Principles and Proper Approach to Record Disclosure
By Rachel Clarke and Alexandre Ogilvie
Arbitrators will not hold parties’ hands in record disclosure. Instead, parties must assert their access to an opposing party’s records clearly and promptly. A party’s after-the-fact complaint about poor record disclosure will not be sufficient to set aside an arbitrator’s decision because of unfairness, if the record disclosure was incomplete, but uncontested. The Alberta Court of Appeal clarifies this in ENMAX Energy Corporation v TransAlta Generation Partnership, 2022 ABCA 206.
In ENMAX Energy Corporation v TransAlta Generation Partnership, the Alberta Court of Appeal considered an allegation that an arbitration panel treated ENMAX Energy Corporation (ENMAX) and the Balancing Pool (collectively, the Appellants) unfairly. ENMAX alleged that unfairness arose as contemplated in s. 45(1)(f) of the Alberta Arbitration Act (the Act) due to a gap in TransAlta Generation Partnership’s (TransAlta) record disclosure.
The Court found that the arbitration panel did not treat the Appellants unfairly because the gap in record disclosure arose from their own inaction. In doing so, the Court:
(a) Clarified the meaning of unfairness under section 45(1)(f) of the Act;
(b) Made three significant findings about arbitrations:
- (i) It is acceptable to have less robust procedures in arbitration compared to civil litigation;
- (ii) International arbitration decisions provide helpful guidance in determining what constitutes “manifest unfairness” that justifies setting aside an award; and
- (iii) The “reliance and request” approach to document production common in arbitrations helps make arbitrations efficient – it does not “lower” the level of disclosure in arbitrations;
(c) Found that, when a court reviews arbitration proceedings:
- (i) Parties are entitled to a fair, but not a perfect, hearing;
- (ii) The overall fairness of the proceedings must be considered, not individual rulings;
- (iii) Parties must exercise due diligence in pursuing issues and cannot later complain of perceived unfairness resulting from their failure to do so;
- (iv) Not every refusal to admit relevant evidence is a breach of natural justice; and
- (v) The threshold for setting aside an arbitral award is very high. Excluded records satisfy the threshold if they are crucial to the case being presented.
The balance of this article will focus on the meaning of unfairness under section 45(1)(f) of the Act.
- Facts of the Case
An arbitration panel adjudicated the underlying dispute between TransAlta and the Appellants and found in TransAlta’s favour.
The Appellants challenged the award, claiming that they were treated unfairly. They argued that TransAlta did not disclose relevant and material records during the arbitration (the Records), and that this gap in disclosure led to the panel’s conclusion.
- The Interpretation of s. 45(1)(f) of the Act
Section 45(1)(f) of the Act provides that the court may set aside an award if, among other things, “the applicant was treated manifestly unfairly and unequally”, or “was not given an opportunity to present a case or to respond to another party’s case”.
Not every procedural breach during an arbitration will result in judicial intervention. The phrase “treated manifestly unfairly and unequally” in s. 45(1)(f) requires an assessment of whether the unfairness is obvious or clear. However, the procedural rigours of civil litigation do not apply to arbitrations under the Act.
The Court clarified that s. 45(1)(f) of the Act must be construed “narrowly and only to ensure the [arbitral] proceedings are not fundamentally or fatally flawed”. If the alleged unfairness does not impact the proceedings in a meaningful way, then it cannot justify setting aside an award.
Thus, where excluded evidence is at the root of the alleged unfairness, the arbitral award may not be set aside unless that evidence was crucial to the party’s case. To make this assessment, a reviewing court must look at the arbitration panel’s reasons and whether the lack of evidence affected the arbitration panel’s conclusions.
- Determining Unfairness in the Arbitration
The Appellants alleged that TransAlta failed to produce the Records, to the Appellants’ detriment. They made this complaint even though: (i) ENMAX chose to stop seeking the Records during the arbitration; (ii) the arbitration panel advised the Balancing Pool that it could apply to the Court for the Records, and the Balancing Pool chose not to; and (iii) the Appellants chose not to request the Records when they were alerted to their potential existence through additional (surreply) evidence that TransAlta later provided.
The Court acknowledged that records can become more relevant over the course of an arbitration. Thus, as records become material and issues crystallize, parties must reassert their position on disclosure. That is true regardless of the disclosure procedure adopted in an arbitration.
The Court concluded that, while the arbitration panel did not order production of the Records, it did not foreclose it either. The Appellants had the opportunity to request further disclosure, but chose not to do so. This was a tactical decision. Accordingly, there was no manifest unfairness in the process.
This decision emphasizes that arbitral awards will only be set aside for unfairness in the most egregious of cases. A party’s failure to contest record disclosure during an arbitral proceeding is not one of these cases.
Overall, it is critical for counsel to be proactive in asserting rights to record disclosure in an arbitration. Parties should voice concerns about record disclosure to arbitrators in a timely manner because, on a set-aside application, courts are unlikely to be sympathetic to a party that has failed to exhaust procedural requests for disclosure during the arbitration.
Rachel Clarke is legal research counsel in the Litigation and Dispute Resolution Group of Burnet, Duckworth & Palmer LLP, focusing on commercial litigation.
Alex Ogilvie is junior legal research counsel in the Litigation and Dispute Resolution Group of Burnet, Duckworth & Palmer LLP, focusing on commercial litigation.