Why this Case Matters
The standard of review of appeals arising from domestic arbitration awards is an issue that continues to divide lower courts. Recently, the Ontario Superior Court of Justice addressed the issue in the decision of Burwell v. Wozniak.
While the decision raises interesting issues surrounding the creation of trusts and proprietary estoppel, our focus in this post is the commentary on the standard of review of arbitral awards, and how, in this case, the court determined that the appellate standard of review applied.
Factual Background
Mr. Burwell and Ms. Wozniak were in a relationship from 2010 to 2014. During this time, Mr. Burwell founded Fusebill Inc. In 2011, Mr. Burwell founded a family trust. During a brief separation in that same year, Mr. Burwell sent an email pledging to make Ms. Wozniak the sole beneficiary of his family trust. In an effort to reconcile, Mr. Burwell then appointed Ms. Wozniak as the beneficiary under his trust, which would own all shares of Fusebill.
Ultimately Mr. Burwell continued to hold his own personal shares of Fusebill, alongside the shares his trust owned. When the relationship ended yet again, Ms. Wozniak claimed 50% of Mr. Burwell's personal shares along with the shares held by the trust.
The dispute between the parties was addressed in an arbitration. Ms. Wozniak was successful and was awarded 50% of the value of the shares.
Mr. Burwell sought leave to appeal the arbitrator's award pursuant to s. 45 (1), of theArbitration Act, 1991, SO 1991, c 17. Leave was granted on the grounds that the arbitration award significantly affected Mr. Burwell's financial position and that rectifying any identified errors would alter the arbitrator's award.
The Court's Analysis and Decision
Once leave was granted, the court had to consider the standard of review of the appeal.
Ms. Wozniak argued that the appropriate standard was reasonableness as established by the Supreme Court of Canada in Sattva1, where the Court held that, for private arbitrations, questions of law attract a reasonableness standard unless the question is one that would attract a correctness standard (e.g., constitutional questions). The court confirmed this approach in Teal Cedar.2
On the other hand, Mr. Burwell claimed the appellate standards of review applied, relying on the Supreme Court's decision in Vavilov that post-dated Sattva and Teal Cedar. In Vavilov,3 the Supreme Court ruled that appellate standards of review apply to statutory appeals of administrative decisions. The case, however, did not arise in an arbitral context. Despite having the opportunity to address the standard of review of arbitral award when the issue was before the Supreme Court in Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, the court declined to provide that clarity. What has followed is four years of varied decisions and no clear consensus in the Court of Appeal for Ontario as to whether Sattva remains good law after Vavilov.4
In this case, the Superior Court judge found that Sattva and Teal Cedar are no longer binding following the significant development in the law since they were released. Sattva relied heavily on the Supreme Court's earlier decision in Dunsmuir v. New Brunswick, 2008 SCC 9, which was superseded by Vavilov.
Considering the approach in Vavilov, the court started with the presumption that reasonableness is the applicable standard. Then, the court looked to the legislature's intention and the words of the Arbitration Act. Section 45 of the Act provides for a statutory appeal mechanism, which means that the legislature expects the court to scrutinize the decision on an appellate basis. According to the court, just because the statutory appeal mechanism arises in the context of an arbitration does not change the need to give effect to the legislature's intention.
Finally, the court accepted that the strongest counterarguments against applying appellate standards of review are the policy arguments. Courts effectively retrying arbitrations on appeal would undermine the central aims of arbitration—efficiency and finality—and would not respect the relative expertise of the arbitrators chosen by the parties over the courts. However, these considerations are mitigated when the parties explicitly include an appeal process in their arbitration agreements that refers to the appeal provisions of the legislation.
Concluding Thoughts
The decision in Burwell marks a key development in the court's post-Vavilov approach to determine the applicable standard of review in appeals of domestic arbitral awards. While the decision provides a helpful framework to approaching this issue, appellate court guidance remains elusive.
Footnotes
1. Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53.
2. Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32.
3. Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65.
4. See the varied decisions in Travelers Insurance Company of Canada v. CAA Insurance Company, 2020 ONCA 382; Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corporation, 2021 ONCA 592; and Tall Ships Development Inc. v. Brockville (City), 2022 ONCA 861.
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