Introduction
The Alberta Court of King's Bench recently considered a challenge to a domestic arbitral award under the Arbitration Act, RSA 2000, c A-43 in Medicine Hat (City) v Fieldcore Service Solutions Canada Company, 2026 ABKB 447.
The Court's decision confirms that, despite the uncertainty introduced by the Supreme Court of Canada in Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65 and Wastech Services Ltd v Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, the bar for overturning an arbitral award on the basis of procedural unfairness or inadequacy of reasons remains high in Alberta, and dismissed the challenge in its entirety.
Facts
By way of background, the City of Medicine Hat alleged C$2.8 million in damages arising from damage to a turbine the city ordered from General Electric and commenced an arbitration against GE's subsidiary Fieldcore Service Solutions Canada Company, which inspected the turbine. The arbitral tribunal found that there was no bailment, no breach of the standard of care, no duty to warn and that causation was not established, and awarded costs to Fieldcore. The city appealed and sought a set-aside of the award at the Court of King's Bench on the basis that the arbitrator's reasons were inadequate and that there had been a breach of procedural fairness, relying on sections 44(1) and 45(1)(f) of the Arbitration Act.
Decision
On appeal, Justice Froese recognized the uncertainty regarding the standard of review appliable to commercial arbitral awards created by Vavilov and Wastech. Nevertheless, relying on subsequent Alberta authorities, she confirmed that parties seeking either appellate intervention or the setting aside of an arbitral award continue to face a high threshold in Alberta.
Standard of Review for Appeals
With respect to appeals under Section 44 of the act, Justice Froese applied the authority in Esfahani v Samimi, 2022 ABKB 795, leave to appeal ref'd 2023 ABCA 220, which held that questions of law are reviewed for correctness, and questions of fact, including the drawing of factual inferences, are reviewed for palpable and overriding error.
Since the parties in this case agreed that adequacy of reasons was a question of law, Justice Froese applied the correctness standard of review to find that the arbitrator's reasons were adequate when read as a whole and in light of the parties' positions. The Court accepted that the reasons explained "how and why the decision was reached," enabled the city to meaningfully exercise its right of appeal and provided a basis for meaningful appellate review. The Court held that the city's dissatisfaction with the arbitrator's factual findings was not a basis to find the reasons inadequate.
Standard of Review for Set-Asides
With respect to set-aside applications for lack of procedural fairness under Section 45(1)(f), despite the city's argument that the law in this area has shifted in favour of a correctness standard, Justice Froese found no reason to depart from the "palpable and overriding error" standard of review applied by the Alberta Court of Appeal in ENMAX Energy Corporation v TransAlta Generation Partnership, 2022 ABCA 206.
Justice Froese confirmed that under section 45(1)(f) of the act, the Court must give deference to procedural choices of the arbitral tribunal and will only intervene where an alleged error "goes to the heart of the process and effectively undermines its fairness" or has the "effect of preventing the party from putting forward its case."
Applying this framework, Justice Froese dismissed each of the city's procedural fairness arguments, including that the arbitrator had improperly limited the weight given to an expert report and preferred one party's evidence over the other's. Justice Froese also found that many of the issues raised by the city in its set-aside application arose from its own tactical choices and omissions during the arbitration that could not be raised for the first time on a set-aside application.
Key Takeaways
- Even on a correctness standard, an arbitration award's reasoning need not be perfect. It is only required to explain how and why the decision was reached and enable a basis for meaningful appellate review.
- The standard of review applicable to set-aside applications alleging lack of procedural fairness against arbitral awards issued in Alberta is palpable and overriding error. Alberta courts will give deference to the procedural choices of the arbitral tribunal.
- In the context of a set-aside application alleging procedural unfairness, parties cannot raise complaints about procedural unfairness in respect of matters that they failed to raise during the arbitration, or that arose from their own tactical or strategic choices.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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