Ontario – Participating party in arbitration not granted leave to intervene in appeal/set aside application – #537

In Baffinland Iron Mines v Tower-EBC, 2021 ONSC 5639, the parties were engaged in a dispute about a project to build a railway to transport ore in Nunavut.  They entered into two contracts which contained an arbitration clause. After delays in the project, one party terminated the contracts; the other claimed breach of contract and commenced an arbitration for its own losses and the losses of its sub-contractor, which participated in the hearing and had counsel present. However, that participation expressly did not constitute an agreement that the sub-contractor was a party to the arbitration.  The tribunal issued a Final Partial Award finding that the contract had been wrongfully terminated, however, the tribunal was split on whether the innocent party was also entitled to recover the damages of the sub-contractor.  The innocent party brought an application to set aside the award pursuant to s. 46 of the Arbitration Act, 1991, S.O. 1991, c. 17, and for leave to appeal the award under s. 45(1) of the Act. The sub-contractor sought leave to intervene in the application on the ground that it had an interest in the subject matter of the proceeding and would be adversely affected by the judgment. Justice Pattillo dismissed the motion, in part, because “courts are reluctant to permit third parties to intervene in purely private and commercial litigation” and that this is “more so where private arbitration is involved.”

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B.C. – Leave to appeal on question of law; arbitrator’s error must be “material to result” and appeal must have “arguable merit” – #533

In Escape 101 Ventures Inc. v March of Dimes Canada, 2021 BCCA 313 Justice DeWitt-Van Oosten granted, in part, the Plaintiff’s application for leave to appeal the arbitrator’s award dismissing the Plaintiff’s claims brought pursuant to an asset purchase agreement. The Plaintiff argued that the arbitrator committed errors of law in interpreting the terms of the agreement. Justice DeWitt-Van Oosten found that the arbitrator had misapprehended the evidence, which underlay his conclusions and “laid the foundation for an extricable error of law”. Further, even where an applicant demonstrates that there is an extricable question of law, a court should consider the reasons of the arbitrator as a whole in assessing that error and deny leave unless satisfied that the error was material to the result and the appeal has arguable merit. Justice DeWitt-Van Oosten was satisfied that both these criteria were met. Further, the amount of money at issue met the requirement for leave to appeal in s. 59(4) of the B.C. Arbitration Act, S.B.C. 2020, c. 2, that, “the importance of the result of the arbitration to the parties justifies the intervention of the court”.

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B.C. – Leave to appeal denied where alleged legal errors did not reflect arbitrator’s reasoning – #530

In Ecoasis Resort and Golf LLP v Bear Mountain Resort & Spa Ltd., 2021 BCCA 285, the Applicants (Bear Mountain and related companies) argued on leave to appeal that the arbitrator committed four extricable errors of law relating to whether it was an implied term of a lease that the lessees would have access to limited common property.  The Arbitration Act, S.B.C. 2020, c. 2, like the previous Act, allows appeals on questions of law alone provided they satisfy certain other conditions.  Two of the alleged extricable legal errors concerned whether the arbitrator implied a term based on a wrong principle; the third concerned whether the arbitrator, in interpreting the lease, allowed the factual matrix to overwhelm the words of the contract;  the fourth concerned whether the arbitrator misapplied the law of the duty of good faith by implying a term into the agreement.  On examination, Justice Bennett concluded that none of the alleged errors reflected the arbitrator’s reasoning and, further, “all of the so-called legal issues raised by the applicant, fall into the category of mixed fact and law.  I do not see any extricable question of law arising from the reasons of the arbitrator” (para. 49).   Leave to appeal was denied.

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Ontario – Court application under Model Law Art. 16(3) to “decide the matter” of the tribunal’s jurisdiction is a hearing de novo and not a “review” of the tribunal’s decision – #513

