In Northland Utilities (NWT) Limited v. Hay River (Town of), 2021 NWTCA 1, N.W.T.’s Court of Appeal held that Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65’s revised framework applies to commercial arbitration awards reviewed as a result of a statutory right of appeal. “It is difficult to follow the argument that the reliability of Canada as a forum for resolution of local and global business disputes, would be rendered less grounded in the rule of law in a rules-based system of law by employing an appellate review standard”. The Court distinguished appeal wording in the N.W.T.’s domestic arbitration legislation from the former B.C. domestic arbitration legislation considered in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII),  2 SCR 633 and Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 (CanLII),  1 SCR 688. Vavilov’s omission of any mention of commercial arbitration did not argue for or against its extension. “Silence cuts both ways”. The Court did not comment on whether Vavilov applied to awards arising from contracts which contained no right of appeal and where no statute provided such right. Note: the agreement to arbitrate in issue ought to qualify as a statutory arbitration and not a consensual arbitration as it was not negotiated but imposed under section 91(5) of the Cities, Towns and Villages Act, SNWT 2003, c 22, Sch B.
Northland Utilities (NWT) Limited (“NUL”) signed a November 30, 2006 franchise agreement with The Town of Hay River (“Hay River”) to produce, distribute, supply and sell electricity within Hay River (“Franchise Agreement”). For more on franchise agreements with public utilities, see section 37 and following of NWT’s Public Utilities Act, RSNWT 1988, c 24 (Supp).
Both the Franchise Agreement and the N.W.T.’s legislation governing Hay River as a municipality provided for arbitration for disputes involving franchise agreements. In particular, section 91(5) of the Cities, Towns and Villages Act, SNWT 2003, c 22, Sch B stipulates that, in upon expiration of a public utility franchise agreement, disputes over certain post-termination consequences will be determined by a sole arbitrator under the Arbitration Act, RSNWT 1988, c A-5.
In first instance, the judge applied a standard of review of reasonableness and dismissed NUL’s appeal of the award. In addition, he also found that the award was correct if he applied that standard too. For more on the decision in first instance in Northland Utilities (NWT) Ltd. v. Town of Hay River, 2019 NWTSC 31, see the earlier Arbitration Matters note “Parties do not create standard form contract when their lawyers do not “reinvent the wheel” – #240”.
The appeal required the Court of Appeal to apply two (2) standards of review. First, a standard of correctness when reviewing the chambers judge’s choice and application of the appropriate standard of review. Second, the standard of review applied to the arbitrator’s February 16, 2018 partial final award (“Award”). Regarding the latter standard, the Court identified its first issue as deciding whether that standard was an appellate standard or reasonableness.
The decision contains two (2) sets of reasons. First, Madam Justice Bielby wrote her reasons in which, at paras 20-44, she addressed the impact of Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 (“Vavilov”) on the standard of review. Second, Madam Justices Barbara Veldhuis and Jo’Anne Strekaf wrote shorter, reasons in which they concurred in the result and endorsed Bielby J.A.’s reasons at paras 19-43. It is unclear whether their omission of para. 44 from Bielby J.A.’s reasons is intentional or an oversight. It reads as follows.
“ We therefore conclude that the revised standard of review framework described in Vavilov applies to commercial arbitration decisions reviewed as a result of a right of appeal given by statute. As noted, this does not mean that all issues under appeal pursuant to the Arbitration Act are to be automatically reviewed on a standard of correctness. As this legislation does not limit the right of appeal to questions of law, an appellate standard of review is to be applied to all issues raised, including not only questions of law reviewed for correctness, but questions of fact or of mixed fact and law which will continue to be reviewed on a standard of palpable and overriding error”.
The chambers judge’s reasons issued two (2) months before Vavilov which Bielby J.A. identified as “substantially revised the standard of review framework to be employed when reviewing administrative decisions where such decisions were subject to a statutory right of appeal”.
Vavilov held that the presumptive applicable standard of review is reasonable but can rebutted when legislation provides a statutory appeal mechanism from an administrative decision to a court. Once the legislated appeal process rebuts the presumption, the standard of review is an appellate standard. The latter involves reviewing questions of law for correctness and questions of fact or mixed fact and law on the standard of palpable and overriding error. See Vavilov para. 37 and Housen v. Nikolaisen, 2002 SCC 33 (CanLII),  2 SCR 235 paras 26-28.
