Alberta Court Issues Wide-Ranging Judgment on Settlement and Mediation of Arbitrations

In Pinder v. Woodrow, the Alberta Court of Queen’s Bench recently issued a judgment addressing a number of arbitration and mediation issues. The judgment arose from a settlement that in turn arose from a mediation conducted during the course of the arbitral hearing. As a result, the court dealt with a number of issues that are not frequently addressed in arbitration law. In particular, the judgment of the court dealt with the formalities –or lack thereof- that should be met in conducting a mediation and concluding a settlement during an arbitration. In Canada, there are two regimes relating to whether arbitrators may act as mediators. So this decision, while it involved a matrimonial dispute, is of interest to all those engaged in arbitral law.


The parties entered into an arbitration agreement to deal with a number of matrimonial issues.  The agreement was subject to the Alberta Arbitration Act (the Act).  The agreement stated that the arbitration award would be delivered within 30 days of the close of the hearing “subject to any reasonable delay due to unforeseen circumstances.” The award was to be in writing and to set out the facts found by the arbitrator, apply the relevant law and the determination of the issues in dispute. The agreement provided for an appeal to the Court of Queen’s Bench on a question of law, or with leave of the Court on a finding of fact involving a material misapprehension of the evidence.

While evidence was being given during the hearing, the parties entered into settlement discussions. The Arbitrator acted as the mediator with the agreement of the parties. The parties reached a settlement agreement. Both parties, through their counsel, advised on the record that they were in agreement with the terms of the Settlement Agreement as a final settlement. The Arbitrator submitted his final statement of account three days later.

The settlement agreement was set out in a document entitled “Settlement Terms”. It was signed by the Arbitrator, both of the parties, together with their respective counsel. It included a term that any dispute involving the content of the agreement was to be referred to the Arbitrator for binding determination.

The parties then acted in accordance with that document. The husband commenced paying child support, the wife transferred property to the husband. The husband made repeated demands that the wife comply with all aspects of that document.

Two months after the document was signed, the wife’s counsel applied to the arbitrator for relief, taking the position that the arbitration had been adjourned and that it was still open to the arbitrator to continue the arbitration and issue a final award. The wife alleged that the arbitration had not been formally concluded and that it was still open to the parties to reach a full and final settlement, that the settlement document was not an Arbitral Award within the meaning of the arbitration agreement or the Act, that errors were made during the process that necessitated a remedy; and that the arbitrator retained jurisdiction to deal with these matters.

Counsel for the parties appeared before the arbitrator. After that appearance, the arbitrator issued a written decision in which he stated that the settlement agreement was his final award and he refused to grant any relief to the wife.  The next day, the wife filed an application appealing the arbitrator’s decision of the prior day.

Decision of the Court

The judge hearing the application made a number of decisions:

  1. Reasons for Decision in a Settlement: The requirement, in s. 36 of the Act – that an arbitrator give reasons for decision – does not apply when the parties settle the dispute during the arbitration.
  1. Ingredients of an Arbitral Decision: The settlement agreement complied with the other requirements of s. 38 of the Act, namely that it be signed by the Arbitrator, and indicate the date and place where it was made. The settlement document should be examined in conjunction with the executed Certificates of Independent Legal Advice, the Matrimonial Property Act acknowledgements signed by both parties and their counsel, the attachments to the agreement, and the content of the record from December 13, 2013 in which the parties confirmed their agreement with the settlement. In totality, those documents set forth the date of the settlement agreement and the place where it was made.
  1. Settlement Document may be an Arbitral Decision: The fact that the document was entitled “Settlement Terms” and was not referred to as an arbitration award was of no significance. “It was, in fact, an arbitral award and treated by all concerned as such until a much later date, well after the expiration of the 30 day appeal period…Further, there is nothing in the Act or the agreement which prescribes the form of an arbitration award, just that it comply with the requirements of s. 38.”
  1. Natural Justice, Fairness and Equal Treatment: While the wife was not present during some portions of the hearing, her counsel was present. Accordingly there was no breach of the rules of natural justice nor did the process result in either unfair or unequal treatment of the wife.
  1. Process for converting from Arbitration to Mediation: The conduct of the parties during the hearing – leading to the mediation – was sufficient to satisfy the requirements of s. 35(1) of the Act relating to the conversion of the arbitration to a mediation.

