B.C. – Leave to appeal granted on question of law of public importance – #670

In The Graham-Aecon Joint Venture v. Malcolm Drilling Company Inc., 2022 BCCA 319, the Applicants (The Graham-Aecon Joint Venture and related entities) sought leave to appeal an arbitral award where the underlying dispute turned on the proper interpretation of section 8(d) of the Limitation Act, S.B.C. 2012 c. 13. That provision states that a claim is “discovered” “on the first day on which the person “knew or reasonably ought to have known…that, having regard to the nature of the injury, loss or damages, a court proceeding would have been an appropriate means to see to remedy the injury or loss”.  Based on his interpretation of section 8(d), the Arbitrator had found that the claim was not time-barred. On application for leave to appeal, even though the Arbitrator’s reasons were “careful and thorough” Justice Voith decided to exercise his discretion to grant leave. He found the question of the proper interpretation of section 8(d) met the requirements  of the Arbitration Act, S.B.C. 2020, c.2  for leave as it was a question of law that ‘cannot be dismissed through a preliminary examination’ and was of public or general importance as it had received little previous judicial attention.

Briefly, the facts were these. The Applicants entered into a sub-contract with the Respondent, Malcolm Drilling Company Inc., under which the Respondent was to supply and install cement deep soil mixing walls and beams. Part of the work under the sub-contract required drilling to a certain depth in the ground. While the Respondent was performing the work, the drilling tool became stuck and was ultimately abandoned on the direction of the Applicants. The dispute concerned whether the Applicants had to reimburse the Respondent for the cost of the lost tool.

The Respondent commenced an arbitration. At the arbitration, the Applicants’ only defence to the Respondent’s reimbursement claim was that it was time-barred. The Applicants argued that the claim was “discovered” for the purposes of section 8 of the Limitation Act when the Respondent was directed to abandon the tool and so it was time-barred. The Respondent argued, however, that the claim was not discovered until the Applicants refused to pay the Respondent for the costs of the lost tool. Therefore. it was not time barred. The Arbitrator agreed with the Respondent.

On the application for leave to appeal, the Applicants raised two questions. The first question concerned the proper interpretation of section 8(d) of the Limitation Act. Leave was granted on this question. The second questions concerned whether the change order process under the sub-contract postponed the running of limitation periods. Leave to appeal was not granted on the second question as Justice Voith determined it raised an issue of mixed fact and law, so did not meet the requirements for leave set out in section 59 of the Arbitration Act.

As a preliminary point, the Applicants argued that they did not need to establish an error of law or any merit to the appeal on the leave application as all that was required under section 59(2) of the Arbitration Act for leave is a “question of law”. Based on Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (“Sattva”), para. 74, which considered the almost identical provision under the previous Arbitration Act, Justice Voith found that while it was correct that all that needed to be established on the application was a question of law, that issue still must have some merit. He quoted from Sattva, in part:

“In my opinion, the appropriate threshold for assessing the legal question at issue under s. 31(2) is whether it has arguable merit… the common thread among the various expressions used to describe arguable merit is that the issue raised by the applicant cannot be dismissed through a preliminary examination of the question of law… “

Turning to whether the issue raised a question of law, Justice Voith stated that while discoverability is a question of mixed fact and law, the proper interpretation of a statute, as was being argued here, is generally considered a question of law alone, citingTeal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 at para. 47.

He then turned to the recent British Columbia Court of Appeal case of Aubichon v Grafton, 2022 BCCA 77, where the Court found (in the context of an application to strike pleadings) that the correct interpretation of section 8 of the Limitation Act was an “important” issue  (para. 51), that was “not a straightforward exercise” (para. 49)  and that it had not been yet been considered by the Court of Appeal.  He also noted case law under the previous Arbitration Act where the “novelty” or absence of novelty of the issue raised was a consideration that informed the decision to grant leave and similar case law outside of the arbitration context.

In the result, he concluded that the issue raised an extricable question of law of sufficient merit concluding that this question “cannot be dismissed through a preliminary examination” as stated in Sattva at para. 74, and that leave to appeal should be granted on the basis that the proper interpretation of section 8 of the Limitation Act is of general or public importance.

Contributor’s Note:

Justice Voith also wrote the reasons in another recent case concerning appeal rights under the B.C. Arbitration Act: Escape 101 Ventures Inc. v. March of Dimes Canada, 2022 BCCA 294 where, in considering the appeal, he found a misapprehension of evidence can amount to an extricable error of law and it need not be apparent “on the face” of the arbitral award. See recent case note B.C. – Material misapprehension of evidence is an extricable error of law – #662.  

Another recent case concerning arbitration and discoverability is Maisonneuve v. Clark, 2022 ONCA 113 which considers the issue in the context of a stepped arbitration clause. See recent case note Ontario – Start of limitation period determined by interpretation of stepped arbitration clause – #592.

Finally, a related case, also concerning the topic of stepped arbitration clauses, this time in the context of interpreting arbitration clauses where other agreements are incorporated by reference is Malcolm Drilling Company Inc. v The Graham-Aecon Joint Venture, 2021 BCSC 1136. case note: B.C. – arbitration remains mandatory despite option given to only one party to waive arbitration – #503.