Though arbitrators should give reasons for departing from the “normal” costs rule, Madam Justice Lisa A. Warren in Goel v. Sangha, 2019 BCSC 1916 held that it does not follow that arbitrators must provide reasons for not departing from the normal rule. Warren J. also held that an arbitrator cannot be faulted for following a process adopted by agreement of the parties and that, on appeal, absent further evidence, the court had no role in revisiting an arbitrator’s finding that such an agreement existed in fact.
The same parties had already appeared in B.C. Supreme Court on related matters and Warren J. outlines their procedural history at paras 6-33. Petitioners (“the Goel parties”) had instituted a civil action but, in Goel v. Dhaliwal, 2015 BCSC 2305, the court had stayed the action further to sections 15(1) and 15(2) of the Arbitration Act, RSBC 1996, c 55 in favour of arbitration.
The arbitration produced two (2) key decisions regarding costs:
(a) a March 9, 2018 order that Goel parties pay the costs of the other parties for the first phase of their arbitration with such costs to include reasonably incurred legal fees and expenses (“Costs Order”); and,
(b) following a summary process for quantifying the Costs Order based on affidavit material and written submissions, a September 24, 2018 award, subsequently corrected October 1, 2018, determining the quantum of legal fees and expenses (“Costs Award”).
Following issuance of the Costs Order and the Costs Award, the parties had returned to court to dispute whether the court could declare that the arbitrator’s decision on costs were enforceable in the same manner as a judgment/order of the court and for leave to file and enforce those costs awards as an order of that court. See Sangha v. Goel, 2018 BCSC 2267 and the related Arbitration Note “Arbitrator’s decision on costs qualifies as an award enforceable as judgment/order of the court”.
In this decision, the Goel parties returned to court with an application under the Arbitration Act, RSBC 1996, c 55 for various orders regarding the Costs Order and the Costs Award. At paras 4 and 35, Warren J. distilled the relief sought and issues raised.
The Costs Order and the Costs Award issued from their arbitration administered by the British Columbia International Commercial Arbitration Centre (the “BCICAC”) under its Domestic Commercial Arbitration Rules of Procedure (“BCICAC Rules”).
The Goel parties applied for orders to set aside the Costs Order and for leave to appeal the Costs Award seeking:
(i) paras 42-53 – an order under section 30 to set aside the Costs Order on the basis that the arbitrator committed arbitral error by failing to provide them with the opportunity to make submissions on the type of costs that ought to be awarded; and,
(ii) paras 54-84 – leave to appeal the Costs Order because the arbitrator erred in law by:
(a) failing to give reasons for exercising his discretion in favour of awarding costs consisting of reasonably incurred legal and other expenses as opposed to some other type of costs such as party and party costs; and/or
(b) not recognizing that he had the discretion to dispose of costs in a manner other than by awarding reasonably incurred legal and other expense.
(iii) paras 85-91 – if leave to appeal the Costs Order is denied, should the Costs Award be set aside on the grounds that the arbitrator committed arbitral error by conducting a summary assessment of the legal fees.
Prior to engaging in analysis of those grounds, at paras 36-41 Warren J. paused first to determine whether the Goel parties could even present their applications.
Under section 42(2) of the Arbitration Act, a party has 60 days from notice of an award to apply for relief under sections 30 or 31. The Goel parties applied to the court on November 19, 2018 for orders to set aside the Costs Order and for leave to appeal the Costs Award. That formal application was preceded by an October 5, 2018 notice by the Goel parties’ counsel to the other parties that he had received instructions to appeal the Costs Order.
The application seeking leave to appeal the Costs Order was filed well past the May 8, 2018 cut-off date. The application seeking leave to appeal the Costs Award was filed 50 days after notice of the Costs Award and therefore within the 60 day period.
Warren J. therefore considered whether she should extend the time in which to file the application and excerpted Patenaude v. Patenaude, 2018 BCSC 286 paras 20-21 to list the five (5) factors governing extensions of time: a bona fide intention to appeal within the appeal period; respondent informed of appellant’s intention to appeal within the appeal period time frame; would respondent be unduly prejudiced by an extension; merit in the appeal; and, the interests of justice that an extension be granted. Recognizing that each of the five (5) factors is relevant, Warren J. did single out the last as being “crucial”.
“Having considered the factors, I have no hesitation concluding that it would not be in the interests of justice to grant an extension. This is because the petitioners have provided no evidence that they had an intention to apply to set aside or appeal the Costs Order within the period set by s. 43 and, for the reasons expressed below, there is no merit to the application in any event”
Despite this finding, Warren J. decided nonetheless to include her analysis on the Costs Order and explained that she did so in light of her conclusions on the merits of the Costs Award.
