Ontario – length/brevity of reasons in award not equal to reasonableness/insufficiency – #202

In Peralta v. Peralta, 2019 ONSC 2854, (unreported, May 7, 2019, Court file no. CV-18-26994), Mr. Justice Thomas J. Carey held that lengthy reasons do not equal reasonable and correct reasons any more than brief ones are equated with insufficiency.  In his own brief reasons upholding a final award on the standard of reasonableness, Carey J. echoed earlier judicial observation that losing in arbitration itself does not equate to unfair or unequal treatment. The challenged result was an outcome open to the arbitrator, within his expertise and supported by clear, concise and reasonable reasons.

The dispute involved a group of individual and corporate litigants who operated family-owned fishing and fish-processing businesses.  A dispute had arisen leading to a court application by Respondents for oppression under section 248 of Ontario’s Business Corporations Act, RSO 1990, c B.16.  The parties to the litigation agreed to stay that proceeding by way of a Memorandum of Settlement (“MOS”) and an Agreement to Arbitrate (“ATA”).

The MOS contained competing resolutions of their dispute.  Appellants were allowed to purchase Respondents’ share of two (2) corporate entities, failing which, Respondents could purchase either or both of those corporate entities.

Appellants and Respondents appointed the arbitrator to determine the fair market value of the businesses, with the ATA giving him significant discretion in the conduct of the arbitration.

By agreement of Appellants and Respondents, both sides retained their own independent business valuators who prepared their reports.  Both reports were adduced as exhibits and each expert was heard at the hearing, being cross-examined and re-examined.  Evidence was limited to the reports and the hearing was restricted, again by agreement, to one and a half (1 ½) days of evidence and two (2) half days of argument.   After a hearing held August 27, 28 and 30, 2018, the arbitrator released his October 1, 2018 award (“Award”).

In the Award, the arbitrator chose the valuation estimate and valuation date proposed by Respondents’ expert and set out his reasons for choosing the most recent financial year-end as the fairest valuation date.  Carey J. noted that the arbitrator “supported his conclusion with the evidence and the leading authorities in this area.

Regarding the experts’ reports, the arbitrator admitted both but noted that Appellants’ expert had not taken into account some “significant” issues set out in Respondents’ expert’s report.  The arbitrator stated that this went to the weight he would put on Appellants’ expert’s report.

Appellants applied to the Superior Court to set aside the Award on the basis of alleged errors.  They claimed that the standard of correctness applied and relied on Housen v. Nikolaisen, [2002] 2 SCR 235, 2002 SCC 33.  Carey J. disagreed.  Referring to Sattva Capital Corp. v. Creston Moly Corp., [2014] 2 SCR 633, 2014 SCC 53 paras 38, 102 and 107 and Teal Cedar Products Ltd. v. British Columbia, [2017] 1 SCR 688, 2017 SCC 32 paras 1 and 74, Carey J. held that the standard of reasonableness “almost always applies to arbitration awards”.  This limited jurisdiction, he observed, supported the “central purposes of commercial arbitration, that is, efficiency and finality”.

Carey J. characterized all the questions raised by Appellants as questions of law, at best mixed fact and law. 

I find the arbitrator’s conclusions reasonable as was his exercise of discretion in directions regarding the conduct of the hearing. There was no question of law or constitutional question of importance to the administration of justice, which would be outside of Mr. Cathcart’s expertise as an arbitrator. He was selected by both parties to decide the exact issues that he decided. I find the reasons given by Mr. Cathcart for choosing Mr. Mak’s valuation were clear, concise and reasonable. They contained no manifest errors or anything that was clearly wrong. Clearly, the outcome of choosing Mr. Mak’s report or Ms. Nazzani’s was an outcome that was open to him.

Appellants argued further that the “brevity” of the arbitrator’s reasons lead to insufficient support for his conclusion.  Again, Carey J. dismissed this argument.

Lengthy reasons do not equal reasonable and correct reasons any more than brevity is equated with insufficiency. Findings made by the arbitrator, Mr. Cathcart, were open for him to make. The record supports the lesser weight that he assigned to Ms. Nazzani’s opinion. He is owed a high degree of deference in this regard.

Carey J. also dismissed Appellants’ challenge based on alleged unfair and unequal treatment.  First, he found no evidence to support the assertion.  Regarding the “Rubino affidavit”, Carey J. noted that it was admitted by agreement of counsel and its weight was left up to the arbitrator.  Appellants were allowed to have their expert review the affidavit prior to her continuing her evidence but they declined.

If there was any unfairness to the witness, [Appellants’ expert], it was as a result of the decision of counsel at the arbitration to refuse to allow her to review Mr. Rubino’s affidavit.

In dismissing the challenge based on alleged unfair and unequal treatment, Carey J. referred to Nasjjec v. Nuyork, 2015 ONSC 4978, citing the closing sentence in the following passage:

[67] Based on the above therefore, Nasjjec has failed to establish that the Arbitrator breached his obligation to treat Nasjjec equally and fairly as provided by the [Arbitration Act, 1991, SO 1991, c 17]. Properly characterized, Nasjjec’s submissions amount to no more than it saying the Arbitrator did not treat it equally or fairly because he found against it on the issues before him. Losing, by itself, does not equate to unfair or unequal treatment.

urbitral note – Carey J.’s brief reasons served two (2) purposes.  First, they demonstrated the court’s sufficient consideration of Respondents’ challenge to the award.  Second, they echoed Carey J.’s own observation that the length/brevity of reasons itself is not a sufficient ground to support/critique an award. 

Carey J.’s reasons also underline that a party should not challenge an award on the basis of alleged unequal and unfair treatment if the procedure followed to arrive at the award was established by consent of the parties.  An adverse finding does not amount to unequal or unfair treatment, especially if the finding was a reasonable one open to the arbitrator on the evidence adduced and argument made by the parties.