Ostergaard v Uhl, 2020 ABQB 789

Court of Queen’s Bench of Alberta Citation: Ostergaard v Uhl, 2020 ABQB 789 Date: 20201215 Docket: 1901 14220 Registry: Calgary Between: Bording Ostergaard Applicant - and - Richard Uhl and Daytona Ventures Inc. Respondents _______________________________________________________ Reasons for Decision of the Honourable Madam Justice S.L. Hunt McDonald _______________________________________________________ Introduction [ 1 ] As recently acknowledged by this Court, “arbitration is intended to provide a quicker, and less expensive route to resolution of disputes”: Mitchell v Mitchell , 2019 ABQB 420 at para 17 .

Unfortunately, this desired result is not always realized, as is evidenced in the case before me. [ 2 ] The Applicant, Bording Ostergaard, seeks, inter alia , an Order to set aside an arbitrator’s award issued, in two parts, in the

fall of 2019 and in January 2020. In addition to a protracted arbitration period, the matter before me was argued on two separate court dates. The lawyers’ bills and arbitration fees total over $90,000. The amount involved in the underlying dispute was initially assessed at just over $4,000. Background [ 3 ] Bording and the Respondent, Richard (Rick) Uhl were childhood friends and neighbours. Rick works in the construction industry and Bording is an engineer and business professional. In 2015 Rick was attempting to purchase a Skid Steer with a Tree Spade attachment.

However, he was unable to do so on his own and was having issues with his line of credit. As such, he approached Bording for some form of financial assistance. Bording was familiar with Rick’s work, having engaged him in the past for construction services.

Rick had already put down a $12,500 deposit through his company, Daytona Ventures Inc. (“Daytona”) although there was inconsistent evidence as to whether Bording believed that the deposit was paid by Rick personally or through his company. [ 4 ] Rick initially sought a loan from Bording to enable him to simply pay the vendor, Wildrose Lawn and Snow Services (“Wildrose”) the balance owing. The loan request was refused, but Bording did agree to purchase the Equipment and then let Rick ‘work off’ the balance owing by agreeing to provide construction services on certain properties owned by Bording .

There is some dispute as to whether Bording was aware that the $12,500 deposit was refundable or whether he was led to believe that Rick/Daytona would lose this money if the sale fell through. [ 5 ] In order to achieve this result, the parties entered into a Purchase-Sale Agreement and Agreement for Services dated September 2, 2015 (the “Services Contract”). Pursuant the terms of the Services Contract, Bording was to purchase the Skid Steer and Tree Spade (together, the “Equipment”) from Wildrose for the sum of $26,000.

This amount represented the balance owing on the Equipment after accounting for the deposit of $12,500 paid by Rick. As a condition of this purchase, Bording granted Rick the right to purchase the equipment from him “upon completing of [sic] the work terms and conditions of this agreement” as laid out in the Services Contract. The relevant terms and conditions included the following:

a) The services were to be provided at Bording ’s direction;

b) Rick was to provide an average minimum of 16 hours per week of services, unless Bording agreed to an alternate arrangement, which was to be documented in writing;

c) Rick was to be compensated at a rate of $35 per hour for each of the 16 hours per week that he worked on Bording ’s properties. This amount was to credited toward the balance owing on the Equipment;

d) If Rick worked in excess of 16 hours per week, he was to compensated at a rate of $45 per hour for each additional hour;

e) Rick was to complete daily timesheets;

f) After December 31, 2015, Rick was to be charged interest at ½% on the outstanding amount owing less the value of the accumulated services [ 6 ] The services that Rick was required to provide to Bording included work on three separate properties owned by Bording and referred to as House One (H1), House Two (H2) and House Three (H3). The work on H2 and H3 had to be completed to the extent that the properties were deemed saleable or rentable by either Bording or to an acceptable commercial standard, and was originally set to be completed by December 31, 2015.

The work on H1(work on the exterior of the home) needed to be completed to either Bording ’s satisfaction or to acceptable commercial standards, and was originally set to be completed by April 1, 2016.

Transfer of the Equipment from Bording to Rick would occur: Upon provision of adequate services by Rick to Bording in order to complete the required work on Houses one through 3 […] Upon receipt of payment by Bording from Rick necessary to satisfy the terms of [the Services Contract]… [ 7 ] Default was defined as being an instance of Rick no longer providing his services to work on the houses prior to completion of the same or upon Rick failing to finish the work on the houses prior to the stated completion dates.

Default was also said to have occurred if “Rick has failed to qualify for or exercise his option to purchase [the Equipment] by no later than June 30, 2016…”. Finally, the Services Contract provided that in the case of unresolvable disagreement, the parties agreed to be “bound by the adjudication and decision of Keith Leslie of Leslie Law of Edmonton, AB with the costs of any adjudication to be borne fully by the unsuccessful party.” [ 8 ] There was evidence led to the effect that the December 31, 2015 completion date was meant to have been changed in the final version of the Services Agreement.

There was some debate over when the houses actually had to be finished (the default date) as well as over how and to what extent Bording was directing the completion and scope of the construction work. All of this was before the Arbitrator. [ 9 ] In January of 2017, Rick entered into an agreement with Bording to buy his used 2002 GMC truck (the “Truck”) for $14,750 with a $1,000 down payment. The bill of sale states that the balance is due “on or after delivery.” Evidence was led demonstrating that the Truck loan was worked off in a fashion similar to that of the Services Contract.

There was some debate as to whether the Truck credits were to be earned at $30 per hour or $35 per hour, with Bording asserting that the lower figure was agreed upon to compensate for taxation issues. Again, all of this was before the Arbitrator. [ 10 ] By the Spring of 2018, Rick felt that he had paid off the Truck in full and had provided sufficient work credits and/or payments toward the Equipment to have substantially paid for the same. On May 14, he informed Bording that he believed that the Services Contract had been performed and that he was now entitled to have title to the Equipment transferred.

The work on the houses had not been completed at this time, but Rick took the position that the credits earned and money paid to Bording had covered the value

of the Truck and a significant portion of the Equipment. Rick offered to pay Bording $4,000 to complete the outstanding amount on what he termed to be the Skid Steer ‘loan’. The

preamble of the Services Contract states that the agreement is not a loan. [ 11 ] A dispute arose as to whether Rick had fully performed the Services Contract and as to what should be done with the Equipment. On March 17, 2018 Bording served Rick with a notice of default for failing to complete the work on the houses and requested that Rick prepare the Equipment for liquidation as per the terms of the Services Contract. He reported to the insurer of the Skid Steer that it was missing. A lien was placed on the Skid Steer and an action for replevin was commenced.

