Procedural Fairness as a “Question of Law”: What the British Columbia Court of Appeal’s Decision Means for Arbitration Appeals

Why This Decision Matters

In Green Light Solutions Corp. v. Kern BSG Management Ltd., the British Columbia Court of Appeal held that alleged breaches of procedural fairness constitute “questions of law” for the purpose of seeking leave to appeal an arbitral award under s. 59(2) of the Arbitration Act (British Columbia).^[1]

The decision clarifies an issue with a varied history, including inconsistent chambers decisions. It has important implications for parties considering whether to include — or exclude — appellate rights in their arbitration agreements and how best to structure them.

Factual Background

The dispute arose from a contract to construct a cannabis cultivation facility in British Columbia that was dealt with by way of arbitration. Following the arbitration hearing, the arbitrator issued an award resolving the substantive issues between the parties. In the decision, success was divided. There were three issues before the arbitrator:

• what amount was properly invoiced by Kern BSG Management Ltd. (“Kern”),
• were there deficiencies in Kern’s work, and
• if so, did those deficiencies entitle Green Light Solutions Corp. (“GLS”) to withhold payment?

The arbitrator did not answer the first question, because, under the contract, the valuation of deficiencies, and therefore the net amount owing, was required to be determined at first instance by PBX Engineering Ltd. (the “Consultant”), and had not yet been completed.^[2]  On the second question, the arbitrator determined that Kern’s work did have deficiencies, the value of which had to be determined by the Consultant.^[3] On the third question, the arbitrator concluded that while GLS was entitled to withhold payment pending that valuation, it was not entitled to do so indefinitely. In particular, the arbitrator found that the Consultant should have completed its valuation by January 15, 2023, and that GLS ought to have paid any outstanding amount by that date, with interest running thereafter.^[4] The arbitrator’s reasoning reflects the view that GLS’ continuing refusal to pay after that date was not contractually justified, even though the Consultant’s valuation had not in fact been completed.

The arbitrator ordered that Kern be paid 60% of its costs and the applicant, GLS, be paid 40% of its costs. ^[5] The arbitrator reasoned that the costs should be apportioned in this manner because neither party was substantially successful, but Kern should receive more because GLS’s  breaches of contract had necessitated the proceedings.^[6]

Critically, the arbitrator made the costs award without inviting costs submissions. The arbitrator did not therefore have the benefit of key information from the parties before deciding on costs, including settlement offers and each party’s legal fees (i.e. their bill of costs).^[7] This conflicted with “Procedural Order No. 1” in the arbitration, which contemplated the parties’ costs submissions.  

The costs consequences were significant. Kern had incurred  legal fees and costs of approximately $1.21 million, while GLS had incurred approximately $652,000. The arbitrator awarded Kern 60% of its costs (payable by GLS) (approximately $727,359) and awarded GLS 40% of its costs (payable by Kern) (approximately $260,711). GLS therefore faced a net costs payment to Kern of approximately $400,000 to $466,000, depending on whether arbitrator fees were included.^[8]  

GLS sought leave to appeal the costs award pursuant to s. 59(2) of the Arbitration Act, taking the position that the arbitrator’s failure to invite post‑award costs submissions was a denial of procedural fairness.

The chambers judge denied leave to appeal, concluding that the alleged breach of procedural fairness did not raise a question of law and that, in any event, leave should be denied in the exercise of discretion.^[9] GLS applied to the Court of Appeal pursuant to s. 29 of the Court of Appeal Act to vary that order.^[10] The Court of Appeal granted the application to vary, finding that the application raised a question of procedural fairness, which is a question of law for the purpose of s. 59(2) of the Arbitration Act, and that the chambers judge had failed to consider factors relevant to the exercise of their discretion.

