In Christie Building Holding Company, Limited v. Shelter Canadian Properties Limited, 2022 MBKB 239, Christie Building Holding Company, Limited (“Christie”), applied for leave to appeal two arbitral awards under section 44 of the Manitoba Arbitration Act, CCSM c. A120. Christie asserted six separate grounds for leave to appeal, one of which consisted of four alleged errors of contractual interpretation. It also argued that a portion of the main award should be set aside because: the respondent did not comply with the Arbitration Agreement on issues of document production; that it was not given a fair opportunity to examine parties; and the arbitrator relied on case law not cited by the parties. Chief Justice Joyal dismissed all applications. In holding that none of Christie’s arguments for leave to appeal gave rise to a question of law of arguable merit, he considered the applicable standard of review. He found that “the standard of review on which the merits of this appeal would have to be judged, assuming leave was granted, is reasonableness. Until the Supreme Court of Canada has answered the question of what effect, if any, Vavilov has on Teal Cedar and Sattva, those authorities remain good law and are binding on this court” (paragraph 95). He also stated that if the applicable standard of review was, in fact, correctness, he would have still denied leave as the incomplete record from the arbitration compromised his ability to conduct a meaningful review, even for the narrow purpose of assessing leave. He held it would, therefore, be “unfair to grant leave and proceed with an appeal when a proper and meaningful review would ultimately be impossible” (paragraph 102). This case summary will focus on the analysis of the applicable standard of review.
Briefly, the background of the case was that Christie had engaged the respondent, Shelter Canadian Properties Limited (“Shelter”), as the developer of a commercial property. A dispute arose between them and they brought competing claims before an arbitrator. Among other claims, Shelter sought damages in connection with the early termination of a long-term property management agreement for the commercial property. Christie claimed, among other things, that Shelter was responsible for millions of dollars of cost overruns and delays. Shelter was the successful party on the merits. The arbitrator subsequently granted Shelter “elevated costs” and interest in a separate award. Christie sought leave to appeal both awards and, additionally, sought to have a portion of the merits award set aside.
Section 44(2) of the Manitoba Arbitration Act sets out the requirements for a leave application and provides: “…a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that (a) the importance to the parties of the matters at stake in the arbitration justifies an appeal; and (b) determination of the question of law at issue will significantly affect the rights of the parties.” Relying largely on the decisions of the Supreme Court of Canada in Sattva Capital Corp. v. Creston Moly Corp. 2014 SCC 53 (“Sattva”) and Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 (“Teal Cedar”), the Chief Justice found that this section requires an applicant to identify an error of law of arguable merit and that arguable merit is to be assessed “in light of the standard of review on which the merits of the appeal would be judged (were leave to be granted)” (paragraph 96).
In Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 (“Vavilov”), the Supreme Court of Canada determined, in the context of administrative law, that appellate standards of review are to apply to statutory appeals and that, in considering questions of law, the applicable standard is “correctness”. The Chief Justice noted that there is now a “legitimate debate” among lower Courts as to whether the standard of review set out in Vavilov applies to the appeals of commercial arbitration awards under arbitration statutes. Sattva and Teal Cedar had previously held that the applicable standard of review on appeal was the more deferential standard of “reasonableness” for commercial arbitration awards.
Christie argued that Vavilov displaced the Supreme Court of Canada’s decisions in Sattva and Teal Cedar and that this conclusion was confirmed by the Supreme Court of Canada in Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7 (“Wastech”). The Chief Justice rejected this argument, noting that Christie relied on the Minority reasons in Wastech in support of its position. He quoted from the reasons of the Majority, who refused to decide the issue. They stated:
“[45] … I am mindful, however, that this Court’s judgment in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, which was released shortly after this appeal was heard, set out a revised framework for determining the standard of review a court should apply when reviewing the merits of an administrative decision. I note that Vavilov does not advert either to Teal Cedar or Sattva, decisions which emphasize that deference serves the particular objectives of commercial arbitration [citation omitted].