The replevin order was served on Rick on November 28, 2018 which resulted in various legal proceedings. As the Equipment was stored at Rick’s, Bording attempted to have it seized by a bailiff. However, based on the fact that the Services Contract mandated that disputes were to be settled by Mr. Leslie, a lawyer and arbitrator, the Court ordered that the matter be set for an arbitration by way of an Order dated December 10, 2018. This Order was subsequently confirmed on May 14, 2019. As Mr. Leslie was in a conflict position, the parties agreed to have their dispute heard by Dr.

Nick Tywoniuk. [ 12 ] The parties executed an Arbitration Agreement on June 3, 2019 (the “Agreement”). The Agreement laid out the nature of the dispute and the matters to be resolved. Paragraph 12 of the Agreement states that the Arbitrator “may provide interim awards if he deems appropriate”. It further provides, at paragraph 16, that the Arbitration award shall be final and binding on the parties. Pursuant to

Schedule A, the “Matters to be Resolved” are the following: 1. Did the parties perform under the express written terms and conditions of the 2015 [Services Contract]; 2. Did any party default on the express terms and conditions and, if so, what were those defaults; 3. What should be the consequences and relief for any finding against a party under point 2; 4. Resolving any other issues that may arise during the arbitration process that the Arbitrator agrees should be added for resolution, and; 5. Dealing with and awarding costs. [ 13 ] The Arbitration Hearing took place on July 17, 2019.

Both parties were represented by counsel. The Arbitrator, Dr. Tywoniuk, is an engineer and Chartered Arbitrator and is not a lawyer. He issued his first decision on September 9, 2019 and a follow-up decision on January 12, 2020. Both decisions were ultimately in favour of Rick. Bording then applied to this Court to have the decisions set aside and to have the calculations used by the Arbitrator in his second decision confirmed. Prior to engaging in an analysis as to whether Bording (as applicant) has demonstrated a manifest unfairness or bias, I turn first to a more detailed analysis of the Arbitrator’s findings.

The Arbitration Awards

a) the Initial Award [ 14 ] The first award was issued on September 18, 2019 (the “Initial Award”). In it, the Arbitrator noted that the hearing lasted 12 hours. He stated that he did not provide a

summary of all of the evidence, but rather only those points he found pertinent from the oral hearing. Both parties made fulsome submissions and provided both oral and documentary evidence. [ 15 ] The Arbitrator found that in 2015, Rick had worked 259 hours of the required 240 hours to be credited toward the Equipment. He further found that by agreement, and as evidenced through their actions, the terms of completion for various deadlines contained in the Services Agreement had been altered.

Specifically, he held that given the verbal assurances made by Bording that the deadlines were ‘just a number’ and the fact that the arrangement continued on until March of 2018, the initial deadlines were no longer applicable, and no new deadlines were put into place.

The Arbitrator thus concluded that Rick was not in default under the terms of the Services Agreement and that Bording had incorrectly served him with the Notice of Default (para 141(f)). [ 16 ] In particular, the Arbitrator noted that in 2016, Rick had worked a total of 832.5 hours on the houses, thus meeting the minimum required under the Services Agreement. Rick’s 2016 services were billed as – and paid for in – cash, using the $45 per hour rate.

The Arbitrator adjusted the ‘overpayment’ on the first 16 hours per week in 2016 by $10 (ie: the $35 per hour rate as opposed to the $45) as opposed to the proposed $12.25 amount put forward by Bording to account for GST. [ 17 ] In 2017, Equipment work credits were earned which were later put toward the Truck following the January 25, 2017 Truck purchase. The Arbitrator found that the Truck had been “virtually paid for” by the end of 2017.

He further noted that no work credits were earned during the months of September through to December of 2017, as Rick required time off to deal with his ailing father and to subsequently administer his estate. The Arbitrator found that the Services Agreement and the Truck purchase agreement were somewhat “comingled” given the informal nature of the latter and the morphing nature of the former. As such, he determined that “it would have made sense” and would have been more consistent with the Services Agreement to continue paying off the Equipment prior to directing payments toward the Truck.

He further determined that the as the $35 rate was being used for the Equipment it would be reasonable to use the same amount toward the Truck credits (para 148(b)(ii) and (iii)).

The Arbitrator allowed for Rick’s travel time in all years, noting that the Services Agreement was silent on this point and that such claims were customary. [ 18 ] The Arbitrator found that the 2018 year began with work credits going toward the purchase of the Truck, and ended with Rick withdrawing his services on March 14 of that year. [ 19 ] With respect to the financial standing of the parties as of this date, the Arbitrator noted that Rick’s calculations indicated that the Truck had been paid fully off and that an outstanding balance of $1,850 remained owing on the Equipment.

Conversely, Bording ’s calculations showed an outstanding balance on both the Truck ($3,252.67) and the Equipment ($573). He noted that the discrepancies in

amounts could be explained, in part, by adjustments to travel time, different billing amounts, interest charges and the application of various payments made by Rick. Both parties based their calculations on the same data – data from Rick’s time sheets and record of payment (para 148(c)), with the differences arising based on the adjustments noted above. [ 20 ] The Arbitrator concluded that, based upon his calculations: (

i) the Equipment was fully paid for by Rick by July 25, 2017; (ii) the Truck was fully paid for by February 12, 2018; (iii) by March 15, 2018 Rick had overpaid for the Truck and/or the Equipment by $3,885.86 (para 150). The Arbitrator concluded that even if Bording ’s calculations were accepted, Rick had offered to pay $4,000 to settle the matter which would have met his contractual obligations. [ 21 ] He therefore concluded that the requirements of the Services Contract had been fully met and it was thus reasonable for Rick to have proceeded as he did in order to have the contract terminated (para 153).

As the Services Contract provided for Bording to execute an unencumbered and unconditional Bill of Sale for the Equipment upon satisfaction of the contractual terms, the Arbitrator found that Bording was therefore in “default” by failing to do so and by instead seeking an order for replevin (para 158) and that his actions caused significant delay in resolving the dispute. [ 22 ] Of note, the Arbitrator rejected Bording ’s argument that Rick had falsely claimed the same 2017 and 2018 work credits twice – once in his June 5, 2018 affidavit (going toward the Equipment) and again in his June 14, 2019 affidavit (going toward the Truck).

