In Cove Contracting Ltd v. Condominium Corporation No 012 5598 (Ravine Park), 2020 ABQB 106, Mr. Justice Grant S. Dunlop held that Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 had not changed the standard of review for commercial arbitrations from reasonableness to correctness and denied leave to appeal. In Buffalo Point First Nation et al. v. Cottage Owners Association, 2020 MBQB 20, Mr. Justice Chris W. Martin held that Vavilov had changed the standard and granted leave to appeal. Dunlop J. postponed his hearing to give the parties the opportunity to argue the role of Vavilov. Martin J. issued his decision on leave to appeal without hearing from the parties but invited them to submit argument for the merits of the appeal.
#1 – Cove Contracting Ltd v. Condominium Corporation No 012 5598 (Ravine Park), 2020 ABQB 106 by Dunlop J.
Condominium Corporation No. 012 5598 (“Ravine Park”) and Contracting Ltd. (“Cove Contracting”) had entered into a Canadian Construction Documents Committee construction contract (“CCDC2”) to rebuild Ravine Park’s condominium complex destroyed by fire. They eventually disputed whether certain electrical work was included in the contract. They submitted the dispute to arbitration and, following hearing and argument, an award issued which found that the work was included in the contract. Cove Contracting appealed.
The hearing had been scheduled to proceed on December 19, 2019 at 10:00 a.m. and pleaded on materials filed prior to that date. That day, before the hearing commenced, the Supreme Court of Canada released three (3) decisions relating to the standard of review applicable to decisions issuing from administrative tribunals: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 (“Vavilov”); Bell Canada v. Canada (Attorney General), 2019 SCC 66 (“Bell Canada”); and, Canada Post Corp. v. Canadian Union of Postal Workers, 2019 SCC 67 (“Canada Post”). Dunlop J. rescheduled the hearing to January 31, 2020 and provided time and opportunity to the parties to submit revised or supplemental briefs.
“[5] In their briefs filed before December 19, 2019, the parties agreed that the standard of review of the arbitrator’s decision is reasonableness on all issues. In light of Vavilov, Cove Contracting now submits that the standard of review is correctness on issues of law and palpable and overriding error on issues of fact and issues of mixed fact and law. However, Cove Contracting concedes that it is not clear whether the Vavilov framework applies to commercial arbitration appeals. If not, then Cove Contracting submits that the standard of review is reasonableness on all issues. Ravine Park submits that the standard of review applicable to commercial arbitration is not changed by Vavilov, and that the standard of review on a commercial arbitration appeal is reasonableness.”
Dunlop J. issued his reasons on February 12, 2020.
Dunlop J. held that Vavilov did not overrule Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 (CanLII), [2017] 1 SCR 688 (“Teal Cedar”) and Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII), [2014] 2 SCR 633 (“Sattva Capital”) and Teal Cedar and Sattva Capital bound him. Dunlop J. therefore held that the standard of review applicable is reasonableness.
Dunlop J. reasoned that Vavilov, Bell Canada and Canada Post dealt with judicial review of administrative bodies and the Supreme Court made no reference in those decisions to Teal Cedar and Sattva Capital which established reasonableness as the standard of review on appeals involving commercial arbitration.
Referring to paras 7, 8, 12, 17, 23, 24, 26, 30, 33, 36, 37, 44, 46, 82 and 140 of Vavilov, Dunlop underlined that the framework established in Vavilov rested on legislative intent expressed in legislation creating administrative tribunals. That reasoning, Dunlop J. held, did not apply to appeals from commercial arbitrators. He expressly agreed with the following passage of argument extracted from submissions by Ravine Park.
“This appeal is not a statutory appeal or judicial review of an administrative decision as contemplated in the Vavilov decision. Rather, in this case, the parties had agreed by way of contract to participate in arbitration as the means of resolving their disputes. The arbitration was not statutorily mandated. It does not involve an administrative body. Rather, the parties contractually agreed to this form of alternative dispute resolution.”
Dunlop J. considered, but rejected, argument by Cove Contracting that the mention of a right of “appeal” in the Alberta Arbitration Act, RSA 2000, c A-43 creates “an appellate standard of review” based on para. 44 of Vavilov.
“More generally, there is no convincing reason to presume that legislatures mean something entirely different when they use the word “appeal” in an administrative law statute than they do in, for example, a criminal or commercial law context. Accepting that the word “appeal” refers to the same type of procedure in all these contexts also accords with the presumption of consistent expression, according to which the legislature is presumed to use language such that the same words have the same meaning both within a statute and across statutes: R. Sullivan, Sullivan on the Construction of Statutes (6th ed. 2014), at p. 217.”
