In SZ v JZ, 2022 ABQB 493 Justice Marion agreed to hear an application for urgent relief, despite the Respondent’s position that he had no jurisdiction. The Respondent argued that the parties were engaged in arbitration until the Arbitrator resigned unilaterally; however, the parties’ arbitration agreement continued to be enforceable. Justice Marion disagreed. He found that the Alberta Arbitration Act, RSA 2000, c A-43 (Arbitration Act) and the arbitration agreement (to which the Arbitrator was a party) allowed the Arbitrator to resign and that because the parties agreed to arbitration only before the specific Arbitrator appointed, upon his resignation, the arbitration terminated. However, the Arbitrator was required to exercise his discretion to resign reasonably and in good faith, including in a manner that was consistent with the purposes for which the discretion was provided in the contract, in accordance with the Supreme Court of Canada decision in Wastech Services Ltd v Greater Vancouver Sewage and Drainage District, 2021 SCC 7. There was no suggestion that he had not done so.
This was a high-conflict family law proceeding in which the Applicant Wife sought urgent relief relating to the care of the youngest child of the marriage.
On October 7, 2021, the parties agreed to the terms of a Consent Order that dealt with certain issues on an interim basis and provided, among other things, that: “[t]he parties shall attend mediation/arbitration on this matter, including… parenting, property, partition and sale of the home, child and spousal support, no later than November 5, 2021, subject to the availability of the parties, their counsel and the mutually chosen mediator/arbitrator”.
On October 21, 2021, the parties entered into a Mediation/Arbitration Agreement, pursuant to which they agreed that they, “shall submit to arbitration, under the terms and conditions hereinafter set out”, twelve issues including custody and parenting time with the child. Justice Marion noted that the parties appeared to have had independent legal advice prior to executing the Mediation/Arbitration Agreement. Thereafter, the parties appointed the Arbitrator as the sole arbitrator to hear and determine the issues in dispute. The Arbitrator was a party to the Mediation/Arbitration Agreement, although his signature was not on the version in evidence before Justice Marion.
On April 8, 2022, the Arbitrator resigned by a short email, which stated as follows:
“I am writing to advise as to my resignation as arbitrator. Looking to my current workload and scheduling into the summer and fall it is difficult to accommodate the scheduling possibly required.
I have reviewed where the file sits and wanted to provide ample notice so as to avoid any prejudice to the parties moving this forward.
I am available to assist if required in terms of the process to appoint an alternative arbitrator pursuant to the act.”
Justice Marion noted that he had no other information concerning the reason for the Arbitrator’s resignation.
On May 12, 2022, the Husband raised the issue of whether the Arbitrator had the authority to resign under the terms of the Mediation/Arbitration Agreement and the Arbitration Act. While the Arbitrator responded and suggested that he would like to discuss this, the issue was never put to the Arbitrator to decide. Justice Marion also noted that it appeared that neither party asked the Arbitrator to appoint a new arbitrator and did not agree to appoint a new arbitrator. Nor did either party apply to the court for the appointment of a new arbitrator.
On May 26, 2022, the Applicant brought this urgent application to vary the Consent Order on parenting and decision-making issues to give her sole decision-making authority with respect the child. The Respondent opposed the Application and argued that Justice Marion had no jurisdiction to hear it. Because the parties had agreed to mediation/arbitration, he was bound by the terms of the Consent Order, pursuant to which the parties had agreed to mediation/arbitration. Therefore, Justice Marion was required to either appoint a new arbitrator or the parties must choose a new arbitrator.
Justice Marion found that it was appropriate for him to decide the jurisdiction issue, despite the limited factual record, because there would be delay if the parties were required to go back to the Arbitrator, and because the Arbitrator had already decided that he had the discretion to resign. Justice Marion noted that neither party had sought leave to appeal the resignation decision.