Again, the Arbitrator found that despite the parties’ agreement to put the work credits toward the Truck first, the “handshake” Truck deal was incompatible with the Services Agreement in that both called for use of the initial credits. He determined that the credits were applicable to the Equipment first.

He further determined that given the short time frames, and the informal nature of Rick’s timesheets and calculations, his calculations were reasonable (para 164). [ 23 ] In dealing with allegations of fraud/misrepresentation and deceit, the Arbitrator concluded that, on the evidence before him, the deposit on the Equipment was paid by Daytona, a fact apparent to Bording when he executed the sales document on the Equipment.

He further concluded that evidence as to the refundability of the deposit paid on the Steer Skid was inconclusive but ultimately did not determine the issue of why Bording agreed to enter into the arrangement with Rick. That is, Bording ’s chief motivation for entering into the Services Agreement was the pressure he was facing from various sources to complete work on the houses. The refundability of the deposit was not a primary factor in entering into contractual obligations with Rick. Bording suffered no loss as a result.

The Arbitrator thus declined to find any fraud or deceit on the part of Rick (para 162). [ 24 ] Finally, the Arbitrator looked at the Bording ’s actions following the termination of the contract by Rick. He found that Bording ’s choice of pursuing replevin as opposed to the required arbitration resulted in a series of other actions over the next year which proved to be “time consuming, delaying and costly” (para 169).

He concluded that the costs associated with this “unnecessary” action arose directly from the Services Agreement and therefore needed to be “more specifically defined and considered for purposes of awarding costs” given that the Services Agreement expressly provided that “the costs of any adjudication” were to be borne by the unsuccessful party (paras 172 and 173). The Arbitrator then went on to examine the types of costs sought. Of note, each party claimed not only legal expenses as costs, but also compensatory costs for personal loss of time, punitive damages based upon allegations of misconduct and more.

The Arbitrator thus concluded, at para 178 that: It is my

interpretation that the [Services Agreement] provides only for ‘adjudication’ costs, meaning costs of arbitration; it did not foresee other actions. However, the intent was for full indemnity to the Party suffering damages. This is consistent with the Parties suggested remedies noted above. [ 25 ] In sum, after reserving jurisdiction for the purpose of awarding costs, the Arbitrator ordered the following award as ‘final and binding’ on the parties (para 186): (

i) Bording is to immediately execute an unencumbered bill of sale for the Equipment in favour of Rick; (ii) Bording is to pay Rick $3,885.86 representing the overpayment on the Truck purchase, plus interest, for a total of $4,250.85; (iii) Bording is to pay ‘costs’ to Rick on a full indemnity basis, to be determined following submissions for costs by Rick personally and on behalf of Daytona if applicable. The parties were directed to “follow the process for submission and review of the costs claim and the guidelines with respect to content and format of the claims that are outlined in

Schedule C (of Alberta’s Rules of Court)”.

b) subsequent correspondence [ 26 ] Following the release of the Initial Award, the Arbitrator received a flood of correspondence, chiefly from counsel for Bording (not the same counsel who argued this matter before me). Many of the points contained therein inappropriately attempted to reargue factual matters upon which Bording had initially been unsuccessful. [ 27 ] Section 43(1) of the Arbitration Act , RSA 2000 c A-43 allows that an arbitrator may, either upon his or her own initiative, or in response to a request by one of the parties: (

a) correct typographical errors, errors of calculation and similar errors in the award, or (

b) amend the award so as to correct an injustice caused by an oversight on the part of the arbitral tribunal. [ 28 ] It further provides that an arbitrator may make an additional award to deal with matters which were in dispute but omitted from the initial award (s 43(2). Its purpose is not to permit dissatisfied parties to relitigate matters fully argued on the evidence before the arbitrator which did not go their way at first instance. In any event, the Arbitrator responded to these submissions, rejecting any invitation to reconsider factual findings in the Initial Award.

Specifically, in his October 16, 2019 response to the parties, the Arbitrator stated that he did not consider the Initial Award to have been improperly granted to Party A [Rick] and that he did not intend to amend and reissue the Award. [ 29 ] He did, however, accept submissions from both parties dealing with costs and damages. On October 7, 2019 he authored a “Notice of Stay of orders and directions” on his Initial Award until such time as he completed a review of the Award.

Specifically, the Stay was put in place in order to ensure that the “‘financials’ as related to the issues of the arbitration were fully assessed and reviewed.”

In his October 16, 2019 correspondence the Arbitrator noted certain “inconsistencies” which needed to be addressed with respect to costs. Correspondence continued between the parties and Arbitrator, with revised calculations provided to the latter. On October 16, 2019, the Arbitrator partially lifted the earlier stay.

Of note, in not lifting that portion of the Stay related to the payment from Bording to Rick, he wrote that: …there is a need to ‘refine’ the calculations to ensure they properly adhere to the [Services Contract], that work credits, pay outs, adjustments etc., are fully and correctly accounted for so that any ‘cost’ imbalances can be appropriately considered within the ongoing proceedings with respect to costs…Although at first sight, this may appear as a step backwards, I believe it is required for procedural fairness. [ 30 ] The Arbitrator dealt with the procedure and timelines involved in determining the costs award in his Notice of October 16, 2019.

In this Notice he defines “offset costs” as those arising from the refinement of calculations discussed in the partial lifting of the Stay. The parties were to provide a ‘refinement’ of their own calculations and present them to the Arbitrator. In discussing offset costs, the Arbitrator wrote that: …the process for refining calculations for determining offset costs will be referred to as ‘refined calculations’ to distinguish this from the ‘arbitration costs’ which have been awarded to Party A [Rick] and are currently the focus of this Arbitration. My reasons for this are: a.

I am aware that these ‘offset costs’ are transactional and are different from the arbitration costs that were awarded to Party A. the need for refining the transactional costs and for including these in the final costs award arises from [sic] nature of evidence and of the ‘calculations’ (contradictions, complexity) difference choices of calculation model and choices in adjustments. [ 31 ] In correspondence dated January 9, 2020, counsel for Bording alleged a reasonable apprehension of bias as against the Arbitrator pursuant to s 13 of the Arbitration Act . That

section provides that a party may challenge an arbitrator if circumstances exist giving rise to a reasonable apprehension of bias (s 13(1)(a)). Procedurally, the party making such a challenge must provide the Arbitrator with a statement of their grounds for doing so within 15 days after becoming aware of them (s 13(3)) and must make any application to the courts to decide the issue within 10 days of being notified of the Arbitrator’s decision on the issue (s 13(6)).