Bielby J.A. acknowledged that the Supreme Court in Vavilov “did not expressly state whether the new standard of review framework applied to commercial arbitration”. Despite the omission, Bielby J.A. identified that the “key issue here is whether the revised approach to standard of review set forth in Vavilov applies to the decisions of commercial arbitrators made under arbitration legislation”.
Citing to Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII),  2 SCR 633 para. 75, Bielby J.A. noted that Sattva Capital Corp. v. Creston Moly Corp. had held that “reasonableness would almost always apply to commercial arbitration conducted under arbitration legislation, except in relatively rare circumstances”. Those rare circumstances might involve constitutional questions or a question of law of central importance to the legal system as a whole and outside the adjudicator’s expertise.
Bielby J.A. wrote that the result in Sattva stemmed from the limited grounds of appeal permitted in the B.C. legislation in issue at the time which Arbitration Act, RSBC 1996, c 55. (Note: the latter has been replaced by B.C.’s new legislation, Arbitration Act, SBC 2020, c 2, in effect as of September 1, 2020.)
“ We note that the Supreme Court also stated in Sattva, at para 50, that contractual interpretation involves issues of mixed fact and law, being an exercise in which principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix of the contract. In the result, appeals from arbitrators’ decisions resolving contractual interpretation disputes would not be permitted under the British Columbia legislation at issue in Sattva, which permits appeals only on questions of law. That would not have been the case had Sattva originated in the Northwest Territories, where the Arbitration Act permits appeals on all questions, in accordance with the agreement of the parties. We also observe that the legislation underpinning that appeal, the Arbitration Act, RSBC 1996, c 55, differed from the Arbitration Act under consideration in this case, in that it permitted appeals from an arbitrator’s decision only on questions of law”.
Bielby J.A. added that the Supreme Court’s subsequent Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 (CanLII),  1 SCR 688 followed the earlier Sattva approach and again applied the former B.C. Arbitration Act.
Bielby J.A. at paras 28-32 addressed “[c]ompeting trial court level authorities” regarding whether commercial arbitration decisions are “exempt” from Vavilov’s application: Buffalo Point First Nation et al. v. Cottage Owners Association, 2020 MBQB 20; Allstate Insurance Company v. Her Majesty the Queen, 2020 ONSC 830; 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 Corporation, 2020 ONSC 1516.
Bielby J.A. observed the differences in the arbitration legislation issuing from the N.W.T. and that in Ontario First Nations (2008) Limited Partnership v. Ontario Lottery And Gaming Corporation.
“ We observe that while s 27 of the Arbitration Act of the Northwest Territories is less detailed than the legislation at issue in [Ontario First Nations (2008) Limited Partnership v. Ontario Lottery And Gaming Corporation, 2020 ONSC 1516], it also expressly provides a right of appeal where agreed to in the contract that is the subject of the arbitration. In Vavilov at para 36, the Supreme Court described the legislative intent that is “signalled by the presence of a statutory appeal mechanism”, as an intent to subject the body appealed from “to appellate oversight”. Does, then, s 27 of the Arbitration Act signal that the legislature intended the Arbitrator in this case to be subject to appellate oversight?”
She noted that, at the appellate levels, no court had yet analysed the issue of whether an appellate standard now applied to commercial arbitration. In Nolin v. Ramirez, 2020 BCCA 274, B.C.’s Court of Appeal concluded that it was not necessary to do so and in Travelers Insurance Company of Canada v. CAA Insurance Company, 2020 ONCA 382, Ontario’s Court of Appeal applied a standard of correctness on an appeal of a question of law under particular legislation.
Both NUL and Hay River argued the impact of Vavilov and, specifically, the conclusion one ought to draw from the Supreme Court’s omission to mention that its new standard applied to commercial arbitration. Hay River pointed out that three (3) of the intervenors “interested in commercial arbitration” participated in the appeal and, despite argument on the point, Vavilov did not speak to the issue.
“[Hay River] points out that three parties interested in commercial arbitration were given permission to intervene in Vavilov, and that comprehensive argument was heard from them to the effect that the reasonableness standard of review should exceptionally be retained in relation to arbitration decision-making. As the Supreme Court nonetheless chose not to expressly address this issue, Hay River argues it cannot be considered to have simply missed the issue”.
Bielby J.A. disagreed with that reasoning. “Silence cuts both ways”. The omission of any mention did not compel a conclusion in favour of NUL’s or Hay River’s arguments on the role of Vavilov in commercial arbitration. Rather, Bielby J.A. determined that the appropriate approach would be to determine if the reasoning in Vavilov “would apply to a statutory appeal from an arbitrator’s decision, including commercial arbitrators”.