Subsection 35(1) says: “The members of an arbitral tribunal may, if the parties consent, use mediation, conciliation or similar techniques during the arbitration to encourage settlement of the matters in dispute.” (emphasis added)

The parties’ conduct during the arbitral hearing was a sufficient “consent” by the parties to convert the arbitration into a mediation. The court held that there was no need for that process to be “explicit, formal, on the record and take place in advance of the conversion of the process.” The Act contains no ‘formula or “recipe”’ for that consent, and that is “consistent with the overall objective of the legislation – to provide a flexible mechanism to litigants that potentially assists them in the resolution of their dispute outside of the formal court process….Both parties were represented by experienced counsel throughout the process. From their agreement to submit this matter to arbitration, the parties must be assumed, in the absence of any evidence to the contrary, to have understood the flexible nature of the process, including that the process could shift from one mode of dispute resolution to another as circumstances dictated.”

The judge did say that “it would have been preferable if the transcript had recorded the proceedings that led the parties and the Arbitrator to shift from arbitration mode to mediation mode.” However, there was no evidence indicating a lack of consent, and there was “very explicit agreement of both parties that is contained on the record at the conclusion of the proceedings.” On the whole record, the judge was satisfied that the parties had consented to shifting from an arbitration to mediation and that the requirements of s. 35 were met.

  1. Time to Appeal: The wife’s appeal was outside the 30-day period in the Act for an appeal to be brought. The settlement document was a valid arbitration award within the meaning of s. 38 of the Act. Once the 30-day period expired after the release of that document, then the arbitrator no longer had jurisdiction over the dispute. Neither the Act nor the agreement between the parties allowed for an extension of the 30-day period. The arbitrator’s later decision which dismissed the wife’s application to re-open the matter was of no legal significance or consequence, even though it was entitled “Arbitration Award”.


This decision will be a useful reference anytime settlement discussions occur during an arbitration, and anytime the parties consider engaging in mediation during an arbitration.

The first issue is: how should the parties and the arbitrator record the process by which a settlement is reached during an arbitration?

Section 35(1) of the Alberta Arbitration Act says that “the members of an arbitral tribunal may, if the parties consent, use mediation, conciliation or similar techniques during the arbitration to encourage settlement of the matters in dispute.” (emphasis added) And subsection (2) then says that “after the members of an arbitral tribunal use a technique referred to in subsection (1), they may resume their roles as arbitrators without disqualification.” These subsections state the premise behind section 36 and the policy behind the Alberta Act, namely, that members of the arbitral tribunal may mediate the dispute if the parties consent, and then if the mediation is unsuccessful, they may revert to their position as members of the arbitral tribunal.

This policy position is quite different than that in some other provincial arbitration statutes. Thus, the Ontario Arbitration Act, 1991 states as follows: “The members of an arbitral tribunal shall not conduct any part of an arbitration as a mediation or conciliation process or other similar process that might compromise or appear to compromise the arbitral tribunal’s ability to decide the dispute impartially.”

However, section 3 of the Ontario Act says that, except with respect to certain specific sections, the parties may contract out of the Act. Section 35 and the section dealing with appeals (section 45 in the Ontario Act) are not listed in section 3, so the parties may contract out of them. In addition, under the Ontario Act, the parties could still engage in settlement discussions and mediation: the only prohibition (unless the parties otherwise agree) is that the members of the arbitral tribunal cannot be the mediators.

[This distinction in policy choices is expressly contained in the Uniform Arbitration Act of the Uniform Law Conference of Canada. Section 35 of the Uniform Act contains an Option A and an Option B. Option A is the one chosen by Alberta. Option B is that chosen by Ontario. The Commentary to Section 35 states:

“Enacting jurisdictions may choose either to allow the arbitrators to practise mediation and conciliation or to forbid them from doing so. The Uniform International Commercial Arbitration Act allows the arbitrators to engage in mediation on the consent of the parties. The present statute provides for a single consent at the beginning of mediation, without a separate consent when the arbitrator goes back to arbitrating, the mediation presumably having failed. The reason for eliminating the double consent found in the international statute was to prevent a party from subverting an arbitration in bad faith at the end of mediation, by refusing consent to return to arbitration. The reason for forbidding a change of role is that a mediator or conciliator may learn things from one party in confidence that he or she may not disclose to the other parties. Knowing this information might be perceived to prevent a judicial disposition of the case on the merits if the person then returns to arbitration.”]