In his January 9, 2020 correspondence, counsel noted that Bording ’s claim of apprehension of bias was based, inter alia , upon the content of the Arbitrator’s letter to the parties dated December 30, 2019 as well as upon his invoice and time sheets of January 7, 2019.

No argument was raised respecting the timing of Bording ’s application. [ 32 ] Specifically, Bording alleged that the apprehension of bias was evidenced by the fact that the Arbitrator recognized that errors in the calculations in the Initial Award would result in Party B [ Bording ] being the successful party in the Services Contract dispute (including $21,620.61 which Bording refers to as the “Missing Payments” and 480.5 hours erroneously credited as work credits). However, acknowledging this issue would result in the Arbitrator having to essentially reverse himself on the Initial Award.

In specifying that he would only deal with calculation errors in costs, as opposed to taking the calculation errors into account on the merits (instead referring to “informal loans”), the Arbitrator was evidencing a bias in favour of his earlier decision.

c) the Costs Award [ 33 ] The arbitrator released his final decision on January 12, 2020 (the “Costs Award”). Part one of the award deals with what the Arbitrator defined as ‘offset costs’, and part two deals with traditional costs, as well as “compensation for costs associated with compensatory damages and punitive damages”. The content of much of the above correspondence was summarized in this decision. Of particular note in the Costs Award are the following findings, with respect to what the Arbitrator termed ‘offset costs’, summarized as follows:

a) by January of 2016, the parties had deviated from their initial agreement to have the first 16 hours of each work week credited to the Equipment. Rather, Boarding began to pay Rick amounts equivalent to the work credits. These payments were dealt with by the Arbitrator as ‘overpayments’ or ‘informal loans’. He followed a similar approach concerning the Truck payments;

b) in his ‘refinement’ of calculations, Rick took the position that there remains an outstanding balance owing to Bording in the amount of $127.50 to complete the payout on the “skidsteer/truck” purchase. The original outstanding amount was said to be $1,850.30. Bording ’s original position was that Rick still owed $3,252.67;

c) because the Truck purchase payments were informal, payments pursuant to the written Services Contract must be accounted for first. Sufficient work credits for the Truck were earned by July 10, 2017, which resulted in an ‘overpayment’ since some of the work credits were also paid out. Sufficient work credits on the Equipment were earned by July 18, 2016; and

d) on March 16, 2018, there was an accumulated ‘overpayment’ of $13,810.59 (owed by Rick to Bording ) which, following adjustments for the deposit paid by Rick to Wildrose amounted to $5,030.59. With ‘refined’ calculations (provided in

Schedule One to the Costs Award) Rick now owed Bording $5,614.00. [ 34 ] Concerning what he described as “costs other than offset costs”, the Arbitrator noted that this heading dealt with what would be termed ‘traditional’ costs as well as both compensatory and punitive damages, awarded to both Rick and Daytona. In sum, he found that Rick had proven a claim for ‘traditional’ legal costs totaling $60,765.20; compensatory costs/damages of $10,663.85 (Rick) and $20,600 (Daytona), and; punitive damages of $20,000.

He then offset the balance owing to Bording ($5,614) against this amount for a total of $85,815.04 owing to Rick and $20,600 owing to Daytona. [ 35 ] Finally, he lifted the remaining part of the Stay. [ 36 ] On January 27, 2020, the Arbitrator released his written response to Boarding’s challenge of bias by determining that there was no bias. Specifically, the Arbitrator found that his actions in the conduct of the Arbitration were reasonable and neither inappropriate nor improper. He determined that there was no reasonable basis for Boarding’s claim of apprehension of bias.

Subsequent steps before this Court [ 37 ] On October 10, 2019, Bording ’s litigation counsel filed an Originating Application seeking to set aside the Initial Award and seeking leave to appeal. In it, Bording requests an Order staying the Initial Award pending the application for leave to appeal and alternatively, an Order setting aside the award. On February 6, 2020 Bording filed an Application seeking an appeal of the Arbitrator’s finding respecting bias, as well as seeking an Order that both the Costs Award and the bias finding be set aside in their entirety.

He requested that this present application be heard concurrently with the October 10, Originating Application. [ 38 ] This matter was argued before me on February 28 and August 17 of 2020 (with a rescheduling required due to the Covid-19 pandemic). The matter was argued as an application to set aside both the Initial Award and the Costs Award pursuant to s 45 of the Arbitration Act . Leave to appeal was not sought or argued, nor is a right of appeal provided in the Agreement. There was no mention of an appeal under s 44 of the Arbitration Act in the Applicant’s written submissions.

Issues [ 39 ] The Applicant Bording takes the position that the process followed by the Arbitrator, in initially finding that Bording breached the Service Agreement, but in later determining that money remained owing to Bording under the Contract, and in accounting for this fact when dealing with costs, as opposed to on the merits of the decision, is procedurally unfair. He further submits that the Arbitrator’s refusal to acknowledge an error on the merits arising from his initial miscalculations demonstrates a bias in that he attempted to manipulate the initial award as opposed to concede an error.

Finally, Bording argues that the Arbitrator exceeded his jurisdiction and erred in law by ordering damages under the guise of costs. [ 40 ] The crux of the Applicant’s argument, as I understand it, is as follows. In his Initial Award, the Arbitrator found that Rick had fully paid off both the Equipment and the Truck prior to the termination of the Services Contract in March of 2018, and that as Bording had refused to transfer title at this point, Bording was therefore in breach of the agreement. At first, the Arbitrator asked for further financial submissions in light of the outstanding costs claim.

However, in light of the flood of correspondence from Bording ’s counsel, the Arbitrator agreed to revisit his calculations and invited the parties to submit a ‘refinement’ of their calculations. He agreed to receive calculations related to both what he termed as ‘off-set’ costs, traditional costs related to the arbitration, and damages.

Given the off-set calculations, the Arbitrator determined that, in contradiction to his Initial Award, Rick now owed an outstanding sum to Bording . [ 41 ] However, rather than revisit and recalculate the award based upon the revised figures, which would result in ultimately reversing the fundamental findings as to breach in his Initial Award, the Arbitrator only considered the ‘refined’ calculations in determining costs.