At paras 38-42, Bielby J.A. reasoned that same standard applied to administrative tribunals should also apply to commercial arbitrations where a statutory appeal mechanism exists. She reasoned that the term “appeal” in legislation should be subject to the “presumption of consistent expression” and therefore an “appeal” should have the same meaning in an administrative context as in a commercial law context.
Applying comments in Vavilov that a standard of review should “no longer be premised upon notions of relative expertise”, Bielby J.A. found support for extending Vavilov to commercial arbitrations to avoid “an otherwise anomalous standard of review” applicable to only commercial arbitrations.
“This logic supports the argument, for example, that a commercial arbitrator’s presumed expertise does not justify exemption from an appellate standard of review any more than does the expertise of other administrative boards typically staffed by experienced adjudicators. Further, there is no reason to have an otherwise anomalous standard of review that applies only to arbitration decisions when all other decisions are reviewable on the appellate standard”.
Recording the potential “disruption” as an argument against that conclusion, Bielby J.A. dismissed those concerns. She observed that the same potential for disruption in administrative decision making did not stop the Supreme Court from issuing its decision in Vavilov. Bielby J.A. characterized the concern as a floodgates argument and reassured that courts would still demonstrate deference.
“Further, the suggestion that the extension of Vavilov principles should be avoided because it would significantly disrupt the legal landscape pertaining to commercial arbitrations, is met by observing that the degree of disruption created through a change affecting every administrative tribunal in Canada would equal or exceed that affecting commercial arbitrations, yet was no reason for the Supreme Court to decline to implement the new framework in Vavilov. The submission that maintenance of a reasonableness standard of review for commercial arbitration decisions is necessary to prevent the courts from being overwhelmed by appeals is answered, in part, by the observation that adoption of the appellate standard of review to commercial arbitration decisions would hardly open the litigation floodgates. Most issues reviewed on that standard would still be reviewed with deference to the findings of the arbitrator, as most issues on appeal are issues of fact or mixed fact and law”.
Bielby J.A. then closed with observations that applying administrative law principles would not undermine Canada’s “reliability” as “a forum for resolution of local and global business dispute”.
“ It is difficult to follow the argument that the reliability of Canada as a forum for resolution of local and global business disputes, would be rendered less grounded in the rule of law in a rules-based system of law by employing an appellate review standard. The Dunsmuir standard requiring deference to arbitrator’s decisions, no matter the basis upon which they were determined, resulted in greater uncertainty than an appellate standard of review. In other words, commercial attractiveness may be enhanced, rather than reduced, by allowing appeals based on an arbitrator’s errors on questions of law. The development of a body of arbitral jurisprudence based on appellate rulings will assist in fostering acceptance of the predictability and reliability of Canadian decision-making”.
Based on her analysis, Bielby J.A. concluded at para. 45 that applying an appellate standard of review would not “ability of parties to consensually participate in arbitration” where the legislation “allows appeals only where contracting parties have agreed to include a right of appeal as a term of their contract”. She added that “[t]he parties are free to sign an agreement which does not contain a right of appeal should they so choose”.
In applying the accepted appellate standard in their briefer, concurring reasons, Madam Justice Veldhuis and Madam Justice Strekaf required that an extricable question of law first be identified before then applying the correctness standard and, having done so, proceeded to apply the over-riding and palpable error test to the question of mixed fact and law.
“ In our view, the Arbitrator’s selection of the valuation method to set the price to be paid pursuant to s 15 of the Franchise Agreement does not raise an extricable question of law subject to appellate review on a correctness standard. That matter involves questions of mixed fact and law and the exercise of discretion, which are reviewable on the standard of palpable and overriding error and reasonableness, respectively. The Arbitrator’s application of the modified book value approach, which he concluded would be fair to both sides, was reasonable and discloses no palpable and overriding error“.
urbitral notes – First, the agreement to arbitrate in the franchise agreement before the N.W.T. courts arose from statute under section 91(5) of the Cities, Towns and Villages Act, SNWT 2003, c 22, Sch B and ought to qualify as a statutory arbitration and not a consensual arbitration. Neither of the parties can opt out of the arbitration imposed under section 91(5). As such, the factual matrix and result in the present case corresponds to a statutory arbitration and its treatment given in Allstate Insurance Company v. Her Majesty the Queen, 2020 ONSC 830 and not a consensual arbitration. The statement of Vavilov’s application might not have the scope of application to consensual arbitrations given to it in the reasons in the present case.