Section 36 of the Alberta Arbitration Act then says that “If the parties settle the matters in dispute during arbitration, the arbitral tribunal shall terminate the arbitration and shall record the settlement in the form of an award.” As noted above, section 38(1) says that “An award shall be made in writing and, except in the case of an award made under section 36, shall state the reasons on which it is based.” (emphasis added).

So it is seems clear that a settlement during an arbitration should be recorded in something called “Award”, even though most litigation counsel might consider a settlement agreement to be an agreement between the parties, not an “award” of the tribunal. It also seems clear from section 38(1) that the settlement “Award” will not contain reasons, and the judge so concluded.

Sub-sections 38(2)-(4) of the Alberta Act say that: an award shall “indicate the place where and the date on which it is made” and “be dated and signed by all the members of the arbitral tribunal, or by a majority of them if an explanation of the omission of the other signatures is included”; and that “a copy of an award shall be served on each party.” (emphasis added) In these subsections, there is no exception for settlements under section 36. So, while one may wonder why these requirements should apply to a settlement, it seems that they do and that they must be met even if the “award” is a settlement.

Under sections 36-38 of the Ontario Act, these requirements apply to a settlement “Award”, even though the members of the arbitral tribunal cannot be the mediator.

The court in the present case demonstrated flexibility in considering all the surrounding facts in order to ensure that the technical requirements of section 38(2)-(4) are met. However, arbitrators and arbitral parties should be aware of these requirements – date, place, signature, service. These requirements should be addressed in the document which the arbitral tribunal issues as its “award” or in some other formal documentation, so that other documents or the surrounding circumstances do not have to be relied upon to provide those elements.

The second issue is: how should the parties’ consent to mediation during the arbitration be evidenced?

In the present case, the judge was satisfied by all of the surrounding evidence – and particularly the documentation after the settlement was made – that the parties had consented. But the judge did say that it would have been better if the “conversion” from arbitration to mediation had been recorded in the transcript of the hearing before the mediation commenced, and possibly in some formal Consent signed by the parties at that time. So counsel and arbitral tribunals in the future might be well advised to adhere to this advice in the future.

Should these requirements, and the same approach to them, apply if the members of the arbitral tribunal cannot be the mediator, as in Ontario (unless the parties contract out of section 35 of the Ontario Act)? Could one argue for a more lax – or stricter – regime when the mediator is a separate person? We will have to await a further decision on that point.

A third issue may be raised by this decision: if the wife’s application to the court related to the conduct or legal issues arising from her application to the arbitrator the day before (what might be called the “re-hearing application”), would it have been out of time?

In the present case, the wife appears to have been complaining about issues that related back to the matters leading up to the settlement. She does not appear to have been complaining about the specific events or legalities of her re-hearing application the day before to the arbitrator. In this situation, the arbitrator and the court found that her application was out of time. But if she had been asserting that her re-hearing application had not been properly dealt with, how should the court have dealt with the timing issue? Did the arbitrator’s disposition of her re-hearing application amount to an arbitral award from which judicial review or an appeal would lie? Does the Act provide any relief in respect of such an application? The present decision did not have to answer those questions.

See Heintzman and Goldsmith on Canadian Building Contracts, 5th ed. Chapter 11

Pinder v. Woodrow, 2015 CarswellAlta 2182, 2015 ABQB 750

Arbitration – mediation – settlement – re-hearing application – appeal and review of arbitral awards

Thomas G. Heintzman O.C., Q.C., FCIArb                                   January 24, 2016


The Supreme Court Of Canada Proclaims 10 Rules For The Interpretation Of Contracts And The Review Of Arbitration Awards

The Supreme Court of Canada’s recent decision in Sattva Capital Corp. v. Creston Moly Corp. is a remarkable document. It is more than a judicial decision. It is literally a textbook or checklist for the interpretation of contracts and the review of arbitration decisions.


