The Applicants, who were not allowed to participate in the arbitration process due to their failure to pay the required fees, successfully argued that it was manifestly unfair for the arbitrator to render a decision against them. The Applicants ought to have been given the opportunity to make submissions with respect to the Respondent’s claim against them.

Administrative law – Decisions of administrative tribunals – Arbitration Board – Arbitrators – Powers – Judicial review – Procedural requirements and fairness – Natural justice – Compliance with legislation

Mericle v. Basement Systems (Calgary) Inc., [2010] A.J. No. 221, 2010 ABQB 137, Alberta Court of Queen’s Bench, February 22, 2010, W.A. Tilleman J.

This was an application for judicial review of an arbitration award. The Applicants, Dan and Janet Mericle, had entered into a contract with the Respondent, Basement Systems (Calgary) Inc., which provided for arbitration in the event of a dispute. A dispute arose and both the Applicants and Respondents claimed against each other. The parties contacted an arbitrator who required a payment of $11,000 from each party in order to proceed. The Respondents paid the required fee, however the Applicants were unable to do so. The arbitrator received submissions on how best to proceed given the Applicants’ failure to pay the fees and concluded that the arbitration would proceed as scheduled but without participation by the Applicants.

The hearing proceeded in the absence of the Applicants and the arbitrator concluded that the Applicants’ claims were without merit but that the Respondent had proved its claim. The arbitrator thus made an award in favour of the Respondents. The Applicants claimed that the arbitrator breached the fundamental rule of procedural fairness that each party must be heard. They claimed that they were denied the opportunity to present their case and to respond to the Respondent’s case.

The Arbitration Act, R.S.A. 2000, c. A-43 allows a court to set aside an arbitration award where a party has been treated manifestly unfairly and unequally. In this case, it was manifestly unfair for the Respondent to be permitted to proceed with its claim at the arbitration hearing without providing the Applicants with an opportunity to make full answer. Accordingly, the Court held that there must be a new arbitration hearing with respect to the Respondent’s claim. If the Applicants were unable to pay the required fees, they would be entitled to make written submissions which would respond to the claim against them.

Despite the analysis above, the Court held that there was no unfairness with regard to the arbitrator’s decision to dismiss the Applicants’ claim against the Respondent absent their participation. The Applicants were sophisticated, knew and agreed with the rules, and had legal counsel and yet paid nothing towards the costs of the arbitration process. By refusing to abide by the agreed rules of procedure, they disentitled themselves from pursuing their claim and the arbitrator’s decision to dismiss that claim was fair.

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