A Cautionary Tale: The BC Supreme Court issues another reminder of the challenges faced by parties seeking to appeal arbitral awards

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The Supreme Court of British Columbia has provided yet another reminder of the up-hill challenge faced by parties appealing arbitral awards in its recent decision in Gormac Developments Ltd. v Teal Cedar Products Ltd., 2020 BCSC 712 (“Gormac”).

Following Teal Cedar Products Ltd. v British Columbia, 2017 SCC 32 (“Teal Cedar”) and MSI Methylation Sciences Inc. v Quark Venture Inc., 2019 BCCA 448, the Court’s decision in Gormac reiterates the endorsement of arbitration as a final and binding means of dispute resolution.

Background

The proceeding in Gormac arose in relation to a contract (the “Contract”) governing the construction of roads by Gormac Developments (“Gormac”) in a foresting area harvested by Teal Cedar Product Ltd. (”Teal”). While the Contract expired in 1993, Teal and Gormac agreed to abide by the Contract until they could come to a new agreement. However, no new agreement was ever reached.

A dispute arose when Teal began to harvest second growth forest within the foresting area, rather than the tradition old growth. This meant that Teal required the construction of fewer new roads and more reconstruction and improvement of existing roads. Rather than Gormac, Teal turned to another contractor to perform the improvements, arguing that that road reconstruction and rehabilitation were not included under the terms of the Contract. Gormac, however, took the position that it was entitled to that work pursuant to the Contract.

The main issue before the Arbitrator was whether the Contract included reconstruction and rehabilitation work or solely new road construction. Deciding in Teal’s favour, the Arbitrator issued the Final Partial Award (the “Award”), declaring that the Contract did not include replaceable road reconstruction or road rehabilitation work.

On January 22, 2016, Gormac filed a petition seeking leave to appeal the Arbitrator’s decision. Gormac argued that the Arbitrator made three errors in the granting of the Award, namely:

  1. failing to properly interpret and apply the Regulation;
  2. failing to consider the Contract as a whole; and
  3. failing to consider material evidence regarding the British Columbia forest industry.

The Court’s Decision

The crux of the Court’s decision was whether any of the issues raised by Gormac amounted to an extricable question of law, as required to grant leave by section 31(1) of British Columbia’s Arbitration Act.[1],

The Court prefaced its analysis by noting that caution must be exercised in determining whether a question is one law or one of mixed fact and law. The Court kept this distinction at the fore of its analysis and proceeded to classify all three of the issues raised by Gormac as questions of mixed fact and law.

On the first error, failing to properly interpret and apply the Regulation, the Court noted that Gormac was really arguing that the application of the law should have resulted in a different outcome. The Court expressed concern that such a claim lacked the level of generality required to make it a question of law, as the application of the Regulations were intimately tied to the facts of the case.

Similarly, the Court dismissed Gormac’s second asserted error, failing to consider the Contract as a whole, on the basis that this was not an instance where an error in contractual interpretation gives rise to an extricable question of law. Drawing on the Supreme Court of Canada’s decision in Teal Cedar, Gormac reiterates the notion that, in general, contractual interpretation remains a question of mixed fact and law.

Finally, the Court dismissed Gormac’s third error, failing to consider material evidence regarding the BC forest industry, showing deference to the position of the Arbitrator as the finder of fact. The Court noted that the Arbitrator canvased the available evidence and was entitled to weigh it as he saw fit. Indeed, the Court held that arbitrators are best situated to make these sorts of determinations. Having failed to identify an extricable question of law, the Court proceeded to dismiss the petition.

Concluding Thoughts

In an era of overburdened trial courts, Gormac represents further judicial endorsement of arbitration as a final and binding alternative to litigation. Likewise, for parties seeking to appeal an arbitral award, Gormac serves as yet another reminder of the onerous standard that one must meet in order to be granted leave to appeal. Parties considering entering into an arbitration agreement should therefore be mindful of the narrow scope of arbitral appeals and take care to draft arbitration clauses accordingly.

[1]Arbitration Act, RSBC 1996, c 55

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