First, the context. Creston agreed to pay Sattva a finder’s fee in relation to its acquisition of a mining property.  The parties agreed that Sattva was entitled to a finder’s fee of US$1.5 million and was entitled to be paid this fee in shares of Creston. They disagreed on which date should be used to price the shares and therefore the number of shares to which S was entitled.  S argued that the share price was to be fixed on one date, and therefore it was entitled to about 11,460,000 shares priced at $0.15.  C claimed that the proper date was the date when the compensation was payable, that the agreement’s “maximum amount” proviso prevented S from receiving shares valued at more than US$1.5 million on that date and therefore that S should receive approximately 2,454,000 shares priced at $0.70.  The parties agreed to arbitrate their dispute under the B.C. Arbitration Act.

The arbitrator found in favour of Sattva.  Creston was denied leave to appeal on the basis that the issue was not a question of law.  The Court of Appeal reversed that decision and granted C’s application for leave to appeal, finding that the arbitrator’s failure to address the meaning of the agreement’s “maximum amount” proviso raised a question of law, and remitted the matter to the superior court.

The superior court judge then dismissed C’s appeal from the arbitrator, holding that the arbitrator’s interpretation of the agreement was correct.  The Court of Appeal allowed C’s appeal, finding that the arbitrator reached an absurd result.  The Court of Appeal also held that the superior court judge was bound by the Court of Appeal’s prior decision. S appealed to the Supreme Court of Canada which re-instated the decisions of the arbitrator and the superior court judge.

Decision of the Supreme Court of Canada

Here are the major pronouncements in the Supreme Court’s decision. They are not listed in the decision in this way but they appear to be the major grounds for the decision.

  1. A contract should be interpreted in light of the surrounding circumstances.

The Supreme Court held that a contract should be interpreted in light of all the surrounding circumstance. Moreover, doing so does not contradict the parol evidence rule. The court said:

“The parol evidence rule does not apply to preclude evidence of the surrounding circumstances. Such evidence is consistent with the objectives of finality and certainty because it is used as an interpretive aid for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words.”

  1. The interpretation of a contract is a question of mixed fact and law, not a question of law.

The Supreme Court held that, except in the “rare” instances in which an “extricable question of law” can be found, the interpretation of a contract is a matter of mixed fact and law, not a matter of law. The court acknowledged that historically, the determination of the rights and obligations under a contract was considered a question of law. However, Justice Rothstein, speaking for the unanimous court, said that rule should no longer apply:

“I am of the opinion that the historical approach should be abandoned.Contractual interpretation involves issues of mixed fact and law as it is an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix.”

Justice Rothstein said that it “may be possible to identify an extricable question of law from within what was initially characterized as a question of mixed fact and law” but that “courts should be cautious in identifying extricable questions of law in disputes over contractual interpretation.”

  1. Leave cannot be granted to appeal the interpretation of a contract by an arbitral tribunal award if the test for granting leave is “a question of law”

Under the arbitration statutes of most provinces, leave to appeal from the arbitrator’s award can be granted if there is a question of law involved. A strong argument can be made that the whole regime relating to appeals from arbitral awards was premised on the historical assumption that the interpretation of a contract was a matter of law. In Sattva, the Supreme Court held that an interpretation of a contract does not raise a question of law, and so it held that leave to appeal should not have been granted in this case. So in the future, and except in rare instances, a court may no longer grant leave to appeal to determine if the arbitrator was correct in his or her interpretation of the contract.

This decision goes affects much more than applications for leave to appeal. It affects any legal regime relating to the interpretation of a contract. For example, if the parties agree to an appeal on a point of law – and most of the provincial and territorial arbitration statutes allow the parties to do so – now such an agreement will not allow an appeal concerning the interpretation of the agreement.

