In Han v. Baune, 2021 BCCA 139, the Court of Appeal held that an arbitrator’s decision to prefer one expert’s report over another’s was patently unreasonable as both confirmed the same facts determinative of a fact in dispute. Determining that the parties’ expert reports did not conflict in any material respect and that reliance on only one was patently unreasonable, the Court set aside the award and remitted the matter for rehearing before another arbitrator. Though the decision involved a statutory scheme for arbitration and judicial law principles, the Court’s determination of how arbitrator must handle overlapping expert reports still serves as guidance in private commercial arbitration which invariably involve experts’ reports.
A tenant attributed issues to the presence of mould but the landlord disagreed. They engaged in arbitration established by Residential Tenancy Act, SBC 2002, c 78 in which the arbitrator, as “Residential Tenancy Branch”, exercises delegated authority to make decisions pursuant to the RTA. That legislation and the case law adopt the standard of patently unreasonable for overturning determinations of fact.
Each party hired their own expert as part of their case. Both reports found visible mould in the rented premises including elevated levels of toxigenic mould and both identified the potential for further mould growth and stated that mould removal was required. Despite this overlap, the arbitrator determined that remedial work was unnecessary.
Tenant filed a judicial review application, available against the decision, but was unsuccessful in first instance. On appeal, the Court agreed that the judge in first instance correctly identified the standard of review as patent unreasonableness but erred in its application.
“[8] A patently unreasonable decision is one that is “clearly irrational” or “evidently not in accordance with reason”: Canada (Attorney General) v. Public Service Alliance of Canada, 1993 CanLII 125 (SCC), [1993] 1 S.C.R. 941 at 963–64. I conclude that the arbitrator’s decision was patently unreasonable for two main reasons”.
First, the arbitrator discounted the tenant’s report because she held that it was “largely based on what the tenant told the technician” about a chronic leak. The Court acknowledged that the report did recount information about an earlier incident but excerpted passages from the report and concluded that the “report is based on objective measurements of air and surface mould spores and objective measurements of moisture in the walls—not on what the tenant told the technician”.
Second, the arbitrator asserted that she found the experts’ reports “somewhat conflicting” and preferred the report filed by the landlord. The Court disagreed with this assertion. “In fact, the two mould inspection reports did not conflict in any material aspect”. The Court again excerpted from the conclusions and recommendations of the landlord’s expert.
“[11] Thus, both reports found small areas of visible mould in the drywall beside the bathroom window and at the base of the closet wall. Both found elevated levels of toxigenic mould, and both identified the potential for further mould growth behind the drywall. Of particular significance, both reports stated that mould removal was required.
[12] In short, on the record before her, there was no rational basis for the arbitrator to prefer one report’s findings over the other. More importantly, neither report supported the arbitrator’s conclusion that mould remediation was not necessary and that the tenant should be responsible for removing the mould”.
urbitral notes – First, though the dispute arose in a statutory scheme for arbitration and the appeal involved discussion of judicial law principles, the Court’s determination of how to handle expert reports still serves as guidance in private commercial arbitration which invariably involve experts’ reports. The Court’s decision in the present matter underlines the need to ensure that the arbitrators recognize overlap in experts and that any asserted disagreement must exist in the report and not just by affirmation.
Second, though the standard of review of the arbitrator’s award is determined by section 58 of the Administrative Tribunals Act, SBC 2004, c 45, the decision’s application of that standard to the handling of non-contradicting experts’ reports can shed light for commercial arbitration. Matters within an arbitrator’s exclusive jurisdiction are subject to the patent unreasonableness standard of review that is set out in s. 58 of the Administrative Tribunals Act.