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B.C. Arbitrator’s Award Set Aside as “Arbitrary and Irrational”

Lisa C. Munro

B.C. Arbitrator’s Award Set Aside as “Arbitrary and Irrational”
JackF via Getty Images

In Shahcheraghi v Divangahi, 2021 BCSC 1576, Justice Horsman set aside the award of an arbitrator of the Residential Tenancy Branch and remitted the matter for a new hearing. She found that the arbitrator’s reasons were inadequate for the parties to understand the rationale for the decision:

I wish to be clear that my concern with the Arbitrator’s decision is the reasoning process, which in my view is insufficient to serve the basic function of . . . allowing the parties to understand why the decision was reached . . . The point is that [certain] issues are unexplored in the Arbitrator’s decision. It is not the role of the reviewing court to re-write the Arbitrator’s reasons so as to arrive at a new rationale that might support the outcome. Id at ¶ 53

The landlord applied to the court for judicial review of the award pursuant to the Residential Tenancy Act, S.B.C. 2002, c. 78. The arbitrator’s award addressed cross-applications by the parties following the termination of the tenancy. The tenant applied for the return of her rental deposit whereas the landlord applied to recover unpaid rent, compensation for damage to the rental unit, and permission to retain the security deposit. In the award, success was divided.

The landlord argued that the arbitrator’s decision was patently unreasonable (the applicable standard of review under s. 58 of the Administrative Tribunals Act, S.B.C. 2004, c. 45) because it did not permit the parties or the reviewing court to understand the rationale for the arbitrator’s conclusions and that highly relevant evidence put forward by the landlord was simply ignored. The landlord said the arbitrator’s decision largely consisted of a series of conclusory statements without an articulation of the reasoning that led to his conclusions. 

The tenant emphasized the highly deferential standard of review that applies to an arbitrator’s factual and legal findings. The tenant argued that inasmuch as there was some evidence to support those findings, the arbitrator’s decision was not patently unreasonable.

Justice Horsman disagreed with the tenant’s position. She reviewed each of the issues in dispute and summarized the various deficiencies in the award. With respect to the amount of monthly rent, she found that the arbitrator had failed to meaningfully address, or even reference, highly relevant and apparently cogent evidence that was central to the landlord’s submission, which made the decision arbitrary and irrational. She also found that the arbitrator had calculated a rent amount that was not put forward by either party without explaining how he arrived at that number. With respect to repair damage to the premises, the arbitrator found the landlord’s evidence insufficient without explaining the rationale for his conclusion. The arbitrator also failed to acknowledge or assess the central argument and evidence by the landlord with regard to the security deposit.

Justice Horsman also set out the minimum standards required for reasons of an arbitrator under the Act:

The reviewing court must be mindful of the institutional context within which the statutory decision maker functions. The dispute resolution process under the RTA is intended to be a relatively informal and expeditious procedure. The reasons of an arbitrator under the RTA are not to be held to the standard expected of [a] superior court judge. However, such decisions must, at minimum, set out the adjudicator’s findings of fact and the principal evidence upon which those findings were made, and apply the findings of fact to the test to be met in a manner that will allow the parties, and the reviewing court, to understand how and why the decision was reached. . . . While an arbitrator need not necessarily address every piece of evidence provided by the parties, relevant evidence on key issues cannot simply be ignored. [citations omitted] Id at ¶ 33
. . .
I conclude that the Arbitrator’s findings of fact on the critical issues do not allow the parties and the reviewing court to understand how and why the decision was reached, or why seemingly relevant evidence of the Landlord was ignored or rejected.” Id at ¶ 36