Again, Dunlop J. read that passage as being limited to administrative tribunals. He did so because Vavilov omitted any mention of the Supreme Court’s own, leading and recent statements on judicial involvement in commercial arbitration, Teal Cedar and Sattva. In a blunt way, Dunlop J. underlined the distinction between what Vavilov decided without mention of Teal Cedar and Sattva. “Vavilov says nothing about Teal [Cedar] and [Sattva v.] Creston Moly.”
Teal Cedar and Sattva provided “a compelling rationale for the reasonableness standard of review on a commercial arbitration appeal” and Dunlop J. excerpted detailed reasoning of the Supreme Court in each decision to demonstrate that rationale expressly supporting that standard in commercial arbitration. See para. 11 of his reasons.
Dunlop J. applied the standard of reasonableness to the award which he introduced as “well-organized, easy to follow and internally consistent”. In reviewing the arbitrator’s consideration of the evidence on each of the reproaches made by Cover Contracting, Dunlop J. summarized key findings and excerpted extensive passages of the awards. Regarding the latter excerpts, he underlined that “I have quoted the arbitrator’s reasons at length above because I cannot improve upon them by paraphrasing them. They are clear, well-reasoned, and grounded in the documentary evidence”.
Dunlop J. dismissed each of the challenges raised by Cove Contracting, concluding that “[t]he arbitrator’s findings interpreting the November and December 2016 communications, regarding the custom in the industry, declining to draw an adverse inference and accepting Ms. Love’s testimony as credible were reasonable. His decision is detailed, clear and logical. Cove Contracting’s appeal is dismissed.”
#2 – Buffalo Point First Nation et al. v. Cottage Owners Association, 2020 MBQB 20 by Martin J.
Buffalo Point First Nation (“Buffalo Point”), through its Buffalo Point Development Corp. Ltd. (“Development Corp.”), leased land to individuals for cottage development. The Cottage Owners Association (“Association”) represents the 300 cottagers who built cottages on that leased land. After certain disputes arose, Buffalo Point, the Association and Development Corp. entered into an agreement in 2008 (“2008 Agreement”) which included binding arbitration.
Martin J. identified the start of the dispute which lead to the hearing before him.
“[7] In 2011, Buffalo Point decided to pursue its inherent right of self-governance and to enact taxation laws pursuant to the First Nations Fiscal and Statistical Management Act, S.C. 2005, c. 9, subsequently renamed the First Nations Fiscal Management Act (collectively the “FMA”). By June 2012, the authorizing body under the FMA, the First Nations Tax Commission (the “Tax Commission”), approved the Buffalo Point First Nation Property Taxation Law, 2011 and the Buffalo Point First Nation Property Assessment Law, 2011.”
Martin J. wrote that creating property taxes “fundamentally gutted the 2008 Agreement” including the binding arbitration mechanism for disputes over service fees. The Association argued that the 2008 Agreement provided a mutually set framework whereas Buffalo Point argued that it could terminate that agreement by unilaterally exercising its right to impose a new property tax system.
From paras 10-24, Martin J. traces the highlights of overlapping and serial attempts by the parties to resolve their differences by mediation, arbitration and/or litigation. The arbitration process resulted in a series of awards, including awards on jurisdiction and determinations on the extent of prior mediated settlements and whether the settlement encompassed good-faith principles under Bhasin v. Hrynew, 2014 SCC 71 (CanLII), [2014] 3 SCR 494.
Buffalo Point appealed a Supplementary Award and a Second Supplementary Award, raising nine (9) grounds and five (5) grounds respectively against those awards. Martin J. consolidated February 2019 into a single hearing.
Martin J. issued his reasons on January 29, 2020. He identified the applicable provisions of Manitoba’s The Arbitration Act, CCSM c A120, referred to Teal Cedar and Sattva at paras 32-36 and summarized the contents of the arbitral decisions in dispute and the settlement alleged as part of the dispute resolution process at paras 38-39. Martin J. also summarized Buffalo Point’s position at paras 40-42 and the Association’s at paras 43-45.
Then Martin J. took a detour. At para. 46, Martin J. notes the arrival of Vavilov and summarizes its determinations at paras 46-48. He concludes that the standard of review he identified in Teal Cedar and Sattva had now evolved. “Following the Supreme Court’s dicta [in Vavilov], the standard of review should be the appellate standard of correctness, not the reasonableness standard normally associated with a judicial review. I will proceed on that basis.”
Martin J. at para. 48 mentions that Vavilov, forming part of the trilogy with Bell Canada and Canada Post, “was released well after oral argument here”. Unlike Dunlop J.’s approach, Martin J. decided to rule without having the parties submit argument on the role, if any, of Vavilov on the standard of review applicable to appeals in commercial arbitration. Rather, he ruled and announced his preparedness to hear further submissions.