This, Bording asserts, fails to follow the fundamental procedure set out by the Supreme Court of Canada in British Columbia (Minister of Forests) v Okanagan Indian Band , 2003 SCC 71 , resulting in an award which is manifestly unfair and unequal.

Finally, Bording asserts that the Arbitrator’s refusal to even reconsider his ultimate finding as to breach of contract based upon the new numbers evidences a bias on his part demonstrated by an unwillingness to admit to an earlier mathematical error. [ 42 ] For his part, Rick strenuously argued that both the Initial Award and the Costs Award were essentially correct, and that the small amount which remained outstanding to Bording using Rick’s revised calculations was insignificant and was more than addressed using Rick’s initial settlement offer of $4,000.

He asks this court to take whatever measures are necessary to enforce the awards. Rick was self-represented during the application and focused largely on re-arguing the merits of the Arbitrator’s initial findings as opposed to whether one of the grounds for setting aside an award had been established. Law and Analysis [ 43 ] Bording ’s application is brought pursuant to s 45(1) of the Arbitration Act which provides: On a party’s application, the court may set aside an award on any of the following grounds: (

f) the applicant was treated manifestly unfairly and unequally, was not given an opportunity to present a case or respond to another party’s case, or was not given proper notice of the arbitration or of the appointment of the arbitrator; […] (

h) an arbitrator has committed a corrupt or fraudulent act or there is a reasonable apprehension of bias; [ 44 ] Again,

section 44 of the Arbitration Act deals with appeals of an award. As the Arbitration Agreement did not provide for any appeal, the parties, with permission of the court, may appeal an award on a question of law (s 44(2)). The test for leave to appeal is set out in s 44(2.1).

Leaving aside the question of whether the parties agreed to have the Arbitrator consider a claim for damages given their correspondence and submissions (which may arguably bring s 44(3) of the Act into play), I find that the Applicant did not seek leave of the court to argue a question of law, nor did he attempt to satisfy the test for leave in argument before me. There was no argument put forth as to whether the issues raised by Bording would satisfy a “public interest” test: see Frank v Vogel & Co LLP , 2012 ABQB 432 paras 27-32 .

As such, and pursuant to section 44(2) and 44(2.1) of the Act , I shall not determine the question of whether the Arbitrator exceeded his jurisdiction and erred in law by ordering damages under the guise of costs. [ 45 ] I note that Bording ’s claim that the Arbitrator “exceeded his jurisdiction and erred in law” by deciding matters that were not in his jurisdiction (including ordering damages under the guise of costs) might be argued as either a ground for appeal or for judicial review pursuant to s 45(1)(

c) of the Act , which provides for the court’s ability to set aside an award that deals with a matter beyond the scope of an arbitration agreement. As noted above, the fact that Bording provided the revised calculations could be viewed as an

agreement to the inclusion of the matter in dispute (s 45(3)). Moreover, he only expressly relied upon section 45(1)(

f) and 45(1)(

h) as thegrounds upon which the awards could be set aside. As such, I shall determine whether the awards may be set aside on either of thesegrounds. [46] In my view, certain of the arguments put forward by the Applicant invited this Court to reweigh the evidence on the merits.The Arbitration Act does not invite judicial review of the reasons provided by an arbitrator absent the existence of one of the enumeratedgrounds under s 45 or an alleged error in law under s 44.

Whether the Arbitrator erred in his factual findings or whether his reasons fail tomeet the requirement of justification, transparency and intelligibility (as argued by Bording) are not properly before this Court. Rather, Ilimit my analysis to whether Bording has demonstrated that he was treated manifestly unfairly, or has established a reasonableapprehension of bias.

a) Was the Applicant was treated manifestly unfairly and unequally? [47] As our Supreme Court has recently instructed in Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65,where a duty of procedural fairness arises, the procedural requirements imposed by this duty are to be determined with regard to thecontext of the case, including those factors discussed in Baker v Canada (Minister of Citizenship and Immigration), (SCC), [1999] 2 SCR 817: Vavilov paras 23 and 77; Baker, paras 18-28.

The presumption of reasonableness does not apply to issuesinvolving a breach of natural justice or the duty of procedural fairness: Emkay Canada Fleet Services Corp v Gemini Corporation, 2020ABCA 245, para 31.

Allegations of bias engage considerations of fairness and natural justice: Li v Canada (Citizenship andImmigration), 2020 FC 554, para 36. [48] I turn first to Bording’s argument that he was treated manifestly unfairly given the Arbitrator’s methodology of accounting for‘offset costs’ as costs, as opposed to applying these calculations toward determining the key issue of whether the provisions of theServices Contract had been satisfied. The fairness of the proceedings is reviewed by examining whether the proceedings met the level offairness required by law.

As noted by this Court in Ary Homes Inc v Triple-A Classic Homes Ltd, 2017 ABQB 510 at para 45, quotingfrom the British Columbia Court of Appeal in 0927613 BC Ltd v 0941187 BC Ltd, 2015 BCCA 457 (para 59): Natural justice requirements in arbitration have been broadly stated to require the arbitrator to act in good faith (or stated otherwise to beunbiased), fairly listen to both sides, and to give a fair opportunity to those who are parties to make representations, including to corrector to contradict any relevant statement prejudicial to their view. See Kane v.

Board of Governors of the University of British Columbia, (SCC), [1980] 1 S.C.R. 1105 at 1113; and Lakeside Colony of Hutterian Brethren v. Hofer, (SCC),[1992] 3 S.C.R. 165 at 195. [49] The Arbitration Act expressly provides that an arbitral tribunal shall treat the parties fairly and equally: s 19.

This imposes aduty to be fair and to respect the principles of natural justice: Enmax Energy Corporation v TransAlta Generation Partnership, 2019ABQB 486 para 82 [Enmax]. [50] The case at bar is somewhat atypical in that the Applicant was not, in a technical sense, denied an ability to make his case orotherwise be heard by the Arbitrator, nor did the Arbitrator fail to receive relevant and material evidence or take evidence intoconsideration. Both sides were permitted the opportunity to effectively challenge the case of the opposite party.

