In Bosa Properties (Sovereign) Inc. v. The Owners, Strata Plan EPS2461, 2020 BCSC 1357, Madam Justice Neena Sharma reiterated that the “standard to interfere” with an arbitration award is “very high” because “people who choose commercial arbitration have elected to resolve their disputes in a forum that is speedy and final, without the intervention of the courts”. Sharma J. observed that one of the purposes of the standard “is to discourage appeals to the court”, referring to earlier Ed Bulley Ventures Ltd. v. Eton-West Construction Inc., 2002 BCSC 826 which held that “[i]f leave were granted too readily, one of the beneficial and distinguishing features of arbitration (its finality) would be lost”.
Bosa Properties (Sovereign) Inc. (“Sovereign”) and The Owners, Strata Plan EPS2461 (“Owners”) disputed rights and obligations related to air space parcel agreements involving a mixed-use high-rise tower in B.C. (“Agreements”). As background, Sharma J. explained the role of air space parcels in the agreements. (For additional context on air space parcels (“ASP”) in B.C. law, see Land Title Act, RSBC 1996, c 250, Part 9, sections 138-146).
“Turning to the background, air space parcels are sold to raise capital for multi‑level developments. Because the air space parcels and the eventual space in the building are stacked vertically, each parcel requires access and use of various building systems and other components vital to the normal functioning of the building. For example, the building requires an elevator for all levels and elevator shafts occupy an amount of space in each air space parcel”.
The Agreements concerned the following ASPs : ASP 1 – houses a hotel owned by Respondent; ASP 2 – municipal air space parcel owned by municipality in which the tower is located; ASP 3 – retail space and is owned by Respondent; ASP 4 – retail space owned by an entity not involved in the litigation; ASP 5 – the mechanical air space parcel; and, the remainder parcel is the residential parcel.
The parties disputed cost allocation of certain shared costs relating to certain of the Agreements. Sovereign claimed Owners had not paid its fair share of the costs since 2015 and Sovereign initiated arbitration governed by the Arbitration Act, RSBC 1996, c 55, as required by the Agreements. (That legislation, in force during the period relevant to Sharma J.’s decision, has been replaced by B.C.’s Arbitration Act, SBC 2020, c 2, effective September 1, 2020.)
Following a July 29 – August 2, 2019 arbitration hearing, the arbitrator issued an August 13, 2019 award (“Award”) ordering Owners to pay Sovereign $1,295,593.27. That amount carried interest calculated at five (5) percent per annum or a per diem amount of $293.97. Owners applied twice post-Award to the arbitrator for clarification. The arbitrator dismissed each request. For the first, he acknowledged a typographical error but did dismissed the need to rectify the Award. For the second, he considered that Owners’ request raised and re-argued substantive issues already decided and commented that, in his view, Owners’ clarification request “bordered on an abuse of process”.
The parties each presented an application in regard to the Award. Owners, identified as Petitioner in Sharma J.’s reasons, sought leave to appeal the Award on a question of law under section 31(2)(a) of the Arbitration Act. Sovereign, identified as Respondent in Sharma J.’s reasons, applied to enforce the Award under section 29 of the Arbitration Act.
Sharma J. prefaced her analysis with a short statement of the high “standard to interfere” and its purposes of discouraging appeals.
“[19] Pursuant to s. 14 of the Arbitration Act, arbitration awards are final and binding. Case law has consistently held that the standard to interfere with an arbitral award is very high. In Ed Bulley Ventures Ltd. v. Eton-West Construction Inc, 2002 BCSC 826 at paras. 5-6, this Court stated that the high standard is necessary because people who choose commercial arbitration have elected to resolve their disputes in a forum that is speedy and final, without the intervention of the courts. The Court of Appeal noted one of the purposes of the high standard is to discourage appeals to court. It stated that is consistent with the objectives of the legislation which is to preserve arbitration as an alternate dispute forum: Student Association v. BCIT, 2000 BCCA 496 at para. 14. Thus the opportunity to bring an appeal under s. 31 of the Act is narrowly circumscribed: Sattva Capital Corporation v. Creston Moly Corp., 2014 SCC 53”.
