Saskatchewan – arbitrator’s mentions of “in my experience” insignificant and raise no question of law – #213

In Graham Design Builders LP v. Black & McDonald Limited, 2019 SKQB 161, Mr. Justice G.M. Currie denied leave to appeal on a question of law because the arbitrator’s repeat mention of “in my experience” did not qualify as taking arbitral notice of a practice in the relevant market.  Rather, the remarks were “mere passing comments” which did not affect the award based on the factual matrix in evidence and relevant contractual provisions.  In a subsidiary analysis, Currie J. did accept that, had one of the challenges qualified as a question of law, he would have considered it important enough to grant leave to appeal by applying a $1 million threshold he identified as ‘significant’ in his one of his earlier decisions.

Graham Design Builders LP (“Graham”) served as construction manager and general contractor on the construction of a hospital in Moose Jaw, Saskatchewan and contracted with Black & McDonald Limited (“BML”) to serve as subcontractor for services involving mechanical, electrical, plumbing and fire protection.  The parties’ contracts involved less-than-usual forms.

 “[3] The forms of contract used by the parties were not the usual forms used in the construction industry. The parties used contracts that were intended to facilitate a collaborative, non-traditional approach to the project – a method described as Integrated Lean Project Delivery (“IPD”). This method emphasizes teamwork and waste reduction, the goal being to make construction faster and cheaper than traditional project methods.

[4] Despite that goal, the project took longer to complete than planned, and it was completed at a higher cost than planned. BML incurred significantly greater project expenses than expected. Graham refused to reimburse BML for the increased cost of doing the work, and so this dispute arose.

As required by their contracts, BML initiated arbitration against Graham claiming reimbursement of the costs it incurred to complete the work, payment of profits associated with the unpaid costs and interest and costs.  The arbitrator issued a February 15, 2019 award (“Award”) granting BML $11,996,964.84 as reimbursement of its costs to complete the work, $1,439,872.29 for profit associated with the unpaid costs of the work and interest on both amounts.

Because the contracts contained no right of appeal, Graham sought leave to appeal under sections 45(1) and 45(2) of Saskatchewan’s The Arbitration Act, 1992, SS 1992, c A-24.1.  For the applicable criteria, Currie J. circled back to his own earlier decision in Graham Building Services v. Saskatoon (City), 2018 SKQB 336, paras 7-8, a decision in which Graham had also sought leave to appeal.

Applying those criteria, Currie J. considered whether Graham’s challenges raised questions of law.  At paras 17-30, Currie J. determined that the first challenge against the award of interest raised no question of law and, at paras 41-46, that the second challenge involving contract interpretation raised only a question of mixed fact and law.

Currie J.’s reasons are of added interest regarding Graham’s two (2) further challenges.  First, Graham objected to what it characterized as the arbitrator taking arbitral notice and doing so incorrectly.  Second, Graham argued that the arbitrator had referred to legal principles that neither party had argued.  In each case, Graham argued that doing so was a question of law and subject to appeal.

Arbitral notice – At three (3) points in his 129 page Award, the arbitrator referred to his experience.  Currie J. reproduced those references at para. 42 of his reasons:

139. … In my experience, engineers often believe they have a good/perfect design but seldom are on the front lines of installation to observe all the battles the constructors have to face.

325. Numerous cases are cited wherein the courts have found waiver or acquiescence by the owner itself ordering the extra work or consistently ignoring the contract provisions regarding the change order process. In my experience these two events occur more frequently than people following the exact procedures under the contract. …

331. It should be readily apparent that if the Owner, Stantec and Graham are making the decision that there will be no change order, then all the processes become a futile process for a Trade Partner like B&M. They would be going through meaningless processes to get to the mediator/arbitrator stages every time a CO issue arose. This would obviously be a monumental cost/time exercise. All of this leads to the fair and proper interpretation/application of s. 31.5 (Notice of a potential Claim must be initiated within 14 days of the event) and s. 33.2 “Failure to give a timely notice will not result in a loss of rights if, in the circumstances” the party gave reasonable notice and Graham was not prejudiced by the untimely notice.

Graham argued that the comments about typical compliance with strict terms in contracts was a personal view and one not based on the evidence and lead to his finding on awarding profits.  This approach, in Graham’s view, amounted to the arbitrator improperly taking arbitral notice of facts not in evidence.

Currie J. disagreed.  He considered that the remarks were “mere passing comments”, like background to his discussions of the issues. “There is no reason to conclude that the remarks formed an effective part of the arbitrator’s decision on the profit award question. As mentioned above, that decision was based on the contractual provisions and on the factual matrix, which was in evidence before him.

Currie J. also determined that the more extensive remarks at para. 331 of the Award “cannot be characterized as anything other than the arbitrator considering and analyzing evidence that was before him.

Legal principles not pleaded – Graham argued that a question of law arose with respect to fairness when, in its opinion, the arbitrator considered and applied principles which (a) neither party argued and (b) affected a portion of his Award.

Currie J. again disagreed.  Having reviewed the Award, Currie J. held that the principles mentioned were referred to by the arbitrator as “traditional theories”, that the arbitrator expressly noted that neither party argued them and that the arbitrator expressly wrote in this reasons that “I believe, in the final analysis, these traditional theories don’t apply because of the unique wording of the [July 1, 2012 Integrated Form of Agreement” dated July 1, 2012 (“IFOA”)] IFOA.

urbitral note – The challenges made by Graham identify issues key to the process of arbitration.  Currie J. underlined that, despite the appearance of the “in my experience” comments in the Award, the key role of such comments must be proven and impact the results set out in the Award. 

At paras 52-60, Currie J.’s reasons close with a subsidiary analysis of the importance of the challenge regarding the profit award.  Currie J. offered his analysis to confirm that he would have granted leave on the profit award due to its importance.  He refers to a $1 million threshold he identified at paras 29-31 of his earlier reasons in Graham Building Services v Saskatoon (City), 2018 SKQB 336.  His reasons also consider but dismiss Graham’s argument of the precedential value of a court’s analysis on the less-than-usual “Integrated Lean Project Delivery” form of contract identified at para. 3 of his reasons.