Canada – Arbitrator’s Award Set Aside on Basis that it was “Arbitrary and Irrational”

Sep 2021

This article first appeared on the Arbitration Matters blog, here.

In Shahcheraghi v Divangahi, 2021 BCSC 1576, Justice Horsman set aside the award of an arbitrator of the Residential Tenancy Branch (“RTB”) and remitted the matter back to the RTB for a new hearing, either by the same arbitrator or someone else assigned by the RTB.  She found that the arbitrator’s reasons were inadequate for the parties to understand the rationale for the decision:

“[53]… I wish to be clear that my concern with the Arbitrator’s decision is the reasoning process, which in my view is insufficient to serve the basic function of reasons in allowing the parties to understand why the decision was reached…The point is that [certain] issues are unexplored in the Arbitrator’s decision. It is not the role of the reviewing court to re-write the Arbitrator’s reasons so as to arrive at a new rationale that might support the outcome.”

The Landlord applied to the court for judicial review of the award of the RTB arbitrator pursuant to the Residential Tenancy Act, S.B.C. 2002, c. 78. The arbitrator’s award addressed cross-applications by the parties following the termination of the tenancy. The Tenant applied for the return of her rental deposit. The Landlord applied to recover unpaid rent, compensation for damage to the rental unit, and permission to retain the security deposit. In the award, success was divided.  

The Landlord argued on the application for judicial review that the arbitrator’s decision was patently unreasonable (the applicable standard of review under s. 58 of the Administrative Tribunals Act, S.B.C. 2004, c. 45) and that the reasons were so deficient that it was impossible to discern the rationale for the arbitrator’s conclusions. The Landlord argued that the arbitrator’s reasoning on each of the contested issues did not permit the parties or the reviewing court to understand the rationale for the arbitrator’s conclusions and that highly relevant evidence put forward by the Landlord was simply ignored. The Landlord said the arbitrator’s decision largely consisted of a series of conclusory statements without an articulation of the path of reasoning that led to his conclusions. 

The Tenant emphasized the highly deferential standard of review that applies to the arbitrator’s factual and legal findings under the RTB. The impugned findings of the arbitrator were based on the parties’ testimony and the evidentiary record. As there was some evidence to support the findings, it cannot be said that the decision was patently unreasonable.

Justice Horsman disagreed with the Tenant’s position. She reviewed each of the issues in dispute and summarized the various deficiencies in the award. With respect to the issue of the amount of monthly rent, she found that the arbitrator had failed to meaningfully address, or even reference, highly relevant and apparently cogent evidence that was central to the Landlord’s submission, which made the decision arbitrary and irrational. With respect to the issue of the amount of rent paid, she found that the arbitrator had calculated an amount that was not put forward by either party without explaining how he arrived at that number.  With respect to the issue of whether the Landlord could recover amounts paid to repair damage to the tenancy premises, the Landlord adduced relevant evidence, which the arbitrator found was insufficient without explaining the rationale for this conclusion. With respect to the issue of whether the Landlord was required to return the Tenant’s security deposit, the arbitrator failed to acknowledge or assess the central argument and evidence by the Landlord.

Justice Horsman also set out the minimum standards required for reasons of an arbitrator under the Act:

[33] The reviewing court must be mindful of the institutional context within which the statutory decision maker functions. The dispute resolution process under the RTA is intended to be a relatively informal and expeditious procedure. The reasons of an arbitrator under the RTA are not to be held to the standard expected of [a] superior court judge. However, such decisions must, at minimum, set out the adjudicator’s findings of fact and the principal evidence upon which those findings were made, and apply the findings of fact to the test to be met in a manner that will allow the parties, and the reviewing court, to understand how and why the decision was reached: Laverdure v. First United Church Social Housing Society, 2014 BCSC 2232 at para. 35 [Laverdure]. While an arbitrator need not necessarily address every piece of evidence provided by the parties, relevant evidence on key issues cannot simply be ignored: Powell v. British Columbia (Residential Tenancy Branch), 2016 BCSC 1835 at paras. 57–58.

[36] In my view, the Arbitrator’s reasons do not meet the minimum standard articulated in Laverdure, and which has consistently been applied in subsequent decisions of this Court. See for example: Martin v. Barnett, 2015 BCSC 426 at paras41-42; Christiansen v. Harwood, 2015 BCSC 1440 at para20; Marshall v. Pohl, 2019 BCSC 406 at paras. 21–22; Chishuan Housing Society v. Silver, 2021 BCSC 1074 at paras71–74. … I conclude that the Arbitrator’s findings of fact on the critical issues do not allow the parties and the reviewing court to understand how and why the decision was reached, or why seemingly relevant evidence of the Landlord was ignored or rejected.

Editor’s Notes:

First, Laverdure v First United Church Social Housing Society, 2014 BCSC 2232 provides a detailed review of the case law on whether the reasons given by a statutory arbitrator (in that case a Dispute Resolution Officer under the Residential Tenancy Act, S.B.C. 2002, c. 78) are so inadequate as to attract a finding of patent unreasonableness. The threshold that must be met is relatively low:

“[35] What I take from my review of all of the authorities to which I was referred is that for the reasons of a Dispute Resolution Officer to be adequate, they must:

(1) Set out the legal test to be met by the party advancing its claim;

(2) Set out the adjudicator’s findings of fact and the principal evidence upon which those findings were made; and

(3) Apply those findings of fact to the test to be met in reaching a conclusion that will allow the parties and others (including a reviewing court) to understand how and why the adjudicator reached that decision.

[36] That need for the reasons given to be understandable is the key to determining their adequacy.

[37] In short, for reasons to be adequate, they need not necessarily address every issue raised by the parties nor all of the evidence adduced, but on the central issue or issues that underlie the conclusion reached there must be sufficient clarity of fact finding and application of those facts to the test to be met to allow the parties and a court to know why the decision was reached and whether it was within a range of acceptable outcomes”.

Second, it is interesting that Justice Horsman found that the reasons of an arbitrator in this context need not meet the standards required of a judge. In this case, it appears that the arbitrator’s reasons would have been deficient in any context.  For recent Case Notes which address the sufficiency of the reasons contained in arbitral awards in other contexts, including in commercial arbitrations,  see: Ontario – length/brevity of reasons in award not equal to reasonableness/insufficiency – #202B.C. – agreement to accept summary reasons is not acceptance of insufficient reasons – #217Ontario – tests for adequacy of reasons and for remitting awards considered and applied – #245 and Ontario – adequate reasons serve to justify/explain result so losing party knows why it lost – #320.

author

Lisa Munro

Lisa Munro is a partner at Lerners LLP, whose practice is limited to work as an arbitrator in domestic and international commercial arbitrations (both ad hoc and under institutional rules). She brings to this role more than 25 years of experience as counsel in commercial/business litigation and both international and…

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