By Denny Chung
The decision of Justice Dickson in A.L. Sims and Son Ltd. v. British Columbia (Transportation and Infrastructure), 2022 BCCA 440 [AL Sims], provides a recent and rare decision considering the scope of appeal under the BC Arbitration Act, S.B.C. 2020, c. 2 [the “New Act”] within the context of a construction dispute.
This finding is significant as it followed a concurrent appeal decided shortly before it in Escape 101 Ventures Inc. v. March of Dimes Canada, 2022 BCCA 294 [“101 Ventures”]. These decisions have clarified the scope of review of an arbitral award under the New Act as being available where there are “material misapprehensions of evidence” by an arbitrator. This reasoning potentially broadens the understanding of the scope of appeal permitted of an arbitral award provided by the Supreme Court of Canada around nine years ago in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 [“Sattva”]. Sattva has stood for the principle that only legal errors by an arbitrator are subject to appeal and that factual findings are unreviewable—such that only in rare cases will a dispute of contractual interpretation be reviewable since they generally involve findings of fact and law.
It is unclear if this recent decision can be reconciled with the decision in Sattva. What is clear is that construction stakeholders should be cautious in relying on standard-form arbitration clauses.
In 2015, the Ministry of Transportation and Infrastructure [the “Ministry”] awarded a public tender to A.L. Sims and Son Ltd. [“AL Sims”] to perform road building upgrades in Fort St. John, BC in connection to the Site-C Dam project. During the project, disputes arose concerning AL Sims’ scope of work under the contract. AL Sims claimed for extra costs and time.
The parties proceeded to an arbitration under the contract’s dispute resolution provisions. The arbitrator largely dismissed AL