Ultimately, Justice Marion reached the conclusion that he had the jurisdiction to hear the urgent Application. After considering relevant statutory regime, the Mediation/Arbitration Agreement, and the terms of the Consent Order, he found that the Arbitrator had the authority to resign, which terminated the arbitration.
The statutory regime – Justice Marion considered the relevant provisions of the Arbitration Act:
“[74] Section 14(1) of the Arbitration Act provides that an arbitrator’s mandate terminates when the arbitrator resigns and for other reasons not at issue here. Section 42(1)(c) of the Arbitration Act provides that an arbitration is terminated when the arbitrator’s mandate is terminated, if the arbitration agreement provides that the arbitration is to be conducted only by that arbitrator.
…
[77] However, section 6(b) of the Arbitration Act provides that a court may intervene, “to ensure that an arbitration is carried on in accordance with the arbitration agreement”. Therefore, the terms of an arbitration agreement, and what an arbitrator agrees to in it, are relevant. An arbitrator may not be able to unilaterally end his or her mandate or an arbitration process if doing so would be in breach of the terms of the arbitration agreement freely entered into by the arbitrator. This is particularly important in time-sensitive matters, or where a particular arbitrator was sought out or agreed to by the parties due to his or her expertise. Arbitrator commitments to accepted arbitration mandates are important and fundamental to the efficient operation of an alternative dispute resolution process and to the principle of party autonomy. An arbitrator contractually agrees to take on a matter, and is paid to do so. There may also be professional considerations where the arbitrator is a lawyer and hired in part for his or her legal expertise – this was not canvassed with me and I need not comment further on that in this matter.”
Justice Marion stated that because arbitrator resignation will result in delay and thrown-away costs and could lead to jurisdictional confusion, even if an arbitrator has the discretion to voluntarily resign under the terms of the agreement with the parties, absent circumstances that require it (such as conflicts), the arbitrator should be circumspect and cautious in doing so. Relying upon the Supreme Court of Canada decision in Wastech Services Ltd v Greater Vancouver Sewage and Drainage District, 2021 SCC 7, Justice Marion found that the arbitrator must exercise the discretion to resign reasonably and in good faith, including in a manner that is consistent with the purposes for which the discretion was provided in the contract.
The relevant considerations to the exercise of this discretion in this case were as follows:
“[79] In deciding whether to exercise a discretion to resign, an arbitrator should consider relevant factors, including whether resignation will undermine the underpinning purposes of arbitration agreements in the first place, namely expeditious, private, economical dispute resolution with allowance for more specialized expertise: ENMAX Energy Corporation v TransAlta Generation, 2022 ABCA 206 at paras 4 and 24. As a corollary to this, the arbitrator should consider whether resignation will cause unfairness, prejudice or harm to the parties. The arbitrator should also consider whether there are any matters that have arisen since his or her appointment that would preclude the arbitrator from continuing on, such as an emerging conflict of interest, lack of impartiality, bias, or a lack of qualifications the parties have agreed are necessary. This is not intended to be an exhaustive list of factors.
[80] In a family dispute, the arbitrator should also consider whether his or her resignation is in the best interests of any children involved in or affected by the dispute. It may be that in some situations an arbitrator will decide he or she must soldier on at his or own personal inconvenience or hardship – this may be one of the burdens of accepting an appointment and compensation as arbitrator.
[81] The resignation in this case was disruptive to a time-sensitive, complex, delicate, and high-conflict family dispute. Further, the parties lost their mutually chosen decision-maker. They are now unfortunately engaged in further legal proceedings which are clouded with jurisdictional wrangling. Having said all of that, I want to be clear that there is no argument or evidence before me that the Arbitrator in this case was not acting in good faith. I note that there is evidence he wanted to have further meetings with the parties about the resignation after-the-fact, but that does not appear to have happened. There is also evidence the Arbitrator expressly contemplated potential prejudice to the parties.”
