In Charlottetown Equities Ltd. v. Charlottetown Airport Authority Inc., 2020 PESC 41, Madam Justice Nancy L. Key dismissed a set aside application which alleged arbitral misconduct. Stating that an applicant must support its allegation of bias by evidence, Key J. reminded that “the threshold for a finding of bias is high and suspicion is not enough”. Key J. confirmed that a set aside invoking misconduct constituted neither a judicial review nor an appeal and stressed that she must base her review on the record as a whole. The record included two (2) e-mails exchanged between the party appointed arbitrators which Key J. described as “vital” to her decision. Those e-mails formed part of the record on which the Chair had based his decision and, having been referenced by the Chair in his reasons, allowed Key J. to qualify the Chair’s reasons as sufficient. Key J. determined that applicant had agreed to the process by which the arbitration panel’s terms of reference had been drafted and, having contributed to and approved of those terms, could not afterwards allege that a panel member showed bias by drafting those terms.
By lease commencing April 1, 2007 (“Lease”) Charlottetown Equities Ltd. (“Tenant”) leased a commercial lease of property from Charlottetown Airport Authority Inc. (“Landlord”). The Lease is a forty (40) year term with a rent revision each ten (10) years based on land market values. Clause 4.06 of the Lease provided for arbitration disputes involving rent reviews:
(1) If either party disputes the decision of the AIC Appraiser issued pursuant to paragraph 4.05(2)(f) herein, then that party may have the Land Market Value determined by a Board of three (3) arbitrators, one to be appointed by each party within three (3) working days of being asked to do so and a third, who shall be the Chairperson, to be chosen by the first two names within three (3) working days after their selection. The awarded determination of the Board of Arbitrators, or majority of them, shall be rendered within ninety (90) days (or such longer time as may mutually be agreed upon) after selection of the Chairperson and the award shall be final and binding upon the parties and their respective successors and assigns.
(2) The arbitration proceedings shall be conducted and the arbitration award given in a location agreed to by both parties.
(3) The arbitration award pursuant to Clause 4.06(1) shall be final and binding on both parties hereto”.
In September 2016, Landlord advised Tenant of the upcoming rental increase to come into effect March 2017. Tenant objected to what it considered as a significant increase. Despite time to discuss and the exchange of four (4) independent appraisals, the parties could not agree on land market value or the resulting square foot rental cost.
Each party appointed a “representative” and they in turn appointed a Chair. All three (3) were real estate appraisers. The Tenant and the Landlord agreed with the appointment of the Chair.
The arbitrator appointed by Tenant requested that the arbitrator appointed by Landlord (i) draft the terms of reference (“Terms of Reference”) and (ii) include section 4.06 and the following additional wording:
“Role of An Arbitrator
An arbitrator considers evidence such as expert opinions and reaches a conclusion as to the reliability and relevance of that evidence and the degree to which it can inform their decision. The arbitrator relies solely on the evidence presented to them by the parties. Acting as arbitrators, experienced professionals should understand the distinction between an arbitrator and an expert and will avoid inserting their own experience or knowledge into the evidentiary mix. If the process is considered to be a de facto arbitration, the rules under which the expert is to operate are clear: they are set out in the provincial Arbitration Act.
Specifically, the role of the arbitrator is to review the evidence at hand and provide a decision. They are not to deviate from the evidence provided or form their opinion as an additional expert in the matter …”
Tenant reviewed the Terms of Reference and provided written confirmation of its agreement with the terms and the various documents to be included as evidence and reviewed by the arbitrators. Key J. emphasized Tenant’s direct participation in the process.
“A number of emails were exchanged between the representatives but it was the parties themselves who ultimately approved of and consented to the terms of reference, the scope of the arbitration process, and the documents to be included as part of the process”.
When confirming his own appointment, the Chair provided Tenant and Landlord with his letter of engagement with which he also included the approved Terms of Reference as well as the list of documents to be included as evidence in the arbitration. Both Tenant and Landlord confirmed in writing the respective acceptance of the Chair’s letter of engagement.
Despite efforts, the arbitrators did not arrive at a unanimous conclusion. Key J. notes that the Chair “sided” with the “representative” appointed by Landlord. Dissatisfied with the decision (“Award”), Tenant applied to set aside the Award under section 12(2) of the Arbitration Act, RSPEI 1988, c A-16.
“12(1) Where an arbitrator or umpire has misconducted himself, the court may remove him.
(2) Where an arbitrator or umpire has misconducted himself, or an arbitration or award has been improperly procured, the court may set the award aside”.
