Closing the Back-Door: An Administrative Law Approach to Admitting Fresh Evidence on Applications to Overturn an Arbitral Award
The guiding principles for admitting fresh evidence on appeal and fresh evidence on judicial review are well defined. However, the Ontario Superior Court of Justice recently observed that there were “no cases directly on point” for the admissibility of fresh evidence in an application to overturn an arbitral award.
In Vento Motorcycles Inc v United Mexican States, 2021 ONSC 7913, (“Vento”), Justice Vermette lays the foundation for a specific approach to admitting fresh evidence on an application to overturn an arbitral award. In doing so, she analogizes commercial arbitrators to administrative decision-makers, and implants the approach to admitting fresh evidence from judicial review.
Why This Decision Matters
With Justice Vermette’s decision in Vento, there is now a clear path to assessing the admissibility of fresh evidence on an application to overturn an arbitral award in Ontario. The principles which apply to admitting fresh evidence on judicial review also apply to the admission of fresh evidence in an application to overturn an arbitral award.
While fresh evidence is generally inadmissible, there is an exception for challenges alleging a breach of natural justice, procedural fairness, or an improper purpose or fraud. In these cases, the Court should ask whether the evidence could have been brought before the arbitrator themselves with “reasonable diligence” on the part of the moving party? Thus, the approach is meant to provide an avenue for evidence which arises after the arbitrator’s decision to be admitted while preserving the intended role of the arbitrator as “merits-decider.”
Likewise, where fresh evidence relates to “background information”, that is, information providing a neutral summary of procedures, or identifying key evidence before the decision-maker below, this is an exception from the general rule against admitting fresh evidence.
Vento Motorcycles Inc. was a U.S. based manufacturer of motorcycles whose business focused on the sale and marketing of motorcycle products in Mexico. After being denied North American Free Trade Agreement (“NAFTA”) preferential ad valorem import tariffs for its US assembled motorcycles being imported to Mexico, its business collapsed. Vento subsequently brought an arbitration claim under Chapter 11 of the NAFTA against Mexico for its conduct.
In the course of the arbitral proceedings, Mexico filed a witness statement which appended a recording of one of Vento’s witnesses, undermining his credibility. Vento moved to strike the recording and all references to it in the corresponding witness statement and Mexico’s Rejoinder memorial. Vento argued that the recordings were a violation of its witness’s right to privacy, that the recordings were made in a manner inconsistent with applicable ethical rules and Mexico’s obligation to conduct itself in good faith, and that Mexico failed to authenticate the recordings by proving that they were unedited and complete.
The arbitral board admitted the recordings and Vento declined to call additional expert evidence to refute the recordings, or to cross-examine Mexico’s witness who created them. The arbitral board ultimately ruled that Mexico did not breach its obligations under NAFTA and dismissed Vento’s claims.
Subsequently, Vento commenced the application at hand to set aside the arbitral award. Vento argued that because the recordings were admitted and its witness was not given the opportunity to further testify against the recordings, it was both prevented from presenting its case and treated unequally contrary to s. 34(2)(a)(ii) of the Model Law. In support of its application, Vento tendered three additional affidavits:
- Affidavit of Eduardo De La Vara Brown (“Brown Affidavit”) setting out a “music and technology specialist’s” opinion on the alterations made to the recording.
- Affidavit of Jose Alberto Ortuzar Carcova, (“OrtuzarAffidavit”) the subject of the recordings, setting out why he acted as witness for Vento and the testimony he would have given in response to the recording if he had been given the opportunity during the arbitration.
- Affidavit of Todd Jeffrey Weiler (“Weiler Affidavit”) setting out the procedural background of the case, a notice issued by Mexico before the Award was transmitted to the parties, and enquiries made by Vento and its counsel into circumstances surrounding Mexico’s appointment of one of the three arbitrators forming the arbitral board.
The issue before Justice Vermette was the admissibility of these three affidavits filed in support of Vento’s application to set aside the arbitral award.
The main dispute between Mexico and Vento was over the test to be applied to admitting fresh evidence in an application to overturn an arbitral award.