In her review at paras 21-24 of the additional principles applicable to appeals raising ostensible questions of law, Sharma J. reiterated a caution made in Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 (CanLII), [2017] 1 SCR 688 para. 46 which stated the relative consequences of identifying a question of law regarding a court decision in first instance and an award:
“[46] From this standpoint, the characterization of a question on review as a mixed question rather than as a legal question has vastly different consequences in appeals from arbitration awards and civil litigation judgments. The identification of a mixed question when appealing an arbitration award defeats a court’s appellate review jurisdiction (Arbitration Act, s. 31; Sattva, at para. 104). In contrast, the identification of a mixed question when appealing a civil litigation judgment merely raises the standard of review ([Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235], at para. 36)”.
At paras 25-32, Sharma J. observed the approach to contractual interpretation and the evolution identified in Teal Cedar Products Ltd. v. British Columbia:
“[47] Given these principles, a question of statutory interpretation is normally characterized as a legal question. In contrast, identifying a question, broadly, as one of contractual interpretation does not necessarily resolve the nature of the question at issue. Contractual interpretation involves factual, legal, and mixed questions. In consequence, characterizing the nature of the specific question before the court requires delicate consideration of the narrow issue actually in dispute. In general, though, as the Court recently explained in Sattva, contractual interpretation remains a mixed question, not a legal question, as it involves applying contractual law (principles of contract law) to contractual facts (the contract itself and its factual matrix) (para. 50)”.
Sharma J. noted a peculiar set of facts which, despite being peculiar, can occur often in commercial transactions similar to the one in issue, namely a mixed-use commercial real estate and/or condominium development.
“[36] There is no dispute that contractual interpretation involves discerning the parties’ intent at the time the contract was formed. There is one peculiarity regarding the agreements at issue in this case. As noted above, at the time the ASP Agreement was registered on title, there was no strata corporation. By the time the Modification Agreement was registered, there was a strata corporation but it was controlled by the respondent.
[37] In that fashion, the agreements are atypical because the respondent was essentially contracting with itself. This has a direct impact on the legal analysis to be conducted as explained in Interville Development Limited Partnership v. The Owners, Strata Plan BCS2313, 2019 BCSC 112 at paras. 88 to 92”.
Sharma J. then turned to five (5) of the proposed grounds of appeal, dismissing each in turn. In regard to the first challenge regarding shared costs of a swimming pool facility, Sharma J. found that Owners had “not accurately captured the arbitrator’s reference” to a particular provision of the Agreements and had failed to identify in what way the arbitrator applied the wrong legal test in interpreting that provision. “Instead, the petitioner’s submissions outline its disagreement with that interpretation, and in my view that does not raise an inextricable error of law”.
In regard to another proposed error of law involving window washing costs, Sharma J. noted that the Owners were, on appeal, challenging the percentage share Owners had submitted in the arbitration as applicable. Identifying certain aspects of Owners’ arguments as “internally inconsistent”, Sharma J. also added that Owners’ proposed ground was more of a disagreement with a conclusion by the arbitrator than a question of law.
“[63] In my view, the arbitrator’s assessment of the percentage was clearly a question of mixed law and fact. Because that approach was specifically requested by the petitioner, it appears unreasonable for it now to complain that the approach was used. Importantly, the petitioner does not identify what analysis should have guided the arbitrator, it simply disagrees with his conclusion. That does not raise a question of law”.
Sharma J. also dismissed Owners’ submission that the alleged ambiguity in the Agreements deserved the court’s analysis on appeal because the arbitrator erred by failing to apply the principle of contra preferentem in its favour and, in its submissions, relied on Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 SCR 23.
Sharma J. stated in order to better analyse its application to the leave to appeal sought by Owners:
“The principle is this: if a court is unable to resolve an ambiguity, the language of the contract will be construed against its author in those cases where the other party has had no meaningful opportunity to modify the wording: Karim v. Seo, 2010 BCSC 746, at para. 17”.
Sharma J. agreed with Sovereign the Owners’ reliance on Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co. was misplaced.
