction lies for appeals on ancillary or procedural matters arising from the arbitral proceedings.” However, in Esfahani v Samimi, 2021 ABCA 290, a single justice of the Court of Appeal granted permission to appeal a Court of King’s Bench pre-trial order directing that a leave application under Section 44(2) of the Arbitration Act, and the substantive appeal, be heard together. A panel of the Court of Appeal later held, in Esfahani v Samimi, 2022 ABCA 178, at para. 23, that the Court of King’s Bench had erred: “[a]n application for permission to appeal must be heard and decided first, and separately, not contemporaneously with the appeal of the arbitral award.”

719 Alberta Inc. distinguished the grant of permission to appeal in Esfahani on the basis that it arose under Rule 14.5(1)(b) in respect of “any pre-trial decision respecting adjournments, time periods or time limits”, not the Arbitration Act. Justice Pentelchuk nevertheless found, in para. 23, that 719 Alberta Inc. and Esfahanihighlight the need for clarification of the scope of this Court’s jurisdiction to hear matters that are ancillary to the arbitral decision and to balance the need for reviewability (and consistency in the development of the law) with finality.” She accordingly granted permission tobrief the issue of jurisdiction to a panel of the Court of Appeal, in order to provide clarity in situations where the Judicature Act, Rules of Court, and Arbitration Act intersect.

The “standard” arbitration agreement issue before the Court of Appeal – The Husband sought to argue that the arbitration agreement, properly interpreted, provided a right to appeal on any question of law, fact, or mixed law and fact. 

In this respect, Justice Pentelchuk noted that the parties referred to the arbitration agreement as “standard”, and observed in a footnote that the remedies provision in Esfahani – also a family arbitration matter – used the same language. While contract interpretation is ordinarily a question of mixed law and fact, the interpretation of a standard form contract may be a question of law. See Ledcor Construction Ltd v Northbridge Indemnity Insurance Co, 2016 SCC 37. In turn, the characterization of the question sought to be appealed determines what appeal rights are available under section 44 of the Arbitration Act. To resolve this issue, Justice Pentelchuk advised the parties to be prepared to address the character of the arbitration agreement, and to apply to adduce fresh evidence on that question, if necessary.

Update: Application for leave to appeal final award dismissed 2023 ABKB 448.

Contributor’s Notes:

First, don’t be put-off by the small amount of the cost award in dispute. Justice Pentelchuk rightly identified that this case engages important policy issues on the fault line between reviewability (consistency, correctness, and the development of the law) and finality (speed, efficiency, economy, party autonomy).

Second, the difficulty identified in this case is that overlap between general and specific statutes and regulations about when leave to appeal is required can create unharmonious results. Parties and their counsel need to know what they are signing up for if arbitration is to be effective and legitimate. Despite the small amount in dispute, the Court of Appeal’s decision to take up these foundational issues is welcome.

Outside of the appellate context, other recent cases consider the intersection between arbitration and insolvency law, including the powerful policies behind the single-proceeding model of administering creditor’s rights which provides that all disputes are to be dealt with by one supervising court. The Supreme Court of Canada recently waded into this in Peace River Hydro Partners v Petrowest, 2022 SCC 41, covered in Case Note 682. Petrowest held that various arbitration agreements – which provided for a “chaotic” pastiche of institutions, parties, and claims – were inoperative because enforcing them would compromise the integrity and efficiency of a related receivership. For more cases at the intersection of insolvency and arbitration, see Case Notes 626 and 660 (Royal Bank of Canada v Mundo Media, 2022 ONSC 2147), and 625 (Arrangement relatif à Rising Phoenix International Inc., 2022 QCCS 1675).