New Brunswick – When is an appeal not an appeal? – #736

In New Brunswick Highway Corporation v. MRDC Operations Corporation, 2023 NBCA 19, the Court of Appeal of New Brunswick (the “Court”) dismissed the appeal of a decision denying an appeal against an arbitral award. The Court found that the arbitration agreement did not grant the parties an automatic right of appeal, and denied leave to appeal pursuant to section 45 of the Arbitration Act, RSNB 2014, as no extricable questions of law were present.  The Court cautioned against finding extricable errors of law in a case such as this involving contractual interpretation of the arbitration agreement. The decision turned on the interpretation of the arbitration agreement, which provided both for an appeal and for no appeal.

The dispute – The dispute arose out of an Operation, Management, Maintenance and Rehabilitation Agreement (the “OMM Agreement”) relating to the Trans-Canada Highway between Moncton and Fredericton.  Under the OMM Agreement, a provincial Crown corporation, the New Brunswick Highway Corporation (“NBHC”) awarded the operation, maintenance and rehabilitation of the Highway to MRDC Operations Corporation (“MDRC”) for a period thirty years.  The OMM Agreement provided for a fixed fee for the first twenty-year period and a process to determine the fixed renewal price to be paid to MDRC for the last ten-year period.  That process provided for arbitration proceedings to determine a commercially reasonable fixed price in the event that the parties could not agree.

The parties could not agree on a renewal price in their negotiations, and arbitration proceedings took place, with the three-member arbitral panel determining that the fixed price for the last ten-year period of the agreement be $312 million.

NHBC sought leave to appeal the arbitral award before the New Brunswick court. The issue was whether the arbitral award could be appealed pursuant to the terms of the OMM Agreement or, alternatively, pursuant to section 45(1) of the New Brunswick Arbitration Act, RSNB 2014, which provides that arbitral awards may be appealed with leave on questions of law.

The arbitration agreement

The analysis of the Court of Queen’s Bench and later the Court of Appeal centered on the contractual interpretation of the following two clauses of the OMM arbitration agreement:

24.7(c) Subject to the exceptions set out in the Arbitration Act and monetary claims in excess of Two Hundred Thousand Dollars ($200,000.00) or errors in law, the decision of the Arbitrator shall be final and binding on the parties and shall not be subject to any appeal or review procedure, provided that the Arbitrator has followed the rules and procedures provided herein in good faith and has proceeded in accordance with the principles of natural justice. For greater certainty (but subject to the exceptions set out in the Arbitration Act), the decision of the Arbitrator with respect to the Renewal Period Fixed Highway OMM Price pursuant to Section 4.2 (sic) shall be final and binding on the parties.

24.7(d) If the decision involves the resolution of a monetary claim in excess of Two Hundred Thousand Dollars ($200,000.00) or if there has been an error in law, the decision of the Arbitrator may be appealed by the parties and determined by an action brought in a court of competent jurisdiction

The Court of Queen’s Bench decision -. NHBC argued that clauses 24.7(c) and (d) provided for a contractual right to appeal the award in relation to errors in law. In the alternative, it argued that leave to appeal should be granted pursuant on s. 45(1) of the Arbitration Act (which provides that arbitral awards may be appealed on a question of law with leave).

Chief Justice DeWare held that the OMM Agreement did not provide an automatic right to appeal the award on questions of law or otherwise and denied NBHC’s motion for leave to appeal the award. She concluded, based on a plain reading of clause 24.7, that the renewal price arbitration provisions set out a comprehensive process which would have specified an automatic right of appeal had that been the parties’ intention. She further denied the alternative request for leave to appeal pursuant to section 45 of the Arbitration Act, as she concluded that no questions of law were raised.

The Court of Appeal decision – NHBC appealed the lower court decision. lt first recalled the principles set out in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII), according to which “contractual interpretation involves issues of mixed fact and law”, unless an extricable question of law is identified.

The Court first assessed whether Chief Justice DeWare’s interpretation of the OMM Agreement revealed an “extricable” question of law.  The Court found that this was not the case, as it concluded that she had decided questions of mixed fact and law, such that the standard was palpable and overriding error.

The Court rejected all the grounds of appeal, arriving at the same contractual interpretation as Chief Justice DeWare. The Court relied on the fact that Section 24.7(c) of the OMM Agreement distinguished between renewal price disputes on the one hand and other arbitral disputes on the other, with regards to rights of appeal for errors of law. It concluded that “the parties intended the Renewal Price award to be treated differently than all other arbitral awards when it came to rights of appeal”.

The Court further based its interpretation on the fact that the renewal price arbitration was a “unique feature” of the OMM Agreement, and that limiting rights to appeal for such a factual and technical pricing dispute was in accordance with sound commercial principles.

In responding to the various arguments advanced by NBHC to identify errors in law so as to allow an appeal, the Court recalled that “courts must be cautious in identifying questions of law and that, when a legal principle is not easily extricable, the issue is one of mixed law and fact.

Finally, the Court also found that the arbitral tribunal did not make an error in law in its subsequent costs award, as cost awards, being discretionary, involve questions of mixed fact and law. The Court found that “absent some form of improper consideration, a costs award will not be a question of law”.

Contributor’s notes

First, this is a case that turned on the precise contractual language of the arbitration agreement on the issue of rights of appeal. Despite the fact that the arbitration agreement stated that “if there has been an error in law, the decision of the Arbitrator may be appealed”, the New Brunswick courts found, based on the interpretation of the agreement as a whole, that no automatic right of appeal existed for the renewal price arbitration, a specific and technical form of arbitration provided by the agreement.

Second, this case emphasizes the importance of precise (and simple!) arbitration agreements to capture the parties’ intentions on points such as appeal rights, especially in sophisticated commercial contracts.  In particular, if parties intend that different kinds of arbitral awards issued under the same agreement be treated differently in terms of appeal rights, they should specify this as clearly as possible in the agreement. On the analysis to determine whether a “question of law” is present, such that the arbitral award may qualify for leave to appeal under the provincial Arbitration Act, this case is consistent with the decision of the Supreme Court in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII), to which the Court refers throughout its analysis.