“[81] The petitioner draws an analogy between the ASP Agreement and contracts of adhesion because, as noted above, the ASP Agreement was concluded and registered on title before the strata corporation existed and before it had an elected council. With respect, that attempt to analogize is overly simplistic. The ASP Agreement is a comprehensive all‑encompassing agreement designed specifically for the Sovereign. It has no application to any other development. The contract is also heavily dependent and circumscribed by earlier disclosure statements”.
Having dismissed Owners’ attempt to appeal the Award, Sharma J. then turned to Sovereign’s application to enforce the Award under section 29 (though mention is made of section 27 in the reasons). See paras 84-94 and her reliance on Bekar v. TD Evergreen, 2006 BCCA 266. Following Sangha v. Goel, 2019 BCSC 2267, Sharma J. agreed that the Award is clear and not ambiguous and can be enforceable as an order of the court.
Sharma J. reviewed in some detail the financial circumstances in which Sovereign found itself following Owners’ nonpayment of its share of the costs, the consequence, if any, of Owners having to pay the amount awarded, certain delays since the Award issued, the delays and need for certain internal procedures required for Owners to assess costs against individual owners and the fact that Sovereign has “has no mechanism whatsoever, except the Award, to force payment”. On the basis of her review of those facts, Sharma J. held that “this is a situation where an enforcement order is appropriate”.
Sharma J. granted an order enforcing the Award.
urbitral notes – First, section 29 of the Arbitration Act does mention that leave of the court is required before an order issues enforcing an award in the same manner as judgment of the court or order of the court to the same effect. No criteria are provided regarding how or why leave would be refused. The section does not grant discretion to reconsider the merits of the argument as that discretion has been constrained by the balance of the Arbitration Act and provisions for leave to appeal. Aside from ensuring that award’s dispositive orders do not breach sections 30 or 31 for example, an arbitral award debtor’s ability or willingness of to pay ought not to be one of those read into section 29.
Second, for ease of reference, the full text of BCIT (Student Association) v. BCIT, 2000 BCCA 496 referred to in Sharma J.’s reasons at para. 19 is as follows:
“[14] It is well accepted that one objective of the new Act was to foster arbitration as an alternate dispute mechanism by, amongst other measures, discouraging appeals of arbitration awards to courts. There has been a sense that under the old Act, arbitration was infrequently utilized because it was seen as merely adding one more layer of litigation to the court process of trial and appeal. On this thinking one could argue that a stringent test for leave to appeal would foster arbitration by keeping it far from court review. In answer, one may observe that so long as access to the courts is given for questions of law arising from arbitration awards, whether screened by a leave process or not, litigation in the courts by parties dissatisfied with an award is inevitable and is provided for by the legislation. Further, where, as now, the test compels full argument of the appeal on the leave application, the courts are bound to be engaged fully in the merits of the decision once a dissatisfied party engages the court process. While it may be argued that the imposition of an onerous burden on the leave application discourages applications for leave, this case demonstrates that such a high standard will not discourage all litigants, even when the “obviously wrong” test clearly cannot be met by the applicant”.
That reference follows Sharma J.’s reference to the 2002 decision in Ed Bulley Ventures Ltd. v. Eton-West Construction Inc., 2002 BCSC 826 which, at paras 5-6, had the following observation on post-award challenges in light of the earlier 2000 B.C. Court of Appeal reasons excerpted above:
“[5] Arbitration is intended to provide a speedy and final resolution of the issues. No party may appeal any aspect of an arbitration award as of right. The court retains a certain discretion, to be exercised according to the criteria set out in s. 31(2), to grant or refuse leave after weighing the importance of the result of the arbitration and the point of law invoked. An applicant for leave must show that there is more than an arguable point to the appeal. These principles are canvassed at some length in B.C.I.T. (Student Association) v. B.C.I.T., [2000] B.C.C.A. 496.
[6] After most arbitrations, one party or the other, perhaps both, will be unhappy with the result. The substantial constraints on the granting of leave to appeal play an important role in preserving the integrity of the arbitration system. If leave were granted too readily, one of the beneficial and distinguishing features of arbitration (its finality) would be lost”.