The Court of Appeal’s Analysis and Decision

The primary issue before the Court of Appeal was whether the arbitrator’s failure to provide an opportunity for post‑award costs submissions raised a “question of law” within the meaning of s. 59(2) of the Arbitration Act.^[11]

Applying the modern principles of statutory interpretation, the Court examined the text, context, and purpose of ss. 58 and 59 of the Act.^[12] The Court emphasized the breadth of the language in s. 59(2), which permits appeals on “any question of law arising out of an arbitral award,” noting that the use of the word “any” signals legislative intent to confer broad appellate jurisdiction, subject only to the statutory leave requirement.^[13]

The Court rejected Kern’s argument that procedural fairness issues must be addressed exclusively through the mechanism of the application to set aside awards pursuant to s. 58 of the Arbitration Act. While s. 58(1)(h) expressly permits an application to set aside an arbitral award where a party was not given a reasonable opportunity to present its case, the Court held that nothing in the statutory scheme indicates that such issues are excluded from the scope of “questions of law” under s. 59(2).^[14] Further, the Court noted that although the alleged procedural fairness breach could have grounded an application to set aside the award under s. 58(1)(h), that avenue was no longer available by the time the issues were narrowed on appeal because the statutory limitation period for seeking s. 58 relief had expired.^[15]

In support of this conclusion, the Court observed that breaches of procedural fairness are routinely characterized as questions of law across a range of statutory appeal regimes.^[16] The Court further held that the Arbitration Act contemplates overlapping, but non‑conflicting, routes for reviewing arbitral awards, and that this overlap is consistent with the Act’s objectives of efficiency, finality and appellate review.^[17]

Having concluded that the appeal raised a question of law, the Court found that the chambers judge erred in principle by failing to properly consider the statutory criteria in s. 59(4) when exercising their discretion to deny leave. Given the potential magnitude of the costs award and the arguable merit of the procedural fairness issue, the Court concluded that it was in the interests of justice to grant leave to appeal.^[18]

Key Takeaways

The Court of Appeal’s decision confirms that alleged breaches of procedural fairness constitute questions of law for the purpose of appealing an arbitral award under s. 59(2) of the Arbitration Act. This is significant to the assessment of available avenues to challenge arbitral awards, particularly in relation to costs determinations.

Arbitration Agreements: Section 59(3) of the Arbitration Act permits parties to exclude appeals on questions of law in their arbitration agreements. There was no such exclusion in this case. Had there been an exclusion, GLS would not have been able to pursue an appeal  and would have been stuck with the costs award. The decision to exclude appeals on questions of law is a strategic one that should be considered on a case‑by‑case basis, balancing finality and efficiency against the benefits of appellate oversight.

Another way to try to avoid this outcome might be for parties to expressly agree and formalize by way of procedural order, that the parties will deliver costs submissions following the arbitral award. This might be worth considering, especially if the arbitration clause does not already specify how and when costs will be addressed. That said, in this case, “Procedural Order No. 1” contemplated the parties’ costs submissions, which the arbitrator appears to have ignored. The Court of Appeal did consider the arbitrator’s failure to follow Procedural Order No. 1 in arriving at their conclusion that the appeal had arguable merit.^[19]

An Application to Set Aside as a Safeguard: Even where parties have excluded appeals on questions of law, s. 58 of the Arbitration Act continues to provide an important safeguard. In particular, pursuant to s. 58(1)(h), an arbitral award may be set aside where a party was not given a reasonable opportunity to present its case. Parties cannot contract out of s. 58 in British Columbia, meaning that core procedural fairness protections remain available even in “no‑appeal” or final arbitrations.

McCarthy Tétrault has significant domestic and international arbitration experience. Should you have any questions about arbitration clause drafting or appellate considerations in arbitration proceedings, please do not hesitate to reach out to a member of our team for assistance.

^[1] Arbitration Act, SBC 2020, c 2.

^[2] Green Light Solutions Corp. v. Kern BSG Management Ltd., 2025 BCCA 408 [“Green Light Solutions”] at para. 10.

^[3] Green Light Solutions at para. 10.

^[4] Green Light Solutions at para. 10.

^[5] Green Light Solutions at paras. 10–11.

^[6] Green Light Solutions at para. 11.

^[7] Green Light Solutions at paras. 15, 77.

^[8] Green Light Solutions at para. 16. The decision is not clear on whether the arbitrator fees were included.

^[9] Green Light Solutions at paras. 2, 23–25.

^[10] Green Light Solutions at paras. 1, 26. 

^[11] Green Light Solutions at paras. 40–41.

^[12] Green Light Solutions at paras. 43–44.

^[13] Green Light Solutions at paras. 45–46.

^[14] Green Light Solutions at paras. 54, 59–60.

^[15] Green Light Solutions at para. 79.

^[16] Green Light Solutions at paras. 48–50.

^[17] Green Light Solutions at paras. 66–67.

^[18] Green Light Solutions at paras. 74–80.

^[19] Green Light Solutions at para. 77.