The Mediation/Arbitration Agreement – The Respondent argued that the Arbitrator’s resignation did not meet the requirements of the Mediation/Arbitration Agreement. It provided as follows:
“REMOVAL OF THE ARBITRATOR
43. The parties may apply to have the arbitrator disqualified, or the Arbitrator may remove himself, pursuant to Sections 13, 14, 15 and 16 of the Act.
TERMINATION BY THE ARBITRATOR
44. The Arbitrator may terminate the arbitration process unilaterally if, in his opinion:
a. it is unnecessary, or likely not possible, to complete the arbitration; or
b. his fees are not paid or secured in a satisfactory manner.”
Justice Marion found that the language in Clause 43 was objectively intended to preserve the arbitrator’s discretion, without limitation, to resign voluntarily. Clause 44 dealt with the arbitrator’s ability to terminate the arbitration in its entirety. However, he recognized in this case that the Arbitrator’s resignation had the effect of terminating the arbitration because he was the mutually agreed upon sole arbitrator.
In the alternative, Justice Marion found that the explanation given by the Arbitrator for his resignation met the requirements of Clause 44 of the Mediation/Arbitration Agreement, which allowed for the arbitrator to terminate the arbitration on the basis that, “it was likely not possible to complete the arbitration” given, “the nature of the matter and its timing, and his personal scheduling constraints (which are not challenged by either party)” (para. 88).
In this case, while the Mediation/Arbitration Agreement gave the Arbitrator discretion to unilaterally resign and to terminate the arbitration process, it did not provide for the appointment of a new arbitrator. Therefore, the arbitration itself was terminated. This interpretation of the Mediation/Arbitration Agreement was also consistent with the Consent Order, which provided that the parties agreed to mediation and arbitration only if they “mutually chose” the arbitrator.
Consent Order – The Respondent argued that even if the arbitration was terminated under the Mediation/Arbitration Agreement, the Court was bound by the Consent Order, which constituted an arbitration agreement under the Arbitration Act. Justice Marion agreed that a consent order which met the requirements of the Arbitration Act could constitute an arbitration agreement. But here, absent an arbitrator who was “mutually chosen”, the Consent Order was an unenforceable agreement to agree: “Respecting party autonomy requires the court to enforce agreements to arbitrate and not intervene, but it also requires the court to refrain from imposing something on the parties that was not agreed to” (para. 101). Nor could the Court appoint an arbitrator in these circumstances.
Editor’s Notes:
Justice Marion also found that even if he was wrong in these conclusions, he had residual parens patriae jurisdiction that provided him with the power to act in the best interests of the child. In this case, there was sufficient urgency concerning the wellbeing of the child to justify his intervention. [But he also relied upon his jurisdiction to hear the Application pursuant to section 6(a) of the Arbitration Act, to assist the arbitration process “given that there is presently no arbitrator appointed, and the parties have not mutually chosen another one or even applied to have the court appoint one” (para. 118).] The effect of the intersection between arbitration law and other areas of the law presents both interesting and practical challenges.
Another recent example of this can be found in the Petrowest v Peace River Hydro case, in which one of the issues is the intersection (and possible conflict) between arbitration law and bankruptcy and insolvency law. For previous Case Notes on this case see: B.C. – court asserts inherent jurisdiction under insolvency legislation to override arbitration clauses – #254 and B.C. – doctrine of separability allows receiver to disclaim agreement to arbitrate while litigating main contract – #399. Leave to appeal was granted by the Supreme Court of Canada in June 2021, and the appeal was argued in January 2022. The decision is on reserve.
See also recent Case Notes on Royal Bank of Canada v. Mundo Media Ltd., 2022 ONSC 2147: Ontario – Receiver not bound by international arbitration clause with foreign seat – #626 and Urbancorp Toronto Management Inc. (Re) 2021 ONCA 613: Ontario – Court denies stay of order authorizing CCAA sale process despite ongoing arbitration – #542.