Accordingly, this decision will require that parties proposing to enter into an arbitration agreement re-think how they express in their agreement the rights of appeal from the arbitral decision. If they intend that the interpretation of the contract by the arbitral tribunal is to be appealable, then it is no longer sufficient for them to provide for an appeal on a question of law. They must now provide for an appeal on a question of mixed fact and law.

In addition, many provincial and territorial arbitration statutes – including British Columbia’s – do not allow the parties to agree to an appeal from an arbitral decision on a question of mixed fact and law, only on a question of law. Under this decision of the Supreme Court of Canada, none of those statutes will now allow the parties to include a review of the interpretation of a contract as a ground of appeal. A whole subject of contract law has potentially been removed from the court’s review.

  1. The test for leave to appeal is “arguable merit”

The Supreme Court of Canada held that the test for a superior court to apply when considering an application to appeal from an arbitral award is “arguable merit.” The test may be described in many different ways using different words, but they come down to these two words.

This test is met if “the issue raised by the applicant cannot be dismissed through a preliminary examination of the question of law. In order to decide whether the award should be set aside, a more thorough examination is necessary and that examination is appropriately conducted by the court hearing the appeal once leave is granted.” In the case of legal issues, “the appropriate threshold ….is whether it has arguable merit, meaning that the issue raised by the applicant cannot be dismissed through a preliminary examination of the question of law.”

  1. The court has a residual discretion not to grant leave to appeal

Even if the court considers that the appeal has arguable merit, the Supreme Court of Canada has confirmed that the court has a residual discretion not to grant leave to appeal. Discretionary factors to consider in a leave application include:

o   the conduct of the parties

o   existence of alternative remedies

o   undue delay and

o   the urgent need for a final answer.

However, “courts should exercise such discretion with caution.” If the court finds an error of law and a potential miscarriage of justice, then the discretionary factors “must be weighed carefully before an otherwise eligible appeal is rejected on discretionary grounds.” There should be no double-counting of the relevant factors. For example, “respect for the forum of arbitration chosen by the parties is a consideration that animates the legislation itself and can be seen in the high threshold to obtain leave…Recognition that arbitration is often chosen as a means to obtain a fast and final resolution tailor-made for the issues is already reflected in the urgent need for a final answer.” So this factor should not be counted again in exercising a residual discretion not to grant leave to appeal.

In considering misconduct in relation to this residual discretion, the court said that the misconduct of a party need not be directly relevant to the question of law in issue in the appeal.

  1. The exercise of discretion should be reviewed by an appellate court with deference

The Supreme Court held that a discretionary decision by the court considering an application for leave to appeal from an arbitral award should be reviewed by another court with deference. An appellate court “should not be interfered with merely because an appellate court would have exercised the discretion differently… An appellate court is only justified in interfering with a lower court judge’s exercise of discretion if that judge misdirected himself or if his decision is so clearly wrong as to amount to an injustice.”

  1. The review of an arbitral decision is not by way of judicial review applicable to administrative tribunals

The Supreme Court drew an important distinction between the review of an arbitral decision by a superior court under the statutes applicable to commercial arbitrations, and a review of the decision of an administrative tribunal by way of judicial review. Arbitral review is not judicial review in the latter sense. Appellate review of arbitral awards “takes place under a tightly defined regime specifically tailored to the objectives of commercial arbitrations and is different from judicial review of a decision of a statutory tribunal.” As the court pointed out, “for the most part, parties engage in arbitration by mutual choice, not by way of a statutory process. Additionally, unlike statutory tribunals, the parties to the arbitration select the number and identity of the arbitrators.” Furthermore, in the arbitration statutes of some provinces and territories (like British Columbia, but unlike the arbitration statutes in many other provinces and territories), the court is prohibited from reviewing an arbitral tribunal’s factual findings. However, in the judicial review of administrative tribunals, a prohibition against the review of an administrative tribunal’s factual findings “signals deference” under the Supreme Court’s decision in Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190.