The courts have held that a statutory arbitration is deemed to be consensual because one party can still opt out. See the Québec Court of Appeal in Conseil d’arbitrage des comptes des avocats du Barreau du Québec v. Marquis, 2011 QCCA 133.
Second, N.W.T.’s Arbitration Act includes the following provisions on appeals in addition to sections 27(2), 27(3) and section 28.
“Section 26 Subject to sections 27 and 28, an award made by award an arbitrator or by a majority of arbitrators or by an umpire is final and binding on all the parties to the reference and the persons claiming under them.
Section 27(1) Where it is agreed by the terms of a submission allows a submission that there may be an appeal from the award, the reference shall be conducted and an appeal lies to a judge within the time stated in the submission or, if no time is stated, within six weeks after the delivery of the award to the appellant”.
Third, for Arbitration Matters notes on the cases mentioned by Bielby J.A., see the following listed in the order in which Bielby J.A. referenced them:
(i) Buffalo Point First Nation et al. v. Cottage Owners Association, 2020 MBQB 20 and Cove Contracting Ltd v. Condominium Corporation No 012 5598 (Ravine Park), 2020 ABQB 106 – “Alberta & Manitoba – courts take different paths to different outcomes following same S.C.C. case – #276”
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.
(ii) Allstate Insurance Company v. Her Majesty the Queen, 2020 ONSC 830 – “Vavilov standard applies to statutory insurance arbitration but not private commercial arbitration – #298”
In Allstate Insurance Company v. Her Majesty the Queen, 2020 ONSC 830, Madam Justice Breese Davies held that Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 altered judicial intervention on appeals from insurance arbitration mandated by legislation. Davies J. held that legislation which includes a statutory appeal mechanism signals legislative intent that courts are to perform an appellate function in respect of the administrative decision and apply appellate standards of review. Davies J. distinguished between appeals of statutory arbitrations and private commercial arbitrations, the latter being seen as autonomous, self-contained process in which courts should “generally” not intervene.
(iii) Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corporation, 2020 ONSC 1516 – “Vavilov does not overrule Teal Cedar or Sattva Capital – #302”
In Ontario First Nations (2008) Limited Partnership v. Ontario Lottery And Gaming Corporation, 2020 ONSC 1516, Mr. Justice Glenn A. Hainey held that Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 does not refer to either Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII),  2 SCR 633 or Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 (CanLII),  1 SCR 688 and that it is not reasonable to conclude that the Supreme Court meant to overrule its own decisions without making any reference to them or to the area of law to which they relate.
(iv) Nolin v. Ramirez, 2020 BCCA 274 – “Court qualifies parties’ agreement to require only summary reasons as “penny-wise and pound-foolish” – #381”
The Court paused, at paras 30-39 to determine whether Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 applied to the standard of review of family law arbitration awards under section 31 of the now-repealed Arbitration Act, RSBC 1996, c 55 (“Former Arbitration Act”). The latter has been replaced, effective September 1, 2020, with the Arbitration Act, SBC 2020, c 2.
The Court observed that neither the majority six (6) nor the concurring three (3) referred to Sattva Capital Corp. v. Creston Moly Corp. or Teal Cedar Products Ltd. v. British Columbia, “let alone the word “arbitration””.
Having identified the issue raised by the release of Vavilov and the parties’ views on its application to their appeal, the Court observed that, to its knowledge, “no appellate court has considered the issue” and declined to be the first appellate court to do so.
“In my opinion, it makes no difference in this case whether the standard of review is reasonableness or palpable and overriding error, as the result would be the same. Since it is unnecessary to decide the obviously complex question, I will leave it to another day”.
In Travelers Insurance Company of Canada v. CAA Insurance Company, 2020 ONCA 382, Ontario’s Court of Appeal set aside an award which issued following a statutory arbitration because the Ontario statute did not apply to the defendant. The Court questioned how did Ontario statutory accident benefits for a Nunavut accident come to be arbitrated under Ontario’s Insurance Act, RSO 1990, c I.8 if that legislation’s priority rules only apply if both insurers are subject to those rules. The Court identified as a “serious” error the arbitrator’s determination that the Insurance Act applied to the defendant insurer. Despite that error, the Court is silent on (i) how/when parties can consent by contract to submit to statutory arbitration under a statute which does not apply to one of them and (ii) why apply the standard of review applicable to statutory arbitrations, recently restated in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, to an appeal from a consensual arbitration.