Mexico claimed that the same policy objective underlying the admission of fresh evidence on appeal applies to applications to set aside an arbitral tribunal’s award. As such, the test should be that from Palmer v The Queen: (a) the evidence should generally not be admitted, if by due diligence, it could have been adduced at trial provided that this general principle will not be applied as strictly in criminal cases as in civil cases; (b) the evidence must be relevant in the sense that it bears upon a decisive or potentially decisive issue in the trial; (c) the evidence must be credible in the sense that it is reasonably capable of belief; (d) the evidence must be such that if believed it could reasonably, when taken with the other evidence adduced at trial, be expected to have affected the result.
Vento claimed that the principles applicable to the admission of fresh evidence on an application for judicial review should apply. In particular, Vento cited Bernard v Canada Revenue Agency that there should be an exception to the rule against the admission of fresh evidence where the evidence relates to natural justice, procedural fairness, improper purpose, or fraud, and could not have been placed before an administrative decision-maker nor interferes with his role as “merits-decider.”
The Court’s Decision
The Court found that the test for admission of fresh evidence on judicial review also applies to applications to overturn an arbitral award. Justice Vermette comments that this is particularly the case when the application is based on procedural fairness, since this is a common ground to an application to overturn an arbitral award and judicial review, but not to an appeal. Likewise, there are similar concerns about non-interference with the role as merits-decider of both an administrative decision-maker and an arbitral tribunal, both being owed a high degree of deference by the Court. Since the test for admitting fresh evidence from the judicial review context is structured around non-interference with the role of the administrative decision-maker as merits-decider, so too should it apply to applications to overturn arbitral awards.
In light of these considerations, Justice Vermette adds that reasonable diligence should also be taken into account, with diligence assessed in light of all the circumstances known at the relevant time. As such, the test for admitting fresh evidence in an application to overturn an arbitral award ought to ask whether the evidence could have been brought before the arbitrator themselves with “reasonable diligence” on the part of the moving party.
Applied to Vento’s motion, the Court made the following rulings:
- The Brown Affidavit does not meet the test for admission of fresh evidence. Vento specifically raised issues with the Recording’s authenticity, faithfulness and partial nature before the arbitrator. As such, Brown’s affidavit could have been raised before the tribunal with reasonable diligence.
- The Ortuzar Affidavit does not meet the test for the admission of fresh evidence. This was the specific evidence that the arbitral tribunal refused to hear. Additionally, since Vento made submissions and filed a witness statement from Mr. Ortuzar in support of its position against admitting the recording in the arbitral proceeding, there is no reason to further supplement the record with additional comments.
- Paragraphs 18, 20, 26, and 28 of the Weiler Affidavit are admissible. They merely state obvious and expected positions and inferences based on the record before the arbitral tribunal. As such, they fall within a different exception to the admission of fresh evidence on judicial review allowing for a neutral summary of procedures and summaries identifying key evidence before the decision-maker below.
- Paragraphs 32, 33, 36, 41, 42 and 43 of the Weiler Affidavit are struck because these do not relate to general information about the arbitral proceeding and do not therefore fall within the exception for “background information.”
Vento provides guidance for the principles Courts ought to have in mind when determining future motions to admit fresh evidence within an application to overturn an arbitral award. The same principles which apply to the admission of fresh evidence in judicial review, also apply to applications to overturn an arbitral award. Two situations in particular which will permit the admission of fresh evidence are:
- Challenges alleging a breach of natural justice, procedural fairness, or an improper purpose or fraud where the evidence could not have been brought before the arbitrator themselves with “reasonable diligence” on the part of the moving party.
- Where the fresh evidence pertains to “background information” relating to the underlying proceedings.
In future arbitral proceedings, parties should be diligent in raising objections and tendering evidence in opposition to procedural rulings by the arbitral board. Evidence which could have been raised within the arbitral proceeding itself through the exercise of reasonable diligence, will not be back-doored through any subsequent court proceedings challenging the arbitral award.
 See Palmer v The Queen,  1 S.C.R. 759 (“Palmer”) at 775; Bernard v Canada Revenue Agency, 2015 FCA 263 (“Bernard”) at paras 13-28.
Vento Motorcycles Inc v United Mexican States, 2021 ONSC 7913 at para 29.
Vento, at para 50.
Vento, at paras 38, 50.
Palmer, at 775.
Bernard, at para 25.
Vento, at para 44.
Vento, at para 44.
Vento, at para 50.
Vento, at para 54.
Vento, at paras 57-58.
Vento at para 62.
Vento, at paras 63-64.
Vento, at para 50.
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