In Grewal v Mann, 2022 BCSC 555, Justice Iyer allowed the plaintiff’s appeal of an arbitral award dated May 15, 2020, made pursuant to s. 31 of the former British Columbia Arbitration Act, RSBC 1996, c. 55. That provision permitted an appeal from an arbitral award to be brought before the Supreme Court if leave to appeal was granted. Justice Iyer held that the “reasonableness” standard of review applies to appeals of arbitral awards, while acknowledging that the appropriate standard of review is still undecided at the appellate level. She allowed the appeal and amended the award to provide that disputed funds held in trust were to be released to the plaintiff. She found that the arbitrator had not interpreted the parties Agreement, but rather had written an entirely new one.
The parties were former business partners who agreed to separate their business affairs because of “irreconcilable differences”. They retained a mediator (who later was also appointed as arbitrator), who assisted them in concluding a settlement agreement (“the Agreement”) in October, 2015.
The Agreement required the defendants to transfer to the plaintiff their interests in the “Gibsons Property”. The parties assumed that the total value of those interests was about $2 million, but the Agreement required an appraisal of the Property, followed by any necessary adjustment. In April, 2017, the appraisal was done but a dispute arose because of the defendants’ mistaken as to their ownership interests in the Gibsons Property. Therefore, they did not transfer their interests in the Gibsons Property to the plaintiff and no adjustment payment was made. In June, 2017, the Gibsons Property was sold for $7.98 million. The funds were disbursed to the other owners (non-parties to the litigation), leaving $3.4 million in trust.
he parties agreed that the plaintiff was entitled to $2 million of that sum, but they disagreed as to who was entitled to the remaining $1.4 million of the proceeds of sale. The arbitrator heard the dispute in a one-day hearing in December, 2019 and issued an award in May, 2020, in which he found that the disputed amount was payable to the plaintiff.
The plaintiff appealed that award. Justice Iyer considered both the standard of review (which was a matter of disagreement between the parties) and the merits of the appeal.
Standard of review – Justice Iyer canvassed the key case law [Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65; Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53 at para. 106; Teal Cedar Products Ltd., v British Columbia, 2017 SCC 32 at para. 1] and referred to cases following Vavilov in which courts came to different conclusions on whether it changed the standard of review for appeals of arbitral awards (para. 9).
She ultimately determined that the reasonableness standard applied:
“[10] In Spirit Bay Developments Limited Partnership v. Scala Developments Consultants Ltd., 2021 BCSC 1415, Justice Davies thoroughly canvassed this issue. He considered the majority and minority decisions in Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, which the parties rely on here, concluding that the reasonableness standard applies to appeals from arbitration decisions: at paras. 58-59. As recently noted in J.E.A. v. V.J.A., 2022 BCSC 171 at para. 43, the question is still undecided at the appellate level.
[11] I agree with Justice Davies that the fact that Vavilov does not refer to Sattva or Teal Cedar means that the Supreme Court has not (as yet) overruled those decisions. The majority judgment in Wastech supports that conclusion by leaving that question “for another day”: at para. 46. As it now stands, Teal Cedar is binding authority.”
Merits of appeal – interpretation of the contract – Justice Iyer described the award as, “brief, consisting of 13 paragraphs, ten of which set out the background and the parties’ positions” and “[t]he…. analysis and conclusion are set out in the final three paragraphs”.
The only issue before Justice Iyer was whether the arbitrator’s determination of the value of the Gibsons Property, which he did without reference to the valuation process in the parties’ Agreement because he found that the sale price determined the value.
She reviewed the principles of contract interpretation (para. 16) and found that, even on a deferential reasonableness standard, the award failed to interpret the contract. Instead, it created a new agreement between the parties that was materially different from the Agreement:
“[18] The first sentence of paragraph 4 of the Agreement clearly and unambiguously requires [the defendants] to transfer their interest in the Gibsons Property to [the plaintiff]. The paragraph assumes that the value of the transferred interest is $2 million, and then provides for an adjustment if the appraised value (based on an appraisal conducted within 30 days of October 30, 2015) is more or less than that amount. Paragraph 8 confirms this interpretation: it says that the intent of the Agreement is for [the plaintiff] to retain the Gibsons Property and for [the defendants] to retain all of the other properties.
