Manitoba Court of Appeal confirms that the reasonableness standard continues to govern appeals from commercial arbitral awards, notwithstanding Vavilov.

Background

In Buffalo Point, the Manitoba Court of Appeal added its voice to the ongoing debate regarding standard of review applicable to appeals from commercial arbitral awards. The Court found that the Supreme Court of Canada’s decisions in Sattva Capital Corp and Teal Cedar Products remain good law such that the reasonableness standard applies.

This is in contrast with the majority of lower court decisions and other appellate court decisions that have held that the appellate standard of review applies in light of the Supreme Court’s analysis of statutory appeal clauses in Canada (Minister of Citizenship and Immigration) v. Vavilov. 

Facts

In Buffalo Point, the arbitral award under review was granted in connection with a dispute arising from a Settlement Agreement reached between the parties following several years of ongoing litigation. The underlying dispute arose in connection with a series of leases granted over land owned by the Buffalo Point First Nation (the "Nation") and the ability of the Nation to enact a taxation scheme over the properties subject to those leases.

In 1974, the Nation surrendered reserve land to the Crown to allow for leases with the Buffalo Point Development Corp. Ltd. (the "Corporation") and the development of a recreational community through sublease agreements with individual cottage owners. The Buffalo Point Cottage Owners Association (the "Association") was created to represent the cottage subleaseholders, and the Corporation and the Association established a process for the payment of fees for annual maintenance and the costs of local services.

In 2000, the Association, the Corporation, and local businesses entered into a co-management agreement establishing a joint planning committee and a process for determining the cost of services. In 2008, the structure of the agreement was revised, and a broadly framed arbitration clause was added (the "2008 Agreement"). The fees for services were calculated and paid pursuant to that 2008 Agreement until 2012. 

In 2012, the First Nations Tax Commission (the "Commission"), exercising its authority under the First Nations Fiscal Management Act (the "FMA"), elected to pursue a transition to the taxation of local property and enacted a property tax regime to be applied to the various leaseholders represented by the Association. 

Arbitration

On July 31, 2012, the Association commenced arbitration under the 2008 Agreement, arguing a breach by the implementation of the property tax regime. An award was issued in favour of the Association, and the Nation and the Corporation applied for leave to appeal. Prior to any appeal being heard, the Nation, the Corporation, and the Association arrived at a settlement agreement (the "Settlement Agreement").

The terms of the Settlement Agreement included that the Nation would enact a Taxpayer Representation to Council Law ("TRL") and submit it to the Commission. The Settlement Agreement included a binding mediation clause in case of disputes over excessive or unnecessary budget expenditures, which was recognized as a "fundamental element of the settlement between the parties." The Settlement Agreement also included a term granting the arbitrator jurisdiction to implement the Settlement Agreement in the event of any remaining remedial issue.

On September 28, 2015, the Nation passed a TRL and submitted it to the Commission. The Commission subsequently raised an inconsistency between the binding mediation process available to the Association in accordance with the Settlement Agreement and the requirements of section 5 of the FMA that the Nation itself exercise the expenditure law-making power. The Commission refused to approve the TRL. The Nation argued that, given the Commission’s refusal, its obligations under the Settlement Agreement were concluded.

The Association requested the arbitrator’s assistance under the Settlement Agreement and sought an order that the Nation use its best efforts to secure approval of the TRL with the necessary amendments. 

The arbitrator issued an award on January 11, 2017, concluding that the Nation was required to take further steps to have the TRL approved by the Commission.

The Nation then took the position that it was willing to submit a revised TRL that included non-binding mediation. However, the Association would only accept that proposal if there was an amendment to provide a monetary remedy where the Nation refused to adopt the non-binding decision. Essentially, the Association required that any non-binding decision of a mediator not adopted as part of the TRL, become a debt recoverable against the Corporation. This alternative to approval of the TRL contemplated by the Settlement Agreement was then placed before the arbitrator.

The arbitrator made a second award in connection with the Settlement Agreement in which he amended the Settlement Agreement to include the debt mechanism procedure. 

Appeal decisions

The Nation appealed the arbitrator's second award amending the Settlement Agreement to the Manitoba Court of King’s Bench. At that level, the Court overturned the arbitrator's award in reliance on a standard of correctness derived from the Supreme Court of Canada's decision in Vavilov (the "King’s Bench Decision"). The King’s Bench Decision was then subject to an appeal to the Manitoba Court of Appeal.

The first issue before the Court of Appeal was whether the appeal judge had selected the correct standard of review. The Court noted that the Supreme Court had considered the appropriate standard of review to apply to commercial arbitrations in Sattva, where the Court held that, in the context of commercial arbitration, the standard of review is 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 Court of Appeal confirmed that a commercial arbitration award was not an administrative decision necessarily captured by the correctness standard of review from Vavilov.

The Court of Appeal highlighted that the evolution of the administrative law standard of review and the review of arbitration awards has necessarily followed distinct paths and that a less interventionist or legalistic approach to review of commercial arbitration awards is justified.

It further held that, without further direction from the Supreme Court on the issue, the application of the reasonableness standard of review from Sattva and Teal Cedar was still good law and confirmed that the correctness standard set out in Vavilov did not apply to a review of a commercial arbitration award. The choice of a reasonableness standard of review for commercial arbitration awards reflected the key policy objectives of commercial arbitration, namely efficiency and finality.

Additionally, the Court of Appeal made clear that the reasonableness analysis set out in Vavilov could be applied to reviews of commercial arbitration awards. Vavilov is therefore still informative in any appeal of a commercial arbitration award.

The Court of Appeal agreed that where the issue on review from an arbitrator's award was constitutional in nature, a correctness standard would apply, creating an exception to the application of a reasonableness standard.

However, the Court of Appeal rejected the argument that the award granting an amendment to the Settlement Agreement impacted or derogated from the Nation's constitutionally protected rights of self‑government. Instead, the issue was whether the remedial action directed by the arbitrator under the Settlement Agreement was reasonable.

Ultimately, the Court held, on a reasonableness standard, that the decision of the arbitrator to amend the Settlement Agreement to provide for the debt mechanism was reasonable, as falling within the "expectations of the parties under a reasonable reading of the terms of the Settlement Agreement," and the award was upheld.

The Court’s selection of the reasonableness standard stands in contrast with other appellate decisions on point, two from the Court of Appeal for Ontario (Continental Casualty Company v. Chubb Insurance Company of Canada, 2022 ONCA 188; Travelers Insurance Company of Canada v. CAA Insurance Company, 2020 ONCA 382) and one from the Northwest Territories Court of Appeal (Northland Utilities (NWT) Limited v Hay River (Town of), 2021 NWTCA 1). The Nation has sought leave to appeal to the Supreme Court of Canada and that appeal, if heard, may provide resolution of the issue. 

 

Buffalo Point First Nation v. Buffalo Point Cottage Owners Association Inc, 2025 MBCA 72