The margin notes in the Arbitration Act for section 12(1) style the process as “Removal of arbitrator” and for section 12(2) as “Award set aside”.
Key J. summarized Tenant’s grounds as comprising three (3) grounds: (i) the arbitrator appointed by Landlord exclusively prepared the Terms of Reference and therefore the Chair was biased towards Landlord’s position; (ii) the Chair exceeded his role by offering an opinion on the per square foot lease rate; and, (iii) the Chair provided insufficient reasons for his decision.
Landlord argued that Tenant’s application was neither a judicial review nor an appeal and that, in addition, the court was not to substitute its own view for that of the arbitration panel. Citing from Landlord’s written submissions contesting Tenant’s application, Key J. underlined that Landlord argued that upon review of the record “as a whole”, Tenant “has not established procedural unfairness, an error going to the jurisdiction of the arbitrator, or an error of law on the face of the award”.
(1) Misconduct is not appeal or judicial review – Key J. confirmed her agreement that her task involved neither a judicial review nor an appeal. She referenced City of Saint John v. Irving Oil Co. Ltd., 1966 CanLII 64 (SCC),  SCR 581 which involved New Brunswick legislation “similar to ours” and a set aside application involving allegations of misconduct.
To set out the scope of the term “misconduct”, Key J. referred to Mijon Holdings Ltd. v. Edmonton (City), 1980 ABCA 39 para. 17, in which the Alberta Court of Appeal observed that in Canada “however, the word “misconduct” is given a very wide meaning going beyond any sense of moral culpability and including an error in law on the face of the award”. Key J. added that the Alberta Court of Appeal referenced the earlier Supreme Court decision in City of Saint John v. Irving Oil Co. Ltd.
“The conclusion being therefore, that while the meaning of “misconduct” may be wide, it is only within narrow grounds that a court should interfere with an arbitral award”.
Key J. isolated Tenant’s allegation of improper conduct which involved the Chair’s reliance on a specific document to which both parties consented its admissions and consideration.
Ground 1 – Terms of Reference – Tenant submitted that it was “inappropriate” for the arbitrator appointed by Landlord “to determine the Terms of Reference without mutual input from both sides”. Key J. dismissed this submission, considering it “disingenuous”.
“ This is incorrect. A review of the entire record, including those pieces of correspondence between the parties which the applicant chose not to include in his application record, establishes that not only did the applicant review the terms of reference, it added its own wording prior to agreeing to the terms of reference and then consented to the revised document”.
See also paras 34-35.
Key J. commented that Tenant’s “allegation of bias” by the Chair towards Landlord “does not make it so”. “An allegation of bias must be supported by evidence”. Referring to Zündel v. Citron, 2000 CanLII 17137 (FCA),  4 FC 225, she added that “the threshold for a finding of bias is high and suspicion is not enough”.
Ground 2 – Chair exceeded role – Tenant argued that the Chair had exceeded his role by offering an opinion on the per square foot lease rate. Key J. examined the Terms of Reference as well as section 4.06 of the Lease.
“ Neither the agreed upon terms of reference nor the provisions specifying the Role of an Arbitrator made any mention as to the method by which the panel was to deliberate. Article 4.06 of the lease itself does not set out the mode by which the arbitration panel is to make its decision. Thus, the panel was able to determine its own process”.
Key J. determined that the record included exchanges of e-mails in which the arbitrators appointed by Tenant and Landlord set out their opinion on the value per square foot value and the rationale for their decisions and that all three (3) members of the arbitration panel were real estate appraisers.
“ The arbitral panel did not need any further expert evidence, nor, in my view, did the members, including the chair, receive or consider any. The documents were reviewed by the panel, the party representatives were asked their opinion and the chair, as he was permitted to do, sided with the Airport Authority representative”.
Key J. spoke to the role of having an odd number of panel members.
“Each of the members provided an opinion. Since the terms of reference required either a unanimous decision or majority agreement the chair did exactly as prescribed in the terms of reference”.
Key J. added that the arbitration panel did exactly as the parties authorized them to do.
“ Harkening back then to the terms of reference, the engagement letter, paragraph 4.06 of the lease, and the Role of an Arbitrator, the three members of the panel did exactly as they were authorized to do: they considered the evidence, reached a conclusion as to the reliability and relevance of that evidence, relied solely on the evidence presented to them by the parties, understood the distinction between an arbitrator and an expert, and avoided inserting their own experience or knowledge into the evidentiary mix. In addition, they reviewed the evidence, provided an opinion and they did not deviate from the evidence provided nor did they form their opinion as an additional expert in the arbitration”.
