In July 2018, a Canadian court issued a decision giving deference to a decision made by an appellate arbitration panel. SG Ceresco Inc. v. BroadGrain Commodities Inc., 2018 MBQB 120.
SG Ceresco Inc. (Ceresco) and BroadGrain Commodities Inc. (BroadGrain) entered into a contract for the purchase of $684,649 USD worth of soybeans (the contract). BroadGrain sourced the soybeans from Prograin Inc., a third party. Ceresco paid BroadGrain’s initial invoices but, further to information Ceresco received after making partial payment, disputed the quality of the first shipment. Inspections of subsequent shipments raised the same quality questions. Ceresco and BroadGrain exchanged positions on the issues of quality and inspection but did not resolve their dispute, leaving BroadGrain’s final invoice unpaid.
The contract provided that any disputes would be resolved by arbitration through the Canadian Special Crops Association (CSCA), a national industry association for pulse crops and special crop growers. The CSCA provides a comprehensive set of arbitration rules, including internal appeals, which Ceresco and BroadGrain agreed in the contract to use.
BroadGrain initiated arbitration against Ceresco, and a three-member arbitration panel, called an “Arbitration Committee” under the arbitration rules, determined that Ceresco was entitled to compensation in the amount of $265,000 USD for the losses stemming from the BroadGrain’s breaches of the contract. BroadGain appealed to a five-member arbitration tribunal called the “Board of Appeal.” The Board of Appeal set aside the Arbitration Committee’s award and issued an award requiring Ceresco to pay BroadGrain’s final invoice in the amount of $137,000 USD. Ceresco challenged the board’s decision in the Canadian courts.
Madam Justice Grammond, Manitoba Queen’s Bench, dismissed the challenge to the Board of Appeal decision. She applied Teal Cedar Products v. British Columbia, 2017 SCC 32, para. 1, in which the Supreme Court of Canada noted that the scope of appellate intervention in commercial arbitration is narrow even when the court’s jurisdiction is limited to a question of law. Judge Grammond also relied on the Supreme Court of Canada’s decision in Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53 which held that, even where jurisdiction exists, the deferential standard of review of reasonableness almost always applies to arbitration awards.
The judge pointed to the policy objectives stated in Teal Cedar Products v. British Columbia: “Together, limited jurisdiction and deferential review advance the central aims of commercial arbitration: efficiency and finality.” These key policy objectives of commercial arbitration were also noted in Wolfe et al v. Taylor et al; Fat Cat Farms Ltd et al v. Wolfe et al, 2017 MBCA 74, para. 74.