In Russian Federation v. Luxtona Limited, 2021 ONSC 4604, the Divisional Court heard an appeal by Russia of an interlocutory decision of Justice Penny of the Ontario Superior Court of Justice, Russia Federation v. Luxtona Limited, 2019 ONSC 7558. Justice Penny had declined to allow Russia to adduce fresh evidence on an application brought under Model Law Art. 16(3) to set aside an interim arbitral award finding that Russia had consented to arbitrate Luxtona’s claims and that the tribunal therefore had jurisdiction.  The proposed fresh evidence related to the jurisdictional issue and had not been before the tribunal. The appeal turned on whether the application before Justice Penny was a “review” of the tribunal award on jurisdiction or a hearing de novo. The Divisional Court, in a decision written by Justice D.L. Corbett, held that Russia was entitled to adduce fresh evidence as of right because the application was a hearing de novo. The court relied upon two key decisions raised by the parties. Mexico v Cargill, 2011 ONCA 622 held that a set aside application brought in the Superior Court of Justice under Art. 34 of the Model Law is a “review” and not a hearing de novo, but in that case there was no challenge to the tribunal’s jurisdiction to hear and decide the dispute. Therefore, the Divisional Court was not bound by it. The English Supreme Court decision of Dallah v Pakistan, [2011] AC 763, held that the court’s role where one party took the position that it had not consented to the arbitration was “to reassess the issue [of jurisdiction] itself” and not to “review” the tribunal’s decision. The Divisional Court found that this approach is supported by the language in the Model Law and the weight of international authority and Art. 2A of the Model Law, which promotes the uniformity of the application of the Model Law internationally.

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B.C. – party not abandoning position made in written argument, despite counsel’s failure to object to arbitrator’s contrary understanding – #512

In Eisler v. Connor Clark & Lunn Financial Group Ltd., 2021 BCSC 1280, Justice N. Smith granted, in part, the petitioners’ application for leave to appeal an arbitral award arising out of a dispute with their former employer, CCL. During their employment, the petitioners were paid income from certain funds owned by CCL that had investments in a variety of companies. After the petitioners’ employment was terminated, CCL re-organized the funds and acquired new investments in the fund. It stopped paying income from the fund to the petitioners, as a result of which they commenced an arbitration. The arbitrator found for CCL and the petitioners sought leave to appeal the award. One of the issues before Justice Smith was whether the duty of good faith first recognized in Bhasin v. Hrynew, 2014 SCC 71 was before the arbitrator. The argument that CCL had breached the contractual duty of good faith, through an improper use of its discretion to re-organize the fund and terminate the petitioners’ income entitlement, was contained in the petitioners’ written argument. But when the arbitrator asserted during the arbitration that it was his understanding that the petitioners were not advancing this position, petitioners’ counsel failed to correct him. Nonetheless, Justice Smith found that the issue was properly before the arbitrator.

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Québec – No bias where arbitrator rejected most objections by a party, had little interest in some evidence, questioned witnesses, and showed irritation at party – #511

In Consortium MR Canada ltée v Morissette, 2021 QCCS 2847, Justice Philippe Bélanger heard an appeal of an arbitral award pursuant to which MR was required to carry out remedial work on buildings built by it, as general contractor, which had longstanding water problems and to pay extra-judicial fees because of its abusive behaviour in failing to remedy the problems. MR appealed the award on a number of grounds, including that that the “attitude and remarks” made by the arbitrator during the hearing were a breach of his duty of impartiality. It filed affidavits from witnesses and MR representatives, who said that the arbitrator “seemed disinterested” and “seemed to favour the [building owners]”. Justice Bélanger found that while the arbitrator clearly demonstrated irritation with respect to MR’s delays in completing its remedial work, a reasonable person would not think that this rose to the level of bias.

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B.C. – Challenge of arbitrator’s interpretation of restrictive covenant in shareholders agreement, relying upon employment contract analysis, not appealable “extricable error of law” – #509

In AES Engineering Ltd. v. Khan, 2021 BCSC 1384, Justice Lamb found that the arbitrator’s determination that a restrictive covenant in a shareholders agreement was unenforceable for ambiguity did not raise an extricable error of law that would provide grounds for an appeal of the final award. The applicant argued that the arbitrator had committed errors of “legal methodology” in interpreting the restrictive covenant, including by applying the principles from the “lens” of an employment contract case.  Justice Lamb ruled: “There is nothing to suggest that the arbitrator’s interpretation of the contract in this case is a question of law as opposed to the usual question of mixed law and fact. It is clear from the Award that the arbitrator’s finding of ambiguity turned on the specific wording of the restrictive covenant. There was no evidence before me to suggest that this form of restrictive covenant is a standard form clause such that there might be precedential value to the proper interpretation of the clause which might turn this issue into a question of law that would be appealable under s. 31(1) [of the former B.C. Arbitration Act. R.S.B.C 1996, c. 55]. Further, there is no indication on the face of the Award that the arbitrator considered an incorrect principle in finding the clause was ambiguous: he considered the “ordinary grammatical meaning of the words” and found the clause to be ambiguous. In short, the interpretation of the restrictive covenant in this case is a question of mixed law and fact.”

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