Indeed, it appears thatboth parties received a full, fair and exhaustive hearing before the Arbitrator. Rather, the Applicant alleges that the Arbitrator’s processof accounting for calculation refinements as an offset to the Costs Award as opposed to correcting the Initial Award constitutes afundamental unfairness. It remains unclear why the “revised” calculations put forward by Bording following the Initial Award were notprovided in the same format before the Arbitrator at first instance.

However, the Arbitrator did not object to the introduction of the sameand incorporated these figures into his revised assessment. [51] The Applicant relies heavily on the Okanagan case in arguing the proper procedure to be followed in determining costs.There, the majority affirmed that costs are typically awarded to the successful party after judgment has been given: p 387.

In discussingthe standard characteristics of a costs award, the majority further noted that “of necessity, the award must await the conclusion of theproceeding, as success or entitlement cannot be determined before that time”: page 388 quoting from Re Regional Municipality ofHamilton-Wentworth and Hamilton-Wentworth Save the Valley Committee, Inc (1985), (ON SC), 51 OR (2d) 23(Ont HCJ) at 32. [52] In his defence, when the Arbitrator first addressed costs, it was after making a finding on the merits. The Initial Award clearlystates that Bording was in default under the Services Agreement.

It then goes on to award costs to Rick and informs the parties that thecosts award will be determined after Rick submits his claim to the same pursuant to

Schedule C. The Arbitrator’s process thus far is inline with Okanagan. [53] It is only after Bording’s October 4, 2019 request for a review pursuant to s 43(1) of the Act that the process becomesconvoluted. Following this correspondence, the Arbitrator acknowledges the possibility of errors in the initial calculations, whichresulted in the subsequent Stay. He informed the parties that the alleged errors reveal “significant inconsistencies with respect to howcredits were actually allocated toward purchasing equipment and how they should have been allocated [sic] per the express terms of the2015 contract”.

This issue is further highlighted in his Partial Lifting of the Stay, in which he acknowledges that “…while ‘refinement’of the calculations will result in changes to the ‘numbers’, the refinement will most likely show that sufficient skid steer credits wereearned, likely earlier than shown by current calculations.

I am aware that this does not constitute absolute certainty because therefinements have not yet been made.” Finally, in his October 16, 2019 Notice of Adjustments and Procedures, the Arbitrator expresslyacknowledges that the calculations will be refined in order to account for ‘offset’ costs, which he accepts constitutes transactional costs,differing in form from traditional costs. [54] In my view, by this point, the Arbitrator has now acknowledged that significant issues exist with respect to the initialcalculations whereby Rick was determined to be the successful party with the consequent ability to claim related costs.

Notwithstandingthis acknowledgement, the Arbitrator proceeds on the basis that the ‘refined’ figures, although transactional in nature, may only beassessed as against the outstanding costs claim. This, I agree, goes against the intent of a costs award which in general is meant to

provide (in part) indemnification for the successful party to a legal dispute: see 321665 Alberta Ltd v Mobil Oil Canada Ltd, 2013ABCA 326 paras 21-24. [55] I acknowledge that arbitral tribunals may determine their own procedure: Arbitration Act, s 20. This allows for an extendedleeway on the part of arbitrators to ensure, in part, a workable ‘fit’ to address both the needs of the parties before them and the specificissues in play.

As this Court noted in Enmax, at para 83: However, the Arbitration Act is designed to allow less rigorous procedural fairness, if doing so might achieve greater efficiency andearlier finality, than characterizes most curial litigation. This is evident from, first, section 20(1) of the Arbitration Act. It gives arbitralpanels the discretion to determine the procedures to be followed in their specific arbitration.

It would be inconsistent with the scheme andpurpose of the Arbitration Act if a reviewing court could lightly substitute its own procedural preference or preferences for those of thearbitral panel. [56] As also noted in Enmax, both the Act and the caselaw reflects an acknowledgment that given the goals meant to be achievedby proceeding to dispute resolution by way of arbitration, intervention or interference by the courts is meant to be minimal. As providedby

section 6 of the Act: No court may intervene in matters governed by this Act, except for the following purposes as provided by that Act: […] (

c) to prevent manifestly unfair or unequal treatment of a party to an arbitration agreement; [57] While there is no question that such procedural leeway is granted pursuant to the Act, it does not provide the ability todisregard the rules of natural justice. It does not afford an Arbitrator with the authority to ignore or depart from the standards ofprocedural fairness as determined to be required contextually by the case before him: see Ary Homes at para 45 and the cases citedtherein. In Flock v Flock, 2007 ABQB 307 at para 49, leave to appeal denied 2007 ABCA 287, this Court concluded the protectionsunder sections 45(

f) should be thought of as “the right to a fair hearing, free from bias and free from procedures which confer relativeadvantages or disadvantages on one of the parties.” [58] In my view, in stating that the refined calculations demonstrated significant inconsistencies in relation to how the credits werecalculated (with such credits going to the very heart of the contractual dispute between the parties), yet in deciding that procedurallythese revisions would only be accounted for as an offset to the costs award, the Arbitrator constructed a process which was procedurallyunfair to Bording.

That is, his methodology utilized a procedure that bestowed a relative advantage upon Rick to the detriment of theApplicant. [59] Of course, the Act calls for more than just a demonstration of unfairness. In order for a party to successfully argue that adecision should be set aside under s 45(f), he or she must evidence a “manifest” unfairness to the court. The idea of ‘compromising’some level of procedural fairness in exchange for increased efficiency and finality of resolution is a well-established one.

As recentlynoted by this Court in Enmax, at para 80: I infer from the legislator’s intention in requiring arbitrations as circumscribed in the Arbitration Act …is for finality sooner, for exampleby reducing the occasions for appeals and re-hearings, particularly over errors of law and mere imperfections in the process. It appearsthat some unfairness is to be tolerated, to be considered an acceptable collateral consequence of the greater benefits to the publicinterest expected from achieving finality to such disputes sooner. [emphasis added] [60] As such, something other than simple unfairness is required.

Under the Act, an applicant must demonstrate a “manifest”unfairness or inequality. When then, does a demonstrated unfairness rise to this level? [61] The definition of the word “manifest” was examined by the Ontario Court of Appeal in R v Videoflicks Ltd (1984), (ON CA), 14 DLR (4th) 10, reversed in part, on other grounds (SCC), [1986] 2 SCR 713. It held, at para 55that: …The pertinent part of the definition of the word "manifest" in Webster's New World Dictionary provides: "to make clear or evident;show plainly; reveal; evince".

