British Columbia – legal errors must reflect award’s actual reasons when read as a whole – #649

In The Fairways at Bear Mountain Resort Owners’ Association v Ecoasis Resort and Golf LLP, 2022 BCSC 1235,  Justice Donegan considered the threshold question for granting leave to appeal a final award, which is whether the alleged errors were questions of law.  In doing so she emphasized the importance of reading the award as a whole and considering what it was that the Arbitrator had actually decided.  When that was done in this case, she concluded that neither of the two suggested grounds for appeal (both concerning the application of a limitation period) were questions of law alone but were, instead, questions of mixed fact and law that were based on the Arbitrator’s construction of the contract. 

Here, the Applicant Owners’ Association brought arbitration proceedings under a Management Agreement alleging that it had been overcharged by the Respondent for over six years.  The Arbitrator found in favour of the Owners’ Association but applied a two-year limitation period to the claim. He did so on the basis that the former B.C.  Limitation Act (Limitation Act, R.S.B.C. 1996, c.266) applied to the arbitral proceedings. The result was to limit the amounts awarded to those paid by the Owners’ Association within two years from the date of the commencement of the arbitration. The Owners’ Association sought leave to appeal. 

The former B.C. Arbitration Act (Arbitration Act, RSBC 1996, c. 55) applied to the arbitration. Under s. 31,  appeals were limited to questions of law (as they are under the new B.C. Arbitration Act  (Arbitration Act, S.B.C. 2020, c.2)).  As stated above, the two grounds identified by the Owners’ Association on the leave to appeal application focussed on the application of the limitation period by the Arbitrator. Relevant to both grounds was that the former Limitation Act stated it applied to court proceedings and made no specific mention of its application to arbitral proceedings.  The new Arbitration Act explicitly states that limitation periods for commencing court proceedings are applicable to arbitral proceedings (section 11).  The former Arbitration Act contained no similar language.

The first alleged error of law was that, as there was no clear language in the Management Agreement stating that the Parties intended to apply the Limitation Act, the Arbitrator erred in interpreting the contract by applying, in essence, a presumption that the Parties intended it to apply. 

The Arbitrator’s reasons on this point were as follows:

“[183]   …The Association points to a gap between the 1996 Arbitration Act and the Limitation Act, which was plugged in the new Arbitration Act, SBC 2020, c. 2 with express language confirming that the Limitation Act applies to arbitrations brought under the 2020 Arbitration Act.

[184]   … my interpretation of the arbitration agreement contained in the Management Agreement is that the Parties’ intended for the Limitation Act to apply given, among other things, that the governing law of the Management Agreement is British Columbia law, which necessarily includes its statutes, absent a clear exclusion. As the Association conceded at the hearing, there is no limitations exclusion for arbitration.

[185]   Moreover, it would in my view be a commercially unreasonable interpretation of the Management Agreement to find, absent express language, that the parties would intend for there to be no statutory limitation period for breach of contract in the face of a long-standing statute that sets out the Province of British Columbia public-policy based limitation period on such breaches…

[186]   I am also not persuaded that the fact that the legislature decided to make it crystal clear in the 2020 Arbitration Act that the Limitation Act applies to arbitration under that Act precludes a finding that the Limitation Act applied to arbitrations under the 1996 Arbitration Act. Legislatures often seek to clarify potential ambiguities in legislation and in this case, the Association could point me to no legal authority that addressed the application or not of the Limitation Act to an arbitration as we have in this case.

Justice Donegan found the resolution of the issue turned on the Arbitrator’s contractual analysis and that he had found as a matter of contractual interpretation that the Parties intended that the former Limitations Act provisions would apply and that it would have been a commercially unreasonable interpretation to find otherwise.  In support of this she stated that the Arbitrator’s reasons had to be read as a whole.  She noted that throughout the decision the Arbitrator canvassed all the relevant provisions of the Management Agreement and the legal principles governing contractual interpretation and he “”.  She pointed to the decision of the Supreme Court of Canada, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, which held that questions of contractual interpretation are generally questions of mixed fact and law although it may be possible to identify an extricable question of law from within what is initially characterized as a question of mixed fact and law in circumstances in which there is the application of an incorrect principle, the failure to consider a required element of a legal test or the failure to consider a relevant factor.  She found the Owners’ Association had not identified any extricable error of law made by the Arbitrator based on his reasons.

She distinguished this case from Sutter Hill Management Corporation v Mpire Capital Corporation, 2022 BCCA 13, which involved a summary trial where the Chambers Judge was found to have erred by applying an incorrect legal framework.  Instead of construing the words of a contractual clause as a whole in light of the surrounding circumstances, the Chambers Judge approached the interpretation of the words of the clause in a “piecemeal” fashion (para. 32).  She found that no similar application of an incorrect framework was identified here.

The second error alleged by the Owners’ Association was that the Arbitrator erred in law by applying the former Limitation Act provisions to the Parties’ contractual dispute because the claim was not made within a “court proceeding” as the former Limitation Act required, nor was the arbitration a “non-judicial remedy” for which perhaps s. 27 of the new Limitation Act (Limitation Act, SBC 2012, c. 13) could be invoked. It pointed out that the former Arbitration Act did not specifically import the application of the Limitation Act, as s. 11(1) of the new Arbitration Act now does.

Justice Donegan dismissed this argument stating:

“[41]      …. It is important to look at what the arbitrator actually decided. Although the arbitrator referred to the Association’s arguments as I have summarized above, he did not base his decision on these arguments; rather, the arbitrator decided the issue on his interpretation of the parties’ underlying agreement. He ultimately found that the parties intended for the Limitation Act provisions to apply to their contractual relations. The parties were free to agree that the limitation period applied to their contractual relations and the arbitrator found that they had done so. In this way, the legal questions raised by the Association surrounding the construction of, and interplay between, the statutes was irrelevant. Given the arbitrator’s findings, he was not required to decide these questions”.

As the alleged error was actually one of contractual interpretation, it was an error of mixed fact and law and not an error of law.

Having found the Association failed to establish a question of law arising from the arbitral award on either ground for leave, Justice Donegan concluded there was no jurisdiction to grant leave to appeal and dismissed the petition.

Contributor’s Note

For other recent cases considering the identification of legal errors on leave to appeal see Ecoasis Resort and Golf LLP v Bear Mountain Resort & Spa Ltd., 2021 BCCA 285, Escape 101 Ventures Inc. v. March of Dimes Canada, 2021 BCCA 313 (CanLII)  and MDG Contracting Services Inc. v Mount Polley Mining Corporation, 2022 BCSC 1078.