[46] In these circumstances, I would leave for another day consideration of the effect, if any, of Vavilov on the standard of review principles articulated in Sattva and Teal Cedar. We have not had the benefit of submissions on that question, nor do we have the assistance of reasons on point from the courts below.” [emphasis in Christie]
Instead, the Chief Justice, agreed with cases such as Cove Contracting Ltd. v. Condominium Corporation No. 012 5598 (Ravine Park), 2020 ABQB 106, Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corporations, 2020 ONSC 1516 and Spirit Bay Developments Limited Partnership v. Scala Developments Consultants Ltd., 2021 BCSC 1415, where the Superior Courts found they were still bound by Sattva and Teal Cedar and so the applicable standard was “reasonableness”. The Chief Justice was of the view that Vavilov’s reformulated standard of review framework was derived from constitutional considerations that justify deference by the judiciary to the legislature and that such considerations are not present in private commercial arbitrations. He also stated he wanted to add “one additional and significant point, which amongst others, if not adequately considered and appreciated, could have implications for the objectives served by commercial arbitrations were an appellate standard of review to apply”. He warned that:
“[94]…On an application of the correctness standard, were any errors to be found on the basis of identified and valid questions of law, the court would then be required to conduct and substitute its own analysis based on the record. In that scenario, once having found the error of law, the now-resulting substituted and fresh analysis required by the court, if it is to be fair, will require a record that permits such a fresh and meaningful analysis and review. In anticipation of that prospective need for a more meaningful record in the event of an identified error arising from a question of law, parties to an arbitration will in the future, inevitably feel obliged and be required to ensure a more formalistic and transcribed court-like record. Arbitrations (a forum chosen by private contracting parties for the efficiency and economy they provide) could very quickly become, in significant ways, less distinguishable from the more formal and rigid processes and adjudications of a court of law. The implications of the correctness standard would be a loss of informality and flexibility of process even over the agreement of the parties”.
He concluded that that “[u]ntil the Supreme Court of Canada has answered the question of what effect, if any, Vavilov has on Teal Cedar and Sattva, those authorities remain good law and are binding on this court” (paragraph 95).
The Chief Justice then reviewed and dismissed all grounds for leave to appeal finding they were all properly characterized as issues of fact or mixed fact and law and, therefore, did not raise a question of law of arguable merit (paragraph 108).
Contributor’s Note:
The readership of this blog is well aware of the number of contradictory lower Court decisions concerning the applicable standard of review. As noted by Justice Marion of the Alberta Court of King’s Bench (in a recent decision that reached the opposite conclusion to Christie on the standard of review: Esfahani v Samimi, 2022 ABKB 795 (“Esfahani”)), the only appellate decision directly addressing the standard of review for an appeal from a non-statutorily mandated arbitration, since Vavilov, is Northland Utilities (NWT) Limited v Hay River (Town of), 2021 NWTCA 1. See case note: N.W.T. – Court applies Vavilov to commercial arbitration awards subject to statutory right of appeal – #419. In that case, the NWT Court of Appeal concluded that Vavilov applied to appeals of commercial arbitration awards. Justice Marion chose to follow this decision in Esfahani finding the reasoning, based on both consistency and the legislative intent that could be gleaned from the presence of the appeal right in the statute, persuasive. It should be noted that the NWT Court of Appeal is largely constituted of Justices of the Alberta Court of Appeal and the panel in question were all from the Alberta Court. Interestingly, Justice Marion also found Sattva and Teal Cedar are not binding law in Alberta on the issue of the applicable standard of review. He did so based on differences between the appeal rights in the Alberta statute and the previous B.C. arbitration statute that was the subject of the decisions in Sattva and Teal Cedar. Alberta and Manitoba’s appeal rights are similar. For a recent Case Note on this decision see: Alberta never bound by Sattva and Teal Cedar – #705.
Despite the uncertainty as to standard of review, another Court of Appeal has recently punted on the issue. In Spirit Bay Developments Limited Partnership v. Scala Developments Consultants Ltd., 2022 BCCA 407 (“Spirit Bay”) it was alleged, among other things, that the lower Court “erred in not giving effect to the minority view in Wastech” which would apply the reasoning in Vavilov to arbitrations. The lower Court had found, instead, that stare decisis required that the reasonableness standard set out in Sattva and Teal Cedar should be applied in determining the issues raised on this appeal. As noted above, this lower Court decision was relied on by Chief Justice Royal in Christie for the proposition that Sattva and Teal Cedar are still binding law. The B.C. Court of Appeal did not endorse or reject the lower Court’s view. It stated, instead: “I would follow the approach of the majority judgment in Wastech and leave the determination of this question to a case where the outcome of the appeal will be affected.” For a related case considering the effect of the arbitral record, or lack thereof, on appellate review see: Christie Building Holding Company, Limited v. Shelter Canadian Properties Limited, 2021 MBQB 77 (See Case Note Manitoba – applicant for leave to appeal cannot revisit procedural decisions creating limited evidentiary record – #467).