The Oxford Dictionary definition is as follows: To make evident to the eye or to the mind; to show plainly; To display (a quality, condition, feeling, etc.); to reveal the presence of, evince. [62] What constitutes a “manifest unfairness” was recently considered by this Court in Enmax. While the Court in Enmax was, inpart, engaged in a comparative analysis between the Arbitration Act and the Uniform Arbitration Act, drafted by the Uniform LawConference of Canada, its discussion on this point is pertinent. The Court noted as follows: 86… there are not degrees of fairness and unfairness.

It either is or is not fair (in all the circumstances of the particular dispute). Theaspect of fundamental refers to its significance to the dispute, whether it is in the overall scheme of things more towards the trifling endof the spectrum or the pivotal. Regarding document production, whether it is about a collateral issue or a core issue. 87 The "manifest" qualifier goes to how apparent is the unfairness — the degree to which it is glaring or obvious to a reviewer.

It isnot unlike the officious bystander test in the laws on implying contractual terms and easements by necessary inference, in which thematter must be obvious to observers: Kew Ridge Road Utility Ltd. v. Miles, 2016 ABCA 317 (Alta. C.A.), at para 17, and the cases citedtherein. It connotes unfairness (or inequality, as I explain below) that is obvious, clear, overt, patently or glaringly so. […]

91 It is not necessary for the alleged manifestly unfair or unequal treatment to have had a foreseeable impact on the outcome of thearbitral panel's award. Sections 6, 19, & 45(1)(

f) of the Arbitration Act guarantee that the parties to an arbitration will be entitled to acertain standard of procedural fairness. They make no reference to the effect of unfair or unequal treatment on the outcome of thearbitration.

Parties' entitlements to procedural fairness do not depend on speculation as to what the panel's decision on the merits wouldhave been had natural justice not been denied them: Syndicat des employés professionnels de l'Université du Québec à Trois-Rivières c.Université du Québec à Trois-Rivières, (SCC), [1993] 1 S.C.R. 471 (S.C.C.) ("Syndicat") at para 52. [63] While the Court of Appeal granted permission to appeal the decision of the Chambers Justice’s decision in Enmax, pursuantto s 48 of the Arbitration Act, it did not, at this stage in the proceedings, comment substantively on the Chambers Justice’s

definitions aslaid out above: 2020 ABCA 68.

Similarly, in Mitchell, this Court concluded that: “the specific inclusion of the word “manifestly”demonstrates a legislative intent that not every potential unfairness in an arbitration proceeding or decision will permit the Court to setaside an arbitration award”: para 18. [64] In my view, when the entirety of the process is considered, I am left with the conclusion that the procedural orders given bythe Arbitrator following the Initial Award, pursuant to which the parties could provide refined calculations which would speak directly tothe underlying merits but would only be addressed on a “costs setoff” basis resulted in a manifest unfairness.

That is, it is an unfairnesswhich is plainly evident or obvious and which is of a fundamental degree regarding its significant in the dispute. [65] The question of work credits provided and payments made pursuant to the Services Agreement was the central issue in disputebetween the parties and almost singularly informed on the issue of which party was in breach. To adopt a procedure whereby evidenceon this point would not go to the merits of the decision is manifestly unfair and unequal.

While I realize that this ‘subsequent procedure’was only mandated by the Arbitrator in response to the prolific onslaught of correspondence following the Initial Award, this does notalter the fact that the prescribed process resulted in a manifest injustice. [66] Pursuant to

section 45(

f) of the Arbitration Act I therefore set aside the Arbitrator’s Initial Award and the Costs Award. I donot come to this determination lightly, as I am cognizant of the fact that this dispute occurred in early 2018, involved a small amount ofmoney, and was meant to be dealt with quickly and efficiently using the arbitral process. Instead, it has dragged on both before theArbitrator and before this Court – both in the initial replevin action and now through the application for review. The respondent appearsto no longer possess the financial ability to retain counsel, and has taken to representing himself.

Further fees will be required for a newarbitration. It is therefore with particular reservation that I make this finding.

b) Has the Applicant demonstrated a reasonable apprehension of bias? [67] In the event I have erred in my above analysis, I turn next to the question of whether the Arbitrator’s decisions may be setaside on the basis of a reasonable apprehension of bias.

Bording submits that the Arbitrator’s conduct reveals a persistent – and perhapsunconscious – bias including a refusal to admit his own mistakes as concerning his calculations used to determine the Initial Award.Specifically, he asserts that the Arbitrator manipulated the revised calculations in order to validate his earlier finding that Rick was thesuccessful party. [68] This Court had recent cause to comment on the test for bias in the arbitral process in Clark v Unterschultz, 2020 ABQB 338,where it noted as follows, at para 16: In Committee for Justice, the accepted test for reasonable apprehension of bias is articulated at para 40: [T]he apprehension of bias must be a reasonable one, held by reasonable and right minded persons, applying themselves to the questionand obtaining thereon the required information. [T]hat test is "what would an informed person, viewing the matter realistically andpractically — and having thought the matter through — conclude.

Would he think that it is more likely than not that [the decision-maker], whether consciously or unconsciously, would not decide fairly." See also, Dool v. Nazarewycz, 2009 ABCA 70 (Alta. C.A.) at para 64, (2009), 448 A.R. 1 (Alta. C.A.), where the Court of Appealadded: An informed person is one with knowledge of all of the relevant circumstances, including an appreciation of the court's tradition ofintegrity and impartiality, which duties are undertaken by the judges of the courts.

Accordingly, the threshold for a finding of real orperceived bias is high. [69] As noted above, counsel for Bording wrote to the Arbitrator on January 9, 2020 detailing alleged instances of bias spanning14 pages. The Arbitrator responded on January 27, 2020 dismissing these allegations. There is no need to reiterate the allegationscontained therein at length.

Rather, the key issue appears, in my view, to be whether the Arbitrator acknowledged key mathematicalmiscalculations, but refused to reconsider how this effected the parties obligations under the contract because he was unwilling to admitany error on his part. [70] I start my analysis on this issue by acknowledging the principle that decision-makers enjoy a strong presumption ofimpartiality. As such, Bording, as the party alleging a reasonable apprehension of bias, bears the burden of rebutting the presumption:Wewaykum Indian Band v Canada, 2003 SCC 45 para 59. [71] The facts in this case are atypical.

