OCA says arbitrator’s lack of legal training didn’t affect lower court's procedural fairness finding

The Ontario Court of Appeal has upheld a judge’s decision affirming the arbitral award of an accounting firm, noting that the parties could have bargained for a legally trained arbitrator if they wanted one well-versed with every aspect of legal procedure. 

On Sept. 6, 2019, Pythian Services Inc. and Pythian Services USA Inc. acquired Tehama Group Inc.’s service business under an asset purchase agreement. The parties agreed that: 

• Pythian should pay Tehama an additional US$10 million if the acquired business earned US$11 million in the year after closing 
• An accounting firm should resolve disputes about any purchase price adjustment 
• The accounting firm’s determinations would be binding and final, without fraud, bad faith, or manifest error 

Pythian claimed that it owed no purchase price adjustment payment because it calculated adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) at US$10.72 million. Tehama challenged the calculation. 

As the arbitrator, PwC confirmed Pythian’s calculation of adjusted EBITDA. Thus, PwC did not find Pythian liable for a purchase price adjustment payment. 

Under art. 34 of the Model Law on Commercial Arbitration in schedule 2 to Ontario’s International Commercial Arbitration Act, 2017, Tehama applied to set aside the arbitral award. Tehama alleged that the arbitrator’s process breached the parties’ agreement or the principles of natural justice.

Arbitral award upheld

In July 2025, in Tehama Group Inc. v. Pythian Services Inc., 2025 ONSC 4134, Justice Jana Steele of the Ontario Superior Court of Justice dismissed Tehama’s application. The application judge found that the arbitrator: 

• deserved considerable deference 
• followed a process consistent with the parties’ agreement 
• did not deprive Tehama of a right to make submissions 
• did not violate natural justice principles by failing to expressly address two of Tehama’s procedural objections or by relying on a new theory not advanced by Pythian 

The judge noted that the parties opted for final and binding arbitration by a technical subject-matter expert that was not a lawyer, specifically a firm with accounting expertise, to determine disputes. 

The judge ruled that the accounting firm did not breach natural justice principles by determining that it did not need to return to the parties to decide the issues. The judge added that the accounting firm relied on a section referenced in the asset purchase agreement rather than on a new theory. 

Lastly, the judge held that she would have exercised her discretion not to set aside the award even if she had found a violation of natural justice principles. She ordered Tehama to pay Pythian’s all-inclusive costs of $100,000. 

On appeal, Tehama alleged that the judge committed a legal error by assessing the alleged breaches of natural justice on a lower standard of procedural fairness because the arbitrator was a chartered accountant, not a person with legal training. 

Appeal denied

Last May 5, in Tehama Group Inc. v. Pythian Services Inc., 2026 ONCA 326, the Court of Appeal for Ontario dismissed the appeal and awarded Pythian $40,000 in all-inclusive partial indemnity costs. 

The appeal court explained that the arbitrator’s lack of legal training did not drive the application judge’s analysis. The appeal court found that the judge: 

• stated the pertinent principles applying to her assessment of Tehama’s allegations 
• made factual findings based on her interpretation of the arbitration agreement and the application record 
• repeatedly determined that the arbitrator complied with the parties’ chosen process, which was informed by the nature of the dispute and the arbitrator’s expertise 
• did not necessarily hold the arbitrator to a lower standard of procedural fairness 
• made no reviewable error in her reasons 
• was entitled to make the factual findings that Tehama was attempting to relitigate