“[48] Applied to these applications, s. 44(2) of The Arbitration Act expressly states “a party may appeal an award to the court … ”. Following the Supreme Court’s dicta, the standard of review should be the appellate standard of correctness, not the reasonableness standard normally associated with a judicial review. I will proceed on that basis. As the trilogy was released well after oral argument here; the standard of review pronouncement is at odds with the Association’s position. Buffalo Point did not directly address this issue, asserting the court should not become overly engaged in such a discussion at this stage of the proceedings. If counsel feel it necessary, I am prepared to hear further submissions on the point.”
Martin J. went on to analyse the Supplementary Award and Second Supplementary Award on the basis of Vavilov’s standard. He allowed the appeal and remained seized of it.
urbitral note – First, each decision, placed before the same Vavilov decision released during/after the hearing of their appeal applications, came to a different conclusion.
Second, Dunlop J. postponed his hearing and invited the parties to submit argument on the applicability, if any, of Vavilov to appeals of awards in commercial arbitration before he rendered a decision. Martin J. learned of the case, noted it in his reasons to grant leave to appeal but invited the parties to submit argument once he had allowed the appeal but before he decided the merits of the appeal.
Third, Dunlop J. provided a principled explanation why Vavilov, silent on Teal Cedar and Sattva, had not changed the current standard of reasonableness. Martin J. acknowledged Teal Cedar and Sattva, recognized the standard set in Vavilov but applied the latter without explaining how it overruled the two former decisions.
Fourth, Martin J. only applied Vavilov to the leave to appeal phase and, by his invitation to the parties to submit argument on Vavilov at the merits of the appeal, leaves open the possibility of revisiting that standard once he hears both parties.
Fifth, the British Columbia International Commercial Arbitration Centre Foundation (“BCICAC Foundation”) filed an October 25, 2018 intervener’s factum for the appeal in Vavilov. In its brief, it squarely raised the role of Teal Cedar and Sattva and argued against changing the framework adopted by them for commercial arbitration appeals. In its introductory three (3) paras, the BCICAC Foundation submitted the following:
“1. These appeals provide this Court with an opportunity to decide questions with a broad impact to tribunals of all shapes and forms—and raise the question of whether a one-size fits all approach is the correct solution. These appeals confront the question of the proper nature and scope of judicial review of administrative action, as addressed in Dunsmuir v. New Brunswick,(“Dunsmuir”),1 and the standard to apply in the court of that review. But the effect of this Court’s decision in Dunsmuir does not stop at administrative decision-makers. In two seminal decisions, Sattva Capital Corp. v. Creston Moly Corp. (“Sattva”)2 and Teal Cedar Products Ltd. v. British Columbia (“Teal”)3, this Court extended the Dunsmuir judicial review framework to the world of private ordering and the “tightly-defined” scheme of commercial arbitration. Accordingly, these appeals transcend administrative law, and speak to the relationship between courts and alternative (and in the case of commercial arbitrations, consensually appointed) decision makers generally. “
“2. While noting that Dunsmuir was not wholly applicable to arbitrations, Sattva and Teal confirmed that the “reasonableness” standard of review should be applied when the court considers the merits of an appeal from a commercial arbitration award. This Court confirmed that a deferential standard of review was consistent with the policy underpinning arbitrations: adjudicative efficiency, judicial economy, and finality.“
“3. The British Columbia International Commercial Arbitration Centre Foundation (“BCICAC”) respectfully submits that the Dunsmuir framework should continue to apply in the commercial arbitration context, and that changes to that framework in the context of administrative law, if any, should be carefully confined to avoid undesirable developments in the law governing judicial intervention in the field of arbitrations, which is significantly circumscribed both by legislation, and this court’s jurisprudence. This Court was correct in 2014 in Sattva and it was correct in 2017 in Teal; nothing has changed to merit a departure from the presumption of deference applied to an arbitrator’s award, in interpreting a contract, or otherwise. Exceptions to the deference standard must be truly exceptional. The BCICAC submits that while reasonableness review must take into account the nature and context of a decision-maker, this Court should not accede to arguments that the rigorousness of the standard varies on the type of issue that has been determined; rather, it should be determined by the nature of the decision maker who has determined. To hold otherwise in the context of arbitrations would undermine the public policy aims recognized in Sattva and other decisions of this court.“
Had the Supreme Court in Vavilov intended to overrule its earlier reasons in Teal Cedar or Sattva, faced with such submissions, it would have expressly turned its reasons to doing so. Vavilov’s omission to reconsider Teal Cedar or Sattva supports Dunlop J.’s approach and result.