That is, the more common forms of alleged bias – including financial interest in theoutcome, prior relationship with a party, outside knowledge of the matters at hand, inappropriate behaviour or institutional bias – are notin play. Rather, the Applicant is alleging that the Arbitrator had a personal interest, not in the outcome of the case per se (that is, noparticular interest as to which party was successful) but rather an interest in ensuring the integrity of his initial findings respectingperformance of the contractual terms.

[ 72 ] In my view, bias has not been established. Bording has failed to demonstrate that a reasonably informed person would believe that the Arbitrator was conducting himself in a partial manner in not essentially ‘reversing’ his findings pursuant to his reconsideration of the parties’ calculations under s 43 of the Act . Rather, the inconsistencies apparent between the Initial Award and the Costs Award appear to arise from an error in conflating transactional costs with traditional costs. As such, the threshold required to prove a reasonable apprehension of bias has not been met in this instance.

I dismiss the application to have the Initial Award and the Costs Award set aside on this ground. Remedy [ 73 ] The Applicant seeks 11 various remedies in his brief, including a declaration that Bording is the successful party based upon the revised calculations, an Order that Bording is therefore the rightful owner of the Equipment, and an Order allowing for the Equipment to be sold at auction with proceeds to be spilt between the parties based upon Bording ’s calculations. In my view, many of the initial remedies sought by Bording are not suitable given the application before me: see Flock paras 65-69.

Section 45(7) of the Act delineates the court’s powers upon setting aside an award based upon manifestly unfair and unequal treatment. It provides that:

(7) When the court sets aside an award, it may remove an arbitrator or the arbitral tribunal and may give directions about the conduct of the arbitration. [ 74 ] During oral submissions, Bording requested that the court remit this matter back to another arbitrator of the parties choosing for a de novo hearing, as well as for an extension of the stay of the award granted by the Arbitrator pending this decision. [ 75 ] In entering into the Services Contract, the parties agreed to have any disputes arising thereunder to be resolved using the arbitration process.

This is the express desire of the parties - that is, something the parties have chosen for themselves - and to which they should be left. As noted by this Court in Flock , at para 70: …Furthermore, there is some support for the proposition that when a Court has determined that the principles of natural justice have been violated after evidence has been heard and findings of credibility and fact have been made fair treatment of the parties can only be secured by conducting the hearing again before a new arbitrator.

In these circumstances that is the only appropriate remedy. [ 76 ] Similarly, in my view, this matter must be determined in a de novo hearing before a new arbitrator as agreed to by the parties. Given that this dispute occurred in 2018 and the parties are eager to reach resolution, I would, in directing the conduct of the arbitration, order that the parties agree to the selection of an arbitrator and to set the date for arbitration within 60 days of the date of these reasons.

If possible, given the starkly contradictory calculation methodologies used by each party, I would strongly encourage the parties to agree upon an arbitrator with a background in accounting or the like. I therefore order that the Initial Award and the Costs Award be set aside in their entirety, and that this matter be returned before a new arbitrator for settlement on an expedited basis. [ 77 ] It is my understanding that Rick is currently in possession of the Equipment. I therefore further order that he make no use of the Equipment until a final determination following the above-ordered arbitration is made.

Costs [ 78 ] Finally, I turn to the costs associated with the application before me. It is well settled law that costs are discretionary, but must be awarded on a principled basis: Mitchell v Mitchell , 2019 ABQB 420 para 130 . [ 79 ] Generally, costs are awarded to the successful party in an application: Mahe v Boulianne , 2010 ABCA 74 para 6 ; rule 10.29 of the Alberta Rules of Court, Alta Reg 124/2010 . As Bording has sought – and received – an order setting aside the Initial Award and the Costs Award, he is the “successful” party in this application.

However, in my view, there are two reasons why this is an appropriate case in which to depart from the usual course. [ 80 ] First, the issues surrounding the Arbitrator’s awards stem in large part from his classification of certain transactions as ‘informal loans’ – a position which was not advanced by either party. Time and effort was also expended in an attempt to clarify the calculations stemming from the Arbitrator’s determination that the Truck loan was to be repaid second – again, a position that was in direct contravention to the evidence given by both parties.

Given the somewhat unique circumstances of this case, I would direct that the costs of this application are to be borne by each party, notwithstanding that Bording was ultimately the successful party: see Flock , para 71, where this Court held that the costs of the application to set an arbitrator’s decision aside were to be borne by each party, despite the fact that one of the parties had been successful in having the award set aside, as the ultimate fault lay with the arbitrator. [ 81 ] Second, as noted above, this application was originally set for a half day special by the Applicant.

It became apparent early on in the application that the initial time requested by the Applicant was woefully inadequate. Immediately following the mid-afternoon break a request for additional time was made, and granted. This required the setting of an additional full day hearing in April, which was rescheduled for August due to the Covid-19 pandemic. Even with the full day set in August, there was barely enough time to complete submissions.

The Applicant had approximately 40 minutes for rebuttal, and requested that additional time be booked for argument, which submission was rejected. [ 82 ] As was known by the Applicant, Rick had to travel approximately 200 kilometers to attend for the February 28 hearing, during which time he was unable to make submissions on his behalf. This necessitated further travel on a future date. This cost and inconvenience could have been avoided if counsel had been more judicious in setting his projected time when booking.

In this instance, time estimates were not slightly off, they were grossly under-projected – as evidenced by the request for an additional booking following the full day hearing in August. This resulted in an inefficient conduct of the litigation. In my view, and in taking the considerations in making a costs award as provided in rule 10.33 into account – and more specifically rule 10.33(2)(a) – this is an appropriate instance in which to depart from the general rule and order each party to bear his own costs.

Conclusion [ 83 ] Both the Initial Award and the Costs Award of the Arbitrator are set aside. The parties are ordered to remit this matter back before a new arbitrator of their choosing within 60 days of the date of these reasons. I further order that Rick is to make no use of the Equipment until a final determination following a fresh hearing before the new arbitrator is made. Each party shall bear his own costs associated with this application. Heard on the 28 th day dof February and the 17 th day of August, 2020. Dated at the City of Calgary, Alberta this 15 th day of December, 2020. S.L.

Hunt McDonald J.C.Q.B.A. Appearances: Trevor R. McDonald and Alison Scott for the Applicant Richard Uhl, Self Represented Litigant For the Respondents