Introduction
The standards of review for courts on appeal or review of lower
court and administrative decision-makers have been the subject of a
huge amount of commentary and controversy. In Vavilov
v. The Queen, the Supreme Court recently sought to clarify the
standard of review in administrative law cases. There have been
other decisions concerning the standard of review concerning
appeals from arbitration awards on questions of law and
decisions that determined what constitutes a question of law
in proceedings concerning the interpretation of a contract.
These issues may now be breaking in a different direction. Three of
the nine judges in the recent decision of Wastech v. Metro
Vancouver, in an appeal where the arbitration award had been
set aside, would have found that the review of a question of law in
an arbitral decision should be reviewed on the basis of correctness
and not reasonableness.
This suggests that further decisions may-or may not-clarify this
important question.
Arbitration Awards Entitled to Deference on Questions of Law?
Although the Arbitration Act, SBC 2020, c.2, s.59,
gives a right to seek leave to appeal on any question of law, the
issues of what is a question of law and the proper standard of
review of a question of law have both proved vexing.
Arbitrators very commonly are required to determine the meaning of
contractual terms. So, the question of whether this raises an issue
of law or not is critical.
This question appeared to be resolved in 2014. In Sattva
Capital Corp. v. Creston Moly Corp., 2014 SCC 53, the Court
ruled that contractual interpretation was no longer a question of
law. Since contractual interpretation involves issues of mixed fact
and law it is an exercise of interpreting the words in their
factual context. Parties may identify an "extricable"
legal error from a judge's contractual interpretation, though
these would be admittedly rare. The Court further ruled that any
issue of law should be reviewed on a reasonableness standard. This
reasonableness standard had at that point been typically applied to
decisions of administrative tribunals. The Court ruled that the
arbitral context was sufficiently similar to import that standard
of review. In 2017, the Supreme Court in Teal Cedar Products
Ltd. v. British Columbia, 2017 SCC 32 applied and affirmed the
approach in Sattva. As a result of these decisions, arbitral
appeals became arguably more difficult to mount: see e.g.
Richmont Mines Inc. v. Teck Resources
Limited, 2018 BCCA 452.
Vavilov Was Interpreted as Revisiting this Question
Whatever confidence in the new legal tests related to appeals
from arbitral awards was achieved by Sattva and Teal was indirectly
shaken in 2019 in the Supreme Court of Canada's comprehensive
reformulation of administrative law standard of review principles
in Canada (Minister of Citizenship and Immigration) v.
Vavilov, 2019 SCC 65 and its companion case, Bell Canada
v. Canada (Attorney General), 2019 SCC 66. While
Vavilov confirmed that the standard of review for
administrative decision makers is to be presumptively
reasonableness, one of the limited exceptions to that rule
identified by the SCC was where the legislature provides for a
statutory right of appeal. In that case, the majority in
Vavilov held that the word "appeal" carries with
it the legislative intention that the challenge to the
decision-maker should follow the appellate standards of review, not
the administrative ones. The appellate standards of review require
that questions of law be approached on a non-deferential,
correctness standard while factual and mixed fact and law questions
are approached on a deferential, palpable and overriding error
standard.
Vavilov also discounted the idea that a deferential
standard of review of reasonableness was justified on the basis of
the expertise of an administrative decision-maker. This reasoning
had been particularly important in Sattva, which justified
deference in part on the basis that parties often chose subject
matter experts to arbitrate their dispute.
Vavilov did not directly address appeals from arbitral
awards, thereby creating a stir within the arbitration community:
what now?
A number of trial courts grappled with this question. Some held
that Sattva was still good law and the standard of review on appeal
from an arbitral award on a question of law was reasonableness:
Ontario First Nations (2008) Limited Partnership v. Ontario
Lottery And Gaming Corporation, 2020 ONSC 1516; Cove
Contracting Ltd. v. Condominium Corporation No 012 5598 (Ravine
Park), 2020 ABQB 106; Allstate Insurance Co. v. Ontario
(Minister of Finance), 2020 ONSC 830. Others found the logic
of Vavilov compelling: Buffalo Point First Nation v.
Cottage Owners Association, 2020 MBQB 20; Northland
Utilities (NWT) Limited v. Hay River (Town of), 2021 NWTCA 1;
Clark v. Unterschultz, 2020 ABQB 338. Other courts, most
notably in BC, declined to answer the question: Nolin v.
Ramirez, 2020 BCCA 274; Allard v. The University of
British Columbia, 2021 BCSC 60. There was an apparent conflict
in the law.
The Supreme Court Declines
Wastechwas an appeal from an arbitral award, thereby presenting the
Supreme Court of Canada with an opportunity to, once more, address
the question of the appropriate standard of review. At issue was an
arbitrator's finding that Metro Vancouver had breached the duty
of good faith in the contract by exercising its discretion in a
manner that deprived Wastech the opportunity to meet certain profit
targets in a calendar year. This finding was appealed, and leave
was granted in an earlier decision, with two questions of law posed
to the trial court regarding the duty of good faith in the
contract. The appeal was allowed at the Supreme Court of British
Columbia and the Court of Appeal. The Supreme Court of Canada
dismissed the appeal. However, one issue on which the majority and
a three judge minority diverged was on whether to answer the
burning question of how to reconcile Sattva and
Vavilov.
The majority declined to address the matter. It was not directly at
issue. Three judges, Brown, Rowe, and Cote JJ., concluded that this
matter needed resolution. For the three judges, Vavilov
had indeed changed the law related to statutory appeals from
arbitral awards. They reasoned that, while there are differences
between arbitration and administrative decisions, the
legislature's decision to provide for statutory rights of
appeal must mean that appellate standards of review apply as a
matter of statutory interpretation. Further, the minority held, the
interpretive exercise mandating effect be given to the legislative
decision to provide for appeal is unaffected by arguments in favour
of deference to arbitrators, including the parties' autonomy in
selecting a decision-maker. When the legislature says
"appeal", it means to appeal, which includes the
appellate standards of review. Finding otherwise would undermine
the decision in Vavilov.
Conclusion
For now, uncertainty remains as to the applicable standard of review on a statutory appeal of an arbitral decision on a question of law. Three judges of the Supreme Court of Canada might be enough to create momentum in favour of applying Vavilov. Unsuccessful parties may be advised to pursue a question of law and give a court the opportunity to decide their case on a correctness standard.
For many parties, the appeal of arbitrations is the promise of an earlier and final private resolution. For those seeking certainty British Columbia's new Arbitration Act in s. 59 allows parties to provide in their arbitration agreement that the parties may not appeal any question of law arising out of the arbitral award. Rather than awaiting the final word from the courts, parties may want to more closely consider whether they can control appeal rights in their contracts.
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.