Ground 3 – Insufficient reasons – Tenant acknowledged that “the bar for proving reasons to be insufficient is a high one”, referring to Newfoundland and Labrador Nurses’ Union v. Newfoundland and Labrador (Treasury Board), 2011 SCC 62 (CanLII),  3 SCR 708 para. 16.
“ Reasons may not include all the arguments, statutory provisions, jurisprudence or other details the reviewing judge would have preferred, but that does not impugn the validity of either the reasons or the result under a reasonableness analysis. A decision-maker is not required to make an explicit finding on each constituent element, however subordinate, leading to its final conclusion (Service Employees’ International Union, Local No. 333 v. Nipawin District Staff Nurses Assn., 1973 CanLII 191 (SCC),  1 S.C.R. 382, at p. 391). In other words, if the reasons allow the reviewing court to understand why the tribunal made its decision and permit it to determine whether the conclusion is within the range of acceptable outcomes, the Dunsmuir criteria are met”.
In regard to insufficient reasons, Key J. further referred to Ayangma v. FLSB and ELSB, 2017 PECA 18 which addressed the purpose of reasons in a decision, albeit in the context of an appeal of motion judge’s decision.
“ The purpose of providing reasons for judgment is to justify and explain the result, to tell the losing party why he or she lost, to provide for informed consideration of the grounds of appeal and to satisfy the public that justice has been done (R. v. Walker, 2008 SCC 34, at para.19). Reasons should address each of the three steps of adjudication: fact identification, law declaration, and application of the law to the facts ([R. v. Sheppard, 2002 SCC 26 (CanLII),  1 SCR 869]). The critical question is whether the reasons are sufficiently intelligible to permit a party to exercise its right of appeal and to enable the appellate court to perform its function (Brown: 13:35-13:36)”.
Landlord sought support from Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 para. 77 and Baker v. Canada (Minister of Citizenship and Immigration), 1999 CanLII 699 (SCC),  2 SCR 817 paras 22-23 regarding the duty of procedural fairness requires a decision maker to give reasons.
Key J. referred to two (2) e-mails which were “vital to the court in making its decision”. Tenant had omitted them from its application materials but Landlord provided them. In those e-mails, each of the arbitrators appointed by the parties exchanged on their own rationale for the preferred square foot rental rates. The Chair’s referred to those exchanges comprising the record which he considered and commented that, in his role as chair “I did not deviate from the evidence provided or form an opinion as an additional expert in this matter”.
Key J. concluded that a review of the entirety of the record “points to the sufficiency of the reasons” and the award should not be set aside for alleged misconduct. “In summary, there was no bias on the part of the chair. He carried out his role as per the expectations set out in the lease, the terms of reference and his engagement letter. Therefore, he did not engage in misconduct nor was his decision improperly procured as he reviewed and considered only the evidence before him”.
In regard to procedural fairness, Key J. added that “the reasons for [the Chair’s] decision, if indeed they were required, are visible on an examination of the written record”.
urbitral note – First, Key J.’s reasons refer to the arbitrators appointed by each party as the “representative” of the party which appointed him but refers to them and the Chair as the “arbitration panel”. The term “representative” does not appear in section 4.06 of the Lease.
Second, in the passage from Ayangma v. FLSB and ELSB, 2017 PECA 18 cited by Key J, the Court referred to R. v. Walker, 2008 SCC 34 (CanLII),  2 SCR 245 para. 19 which reads as follows:
“ [R. v. Sheppard, 2002 SCC 26 (CanLII),  1 SCR 869] recognized a duty to give adequate reasons on a number of broad policy grounds. At the trial level, the reasons justify and explain the result. “Reasons for judgment are the primary mechanism by which judges account to the parties and to the public for the decisions they render” (para. 15). The losing party is entitled to know why he or she has lost. “Informed consideration can be given to grounds for appeal. Interested members of the public can satisfy themselves that justice has been done, or not, as the case may be” (para. 24). “Trial courts, where the essential findings of facts and drawing of inferences are done, can only be held properly to account if the reasons for their adjudication are transparent and accessible to the public and to the appellate courts” (para. 15). See also R. v. Burns, 1994 CanLII 127 (SCC),  1 S.C.R. 656; R. v. R. (D.), 1996 CanLII 207 (SCC),  2 S.C.R. 291, and R. v. Gagnon,  1 S.C.R. 621, 2006 SCC 17, at paras. 13, 14, 19 and 62. It is apparent that these considerations apply as much to acquittals as to convictions. Prosecutions call for a great expenditure of public resources, both human and material, and the Crown and the police, no less than the accused and the public generally, have a legitimate interest in knowing the reasons for the unsuccessful outcome”.