(i) paras 42-53 – an order under section 30 to set aside Costs Order
The Goel parties submitted that the arbitrator had committed arbitral error by failing to provide them with an opportunity to make submissions on the type of costs to be awarded. The Goel parties alleged that they had been denied the opportunity to argue for the lower ‘party-party’ costs rather than the higher ‘reasonably incurred’ costs. In particular, they alleged that the arbitrator ought to have invited them to provide further submissions on the type of costs once the arbitrator noted that the Goel parties had limited their costs submissions to request deferral of a costs decision until completion of the second phase of the arbitration.
Warren J. accepted that a failure to give the Goel parties a fair opportunity to make submissions on costs would be a denial of justice. She referred to Williston Navigation Inc. v. BCR Finav No. 3 et al, 2007 BCSC 190. She also noted that the rules of natural justice and the duty of fairness are variable, determined by the specific context and circumstances of each case. See Knight v. Indian Head School Division No. 19, 1990 CanLII 138 (SCC),  1 S.C.R. 653 and Syndicat des employés de production du Québec et de l’Acadie v. Canada (Human Rights Commission), 1989 CanLII 44 (SCC),  2 S.C.R. 879.
Despite this acknowledgement, based on the actual submissions made in the arbitration, Warren J. dismissed the Goel parties’ argument that they had been denied natural justice. She held that they had made the choice to limit their submissions to deferring costs and had refrained from submitting argument on the level of costs. The arbitrator was not bound to anticipate that they disputed the type of costs. It was reasonable for the arbitrator to proceed on the basis that there was no issue with the type of costs that ought to be awarded and that the only dispute was the timing of a costs decision.
“ It is trite that one of the fundamental purposes of commercial arbitration is the speedy and economical, as well as fair, resolution of commercial disputes. This is reflected in Rule 21(2) of the BCICBC Rules noted above. It would be contrary to that purpose, and unfair to the other parties, to require an arbitrator to address sequential arguments on the same topic, particularly in the absence of an express request by the petitioners to do so.
 As mentioned, knowing that the Sanghas and Dhaliwals had advanced submissions in favour of indemnity costs, the petitioners limited their submissions to the argument that costs should be deferred, they did not make an alternative submission, and they did not ask for the opportunity to make further submissions on the type of costs to be awarded in the event that the arbitrator was not persuaded to defer costs. In these circumstances, it was reasonable and fair for the arbitrator to proceed on the basis that there was no dispute about the appropriate type of costs award.”
(ii) paras 54-84 – leave to appeal the Costs Order
In support of their application for leave to appeal under section 31, the Goel parties alleged that the arbitrator failed to give reasons when exercising his discretion on costs and in awarding a higher level of costs. Warren J. did not consider this ground applicable to an application for leave to appeal under section 31 but more appropriate to an application to set aside under section 30. She still accepted to consider it.
“ In my view, in the arbitral context, a failure to give reasons is more appropriately viewed as a potential failure to observe the rules of natural justice and, therefore, potential arbitral error that would lead to an application to set aside the award or remit the award to the arbitrator pursuant to s. 30 of the Arbitration Act. However, the petitioners framed the issue as an error of law giving rise to an application for leave to appeal under s. 31. In this case, the distinction is insignificant because, for the reasons expressed below, there is no merit to either argument.”
Warren J. found no merit in the Goel parties’ submissions and held there had been no miscarriage of justice under section 31(2). To do so, she identified the sequence of the court’s analysis.
“In order to rise to the level of a miscarriage of justice for the purposes of s. 31(2)(a), an alleged legal error must relate to a material issue in the dispute, which, if decided differently, would affect the result of the case. Therefore, in deciding whether s. 31(2)(a) has been met, it is necessary to engage in a preliminary consideration of the merits of the appeal because an appeal with no chance of success would not affect the result of the case. The appropriate threshold for this preliminary assessment is whether the appeal has arguable merit (cannot be summarily dismissed as being without merit) in light of the standard of review on which the merits of the appeal will be judged.”
First, section 41 of the Arbitration Act stipulates that, in arbitrations subject to that legislation, an order for costs may be made on terms that the arbitrator (“authority”) making the order thinks just. Second, Rule 41 of the BCICAC Rules provides that the “normal or typical” costs awards in arbitration includes reasonable legal expenses. Third, Warren J. added that the “weight of authority also suggests that it is typical or normal for indemnity costs to be awarded in a domestic arbitration to which the Arbitration Act and the BCICAC Rules apply” and referred to Mr. Justice Malcolm D. Macaulay’s decision in first instance in Teal Cedar Products Ltd. v. British Columbia (Ministry of Forests), 2011 BCSC 360 (varied on appeal Teal Cedar Products Ltd. v. British Columbia (Ministry of Forests), 2012 BCCA 70, British Columbia (Forests) v. Teal Cedar Products Ltd., 2013 SCC 51 (CanLII),  3 SCR 301). Note: this line of decisions involving Teal Cedar Products Ltd. ending in 2013 is distinct from the line of decisions involving the same parties but culminating in the more oft-cited 2017 Supreme Court of Canada decision in Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 (CanLII),  1 SCR 688.
Based on the reasoning in that 2013 decision in first instance, “[a]s I understand it, they submit that the arbitrator’s failure, in this case, to give reasons for awarding the normal or typical type of costs means that his discretion was not exercised judicially”.
Warren J. held that Macaulay J.’s decision in Teal Cedar Products Ltd. did not support the Goel parties’ argument.
“ While an arbitrator should give reasons for departing from the normal costs rule, it does not follow that an arbitrator must provide reasons for not departing from the normal rule, particularly where no party argued that he should do so.”
See Teal Cedar Products Ltd. v. British Columbia (Ministry of Forests), 2011 BCSC 360 para. 71 which referred to Cascadia International Resources Inc. v. Novawest Resources Inc., 2008 BCSC 679 para. 78.
Warren J. closed her consideration of this unsuccessful ground by stating the inference she drew on the circumstances before her. “Again, the only reasonable inference to be drawn from the arbitrator’s failure to give reasons for awarding indemnity costs is that he reasonably concluded that the normal scale or type of costs was not in dispute because the petitioners did not address that issue in their submissions.”
Despite the Goel parties’ attempts to argue the reasonableness of some of the legal cost, Warren J. refused to undertake her own assessment of the costs. “It is not open to me, given the relief sought by the petitioners and the grounds relied upon, to embark on my own assessment of the reasonableness of the amounts claimed”.
Warren J. distinguished Williston Navigation Inc. v. BCR Finav No. 3 et al, 2007 BCSC 190 from the circumstances in which the Goel parties found themselves. In that case, the arbitrator had relied on a summary assessment of costs based on limited evidence. Setting aside whether the summary process had been agreed to or not, Warren J. did not find much common ground with the evidence in that case and the one before her.
“However, in [Williston Navigation Inc. v. BCR Finav No. 3], the evidence before the arbitrator was limited to an affidavit that attached, as exhibits, the first page of the legal accounts showing the aggregate fees, disbursements and taxes. The affidavit made reference to the two lawyers who had primary conduct of the litigation and their hourly billable rates, but provided no details as to the actual services provided, the time spent by individual lawyers, or the manner in which the accounts had been determined”.
“In contrast, in this case, affidavits were delivered on behalf of the Sanghas and Dhaliwals appending the legal accounts with details and descriptions of the time spent for each entry and disbursement, together with written submissions on the reasonableness of the work”.
Warren J. also addressed the Goel parties’ challenge to a finding made by the arbitrator that the parties had agreed with the proposed process. They argued that “in fact, there was no such agreement”. Warren J. was emphatic about the limits of her intervention. First, she found no evidence to support the Goel parties’ challenge. Second, she reiterated that she had no role to reconsider the arbitrator’s determinations of fact.
“However, there is no evidence to this effect in the record before me. It is not open to me to find that the arbitrator erred in concluding that each counsel had agreed. In my view, his finding that they did agree is determinative of this issue. It simply cannot be said that the arbitrator committed arbitral error in adopting a process that all parties agreed to.”
See Greata Ranch Holding Corp. v Concord Okanagan Developments Ltd., 2018 BCSC 931 para. 50 and Hanna Collision Repair (1984) Ltd. v. Insurance Corporation of British Columbia, 2010 BCCA 490 para. 46.
Warren J. dismissed the applications and granted responding parties their costs at Scale B.
urbitral note – First, see Gerald W. Ghikas, Q.C., “Costs in Domestic Arbitration: Who Decides How to Decide What is Reasonable?”, the Advocate, Vol. 78, Part I, January 2020, pages 29-38.
Second, the reasons underline that the arbitrator need grant reasons if and when departing from the “normal or typical” costs award.
Third, the arbitrator does not deny a party natural justice by following the procedure adopted by the parties.
Fourth, the arbitrator’s determination of an agreement on the procedure is, without contradictory evidence adduced to the court (or admission by the other party), subject to redetermination by the court on appeal.