Executive Summary: Key Legal and Evidentiary Issues

• Leave to appeal was granted only on the narrow legal issue of whether the arbitrator correctly awarded pre-judgment interest.

• The applicants raised over 120 alleged legal errors, most of which were found to be either mixed questions of fact and law or questions of fact alone.

• The court confirmed that dissatisfaction with an arbitrator’s conclusions or evidentiary preferences does not constitute a question of law.

• The arbitrator found multiple breaches of a Limited Partnership Agreement, including failures to act in good faith, issue financial reports, and protect partnership assets.

• Claims under section 46 of the Arbitration Act to set aside the award were rejected due to insufficient grounds under subsections (c) and (f).

• Solicitor-client costs were upheld as properly awarded based on the arbitrator’s jurisdiction and findings of bad faith conduct.

Background and parties involved

The dispute arose from a real estate investment in Moose Jaw, Saskatchewan. A group of investors, including Deborah Kowbel and several corporate and individual respondents, entered into a Limited Partnership Agreement (LPA) with Gencore Properties GP Inc. and its affiliates. Gencore was the General Partner responsible for managing the affairs of the limited partnership.

Over time, the investor-respondents grew dissatisfied with how Gencore managed the investment. They alleged serious breaches of the LPA and initiated litigation, which was subsequently referred to arbitration. The arbitration was conducted by the Honourable Eugene A. Scheibel, who issued a detailed award in June 2023, followed by an addendum in September 2023.

The arbitration award and findings

The arbitrator found that Gencore and its directors had breached the LPA on numerous occasions and had failed to act honestly, in good faith, or in the best interests of the partnership. Specific breaches included failure to distribute financial statements and tax information, unauthorized payments to themselves, neglecting to safeguard assets, engaging in unrelated business activities, and failing to disclose adverse changes in the partnership’s financial position.

The arbitrator ruled that these breaches constituted both contractual and fiduciary violations. Damages of over $844,000 were awarded to the claimants, along with half of the pre-judgment interest under The Pre-Judgment Interest Act and solicitor-client costs. The arbitrator concluded that although Gencore’s conduct did not amount to criminal fraud, it involved wanton and wilful misconduct justifying a full indemnity costs award.

Court challenge and legal issues

Gencore applied to the Saskatchewan King’s Bench for leave to appeal the arbitrator’s decisions under sections 45(2) and 46 of The Arbitration Act, 1992. They alleged over 120 legal errors, touching on issues such as contractual interpretation, pleading deficiencies, evidentiary treatment, limitation periods, and unjust enrichment. They also sought to set aside the award entirely, arguing that the arbitrator exceeded his jurisdiction and that they had been treated unfairly.

The court, however, found that the overwhelming majority of the alleged errors were either questions of fact or mixed fact and law—matters that are not appealable under the Arbitration Act without clear legal error. The only genuine question of law identified was whether the arbitrator erred in awarding pre-judgment interest without it being explicitly claimed in the Notice to Arbitrate. On that narrow issue, leave to appeal was granted.

Application to set aside the award

The court also rejected the application under section 46 of the Act. Gencore’s arguments that the arbitrator exceeded his jurisdiction or failed to provide fair notice were dismissed. The court noted that the LPA authorized broad relief and that the parties were represented by competent counsel throughout. No evidence supported a finding of procedural unfairness or excess of jurisdiction.

Decision on costs and conclusion

In assessing costs, the court noted that the claimants were largely successful and that Gencore’s attempt to raise over 120 issues unnecessarily complicated the proceedings. As a result, Gencore was ordered to pay $7,000 in costs to the claimants.

The final outcome was that Gencore was allowed to appeal on one issue only: whether pre-judgment interest was properly awarded. All other claims for appeal or to set aside the arbitration award were dismissed. The case reinforces the limited scope of judicial intervention in arbitration awards and underscores the need for clear, concise legal grounds when seeking leave to appeal.