In 1550 Alberni Limited Partnership v. Northwest Community Enterprises Ltd., 2023 BCCA 141, the British Columbia Court of Appeal confirmed the decision of Justice Groves, who refused to grant leave to appeal from an arbitral award that turned largely on the Arbitrator’s interpretation of the parties’ agreement, as modified during the course of its performance. The Court found that the petitioner failed to establish that the proposed appeal raised an extricable question of law – because there was some evidence that supported the findings of fact. In so doing, the Court left the issue of the standard of review of the Arbitrator’s decision following the Supreme Court of Canada’s decision in Canada (Minister of Citizenship and Immigration) v. Vavilov, [2019] 4 S.C.R. 653 for another day.
The basic facts of the dispute were as follows. 1550 Alberni Limited Partnership (“Alberni”) decided to create a magazine to promote one of its luxury residential condominium buildings in downtown Vancouver. It entered into a Magazine Production Agreement (the “Agreement”) with Northwest Community Enterprises Ltd. (“Northwest”) pursuant to which Northwest agreed to produce a 144-page magazine for a publisher fee, plus third-party expenses. The magazine was ultimately published with 206 pages and a dispute arose regarding payments owing to Northwest under the Agreement. Northwest claimed that it was entitled to an additional publisher fee for the extra pages included in the magazine. Alberni refused, alleging that it had overpaid for third-party expenses that Northwest had not incurred. The dispute was sent to final offer selection arbitration, in accordance with the Agreement.
There was a dispute about various facts relating to the parties’ compliance with the initial Agreement and whether they had amended it as a result of ongoing discussions about the content of the magazine. The arbitration hearing lasted five days, and the parties’ witnesses were examined in chief and cross-examined. Each party submitted a final offer under seal and the Arbitrator was required to accept one of the parties’ offers in its entirety and provide reasons. Northwest’s final offer was that Alberni should pay an additional publisher fee of $175 000. Alberni’s final offer was that it should pay nothing.
The Arbitrator found that Northwest’s final offer most closely comported with the law and his findings of fact. He found that the contract between the parties had evolved over time and that that the parties intended that Northwest would be compensated for additional services rendered to meet Alberni’s requests for additional content, based on a fixed-price model. He found that Northwest had been overpaid for certain third-party expenses but that this was accounted for in Northwest’s final offer.
Alberni sought leave to appeal the arbitral award under section 31 of the now repealed British Columbia Arbitration Act, RSBC, 1996, c. 55, arguing that the Arbitrator erred in law by making critical findings of fact that were unsupported by the evidence, by placing an impossible burden on Alberni to prove that Northwest had not incurred the third-party expenses, and by failing to give effect to the Agreement as it was originally written. Justice Groves dismissed Alberni’s petition, finding that Alberni had failed to identify any error of law that would justify granting leave to appeal. (A summary of this decision is found at “Award challenged for legal error, denial of natural justice after baseball arbitration” Arbitration Matters Case Note #552).
Alberni appealed the decision of Justice Groves to the British Columbia Court of Appeal, who dismissed the appeal because Alberni failed to demonstrate, as a threshold issue, that the proposed appeal from the arbitration award raised a question of law alone.
The Court reviewed prior cases having established that issues of contractual interpretation typically raise questions of mixed fact and law that cannot be appealed from, unless the petitioner establishes that the appeal raises an “extricable question of law”, i.e., a question of law that can be extricated from the interpretation process (such as the reliance on an incorrect legal test or principle or the failure to consider a required element of the legal test). The Court warned, however, that the lower courts must be cautious when identifying extricable errors of law, given the legislature’s intention to restrict appeals from arbitral awards and to preserve the integrity of the arbitration system as a forum for speedy and final adjudication.
The Court recognized that an absence of evidence to support a material finding of fact raises a question of law but that when there is some evidence to support a factual finding, then the issue is not a question of law and cannot be raised on appeal. In the present case, the Court found that there was “ample evidence” (including e-mails and a written change order issued by Alberni) to support the Arbitrator’s finding that the parties intended to change their original Agreement in order to compensate Northwest for the additional work it performed at Alberni’s request. The Arbitrator’s other conclusions all hinged on this factual finding. The Court of Appeal concluded that when it read the Arbitrator’s reasons as a whole, as it should, they did not raise any error or questions of law alone that would justify granting leave to appeal.
The Court of Appeal also refused to decide whether the standard of review on appeal from the Arbitrator’s decision would be one of reasonableness, following the Supreme Court of Canada’s decision in Vavilov. Because the standard of review played no role in the decision of Justice Groves, the Court of Appeal found that this was not the appropriate case to resolve that important question.
Contributor’s Notes:
Although the outcome is different, the Court’s findings in Alberni are coherent with Escape 101 Ventures inc. v. March of Dimes Canada, 2022 BCCA 294. In March of Dimes, the Court held that a misapprehension of the evidence that goes to the core of the outcome is an extricable error of law (leave to appeal to the Supreme Court of Canada denied: SCC No 40439, April 13, 2023). Both cases recognize that an award can be appealed from where the Arbitrator’s decision does not rest on the evidence, either because there is no evidence in support of a finding of fact (Alberni, in obiter), or because the finding rests on evidence that has been patently misconceived by the arbitrator (March of Dimes). However, Alberni confirms that there can be no appeal where there is some evidence that, when construed correctly, supports the arbitrator’s findings. This is just one of the many cases in which an appellate court chose not to weigh in on the application of Vavilov to appeals of commercial arbitration awards. For a discussion of this issue, see Martin Valasek, Alison FitzGerald and Alexa Biscaro, “First Appellate-Level Decision on Vavilov and Arbitration Muddies Already Murky Waters”, Jennifer K Choi and Thomas A Cromwell, “A Question for Another Day: Vavilov and Appeals From Commercial Arbitration,” and James Plotkin and Mark Mancini, “Inspired by Vavilov, Made for Arbitration: Why the Appellate Standard of Review Framework Should Apply to Appeals from Arbitral Awards”.