  1.    The Dunsmuir test may be helpful to the review of arbitral awards

The Supreme Court did find, however, that the standard of review developed for administrative tribunals may be relevant or useful to the appeal or review of arbitral awards. The court said the two systems of review are:

“analogous in some respects. Both involve a court reviewing the decision of a non-judicial decision-maker. Additionally, as expertise is a factor in judicial review, it is a factor in commercial arbitrations: where parties choose their own decision-maker, it may be presumed that such decision-makers are chosen either based on their expertise in the area which is the subject of dispute or are otherwise qualified in a manner that is acceptable to the parties. For these reasons, aspects of the Dunsmuirframework are helpful in determining the appropriate standard of review to apply in the case of commercial arbitration awards.”

In applying the Dunsmuirtest, the Supreme Court said the following:

“In the context of commercial arbitration, where appeals are restricted to questions of law, the standard of review will be reasonableness unless the question is one that would attract the correctness standard, such as constitutional questions or questions of law of central importance to the legal system as a whole and outside the adjudicator’s expertise …The question at issue here, whether the arbitrator interpreted the Agreement as a whole, does not fall into one of those categories. The relevant portions of the Dunsmuiranalysis point to a standard of review of reasonableness in this case.”

  1.    The Court may supplement the reasons of the arbitral tribunal

The Supreme Court of Canada held that, in considering an application for leave to appeal from an arbitral award, the court may supplement the award by its own analysis before undermining the award by finding it deficient. The court quoted from its decision in Newfoundland and Labrador Nurses’ Union v. Newfoundland and Labrador (Treasury Board), [2011] 3 S.C.R. 708:

“even if the reasons in fact given do not seem wholly adequate to support the decision, the court must first seek to supplement them before it seeks to subvert them. For if it is right that among the reasons for deference are the appointment of the tribunal and not the court as the front line adjudicator, the tribunal’s proximity to the dispute, its expertise, etc, then it is also the case that its decision should be presumed to be correct even if its reasons are in some respects defective.” (underling in both decisions)

The Supreme Court proceeded to supplement the decision of the arbitral tribunal by its own reasoning. Having done so, it concluded that the interpretation of the contract by the arbitral tribunal award met the reasonableness standard and upheld the award.

10.   The Leave to Appeal decision is not binding in subsequent hearings

The B.C. Court of Appeal had held that its previous decision granting leave to appeal, and the factual findings in that decision, were binding on the superior court judge and on itself during the subsequent hearings. The Supreme Court held that this was wrong:

“A court considering whether leave should be granted is not adjudicating the merits of the case… A leave court decides only whether the matter warrants granting leave, not whether the appeal will be successful…. This is true even where the determination of whether to grant leave involves, as in this case, a preliminary consideration of the question of law at issue. A grant of leave cannot bind or limit the powers of the court hearing the actual appeal.”


This decision has a profound impact on the interpretation of contracts and the appeal and review of arbitral decisions. Some time is required to reflect upon and absorb the decision. The following comments are only a first stab at its full implications.

The decision apparently reduces the authority of the superior court to review arbitral decisions in two respects.

First, it reduces the grounds upon which an existing arbitration agreement may give rise to appellate review: except in rare instances, no leave to appeal on a matter of law may be granted to review the correctness of the interpretation of a contract by an arbitral tribunal, and an agreement providing for an appeal on a matter of law will not encompass such a review.

Second, it reduces the ability of parties to future arbitration agreements to agree on appellate review of the correctness of the interpretation of a contract by an arbitral tribunal; if the applicable arbitration statute does not permit the parties to agree to an appeal on a question of mixed fact and law, then no such appellate review appears possible.

The decision also provides guidance on the practice which applies to applications for leave to appeal from arbitral awards. This guidance particularly applies to the scope of the court’s discretion, the impact of a party’s improper conduct upon the exercise that discretion, the non-binding effect of the leave to appeal decision and the scope of the reviewing court’s entitlement to supplement the reasoning contained in the award. So while the leave to appeal door may have been partially closed by this decision, to the extent that the door is still open the decision clarifies and to some extent broadens the court’s powers to deal with the application.

Sattva v. Creston goes into the first drawer of the Contract and Arbitration tool boxes with a big red sticker on it.

Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53

Contracts – Interpretation of Contracts – Arbitration – Appeal and Review of Arbitral Awards

Discretion – Standard of Review

Thomas G. Heintzman O.C., Q.C., FCIArb                                                     August 10, 2014