[19] The Award finds that there was a different agreement between the parties. It finds that the intention of the parties was that [the plaintiff] receive a fixed total amount of $20.6 million, with $2 million representing the assumed value of the Gibsons Property. This conclusion cannot be found in the words of the Agreement for three reasons.
She found that, firstly, the parties’ intention was that the plaintiff was to retain the Gibsons Property, which meant that he was to assume the risk of any increase or decrease in its value. Secondly, the plaintiff was not to receive $20.6 million in total, but was to receive cash and property, the combined worth of which was $2.6 million at the time of the Agreement. If the parties had intended that the Plaintiff receive $20.6 million, there would have been no need to transfer the Gibsons Property to him. Thirdly, nothing in the Agreement provided that the Gibsons Property was to be sold. The arbitrator, by placing weight on the Gibsons Property sale price, failed to interpret the parties’ intentions at the time of contract formation:
“[23] In conclusion, the Agreement expresses the parties’ mutual intention at the time of contract formation that [the defendants] transfer their interests in the Gibsons Property to [the plaintiff]. The parties’ assumptions about the value of that interest cannot change this fundamental aspect of their bargain. By construing the Agreement as he did, the Arbitrator created a different bargain: that [the plaintiff] would receive no more than $20.6 million in return for transferring his interests in all of the parties’ other jointly owned properties to [the defendants]. That interpretation is unsustainable and unreasonable because it is not grounded in the words of the contract.”
Justice Iyer allowed the appeal and amended the award to require that the monies held in trust constituting the remaining proceeds of sale of the Gibsons Property were to be paid to the plaintiff.
Editor’s Notes:
First, this case has a long history, starting in 2014 when the parties entered into an agreement for the “expeditious” separation of their business interests, which included a process for dispute resolution. The arbitration itself did not take place until 2019, which was followed by five court challenges (so far?).
The B.C. Supreme Court decision granting the defendants a stay of litigation brought by the plaintiff for an order that the Gibsons Property sale proceeds held in trust be released to him pending determination of the arbitration, and denying both parties “special costs” based upon alleged abuse of process, is found at Grewal v Mann, 2019 BCSC 433. See also Case Note B.C. – no abuse of court process by either litigant simply by seeking or resisting arbitration – #187.
The B.C. Supreme Court decision granting the plaintiff’s motion for leave to appeal the arbitral award is found at Grewal v Mann, 2021 BCCS 220. See also Case Note B.C. – expert determination not conducted in accordance with dispute resolution process may be error in law – #435.
The B.C. Supreme Court decision dismissing the defendants’ motion to stay the plaintiff’s appeal of the arbitral award to the Supreme Court, pending determination of the defendants’ appeal to the Court of Appeal of the Supreme Court’s decision granting leave to appeal is found at Grewal v Mann, 2021 BCSC 1995. See also Case Note B.C. – Parties’ “expeditious” settlement process led to 2 arbitrations and multiple court proceedings over 7 years – #549.
The B.C. Court of Appeal decision dismissing the defendants’ appeal of the Supreme Court decision granting leave to the plaintiff to appeal the arbitral award is found at Grewal v Mann, 2022 BCCA 30. See also Case Note B.C. – Arbitrator’s Analysis Must not let Factual Matrix Overwhelm Text of Contract – #588.
Second, for previous Case Notes on Spirit Bay Developments Limited Partnership v. Scala Developments Consultants Ltd., 2021 BCSC 1415 see Case Notes: B.C. – errors interpreting and applying the law eligible for appeal on questions of law but not for set aside – #407 and B.C. – Spirit Bay Developments Limited Partnership v. Scala Developments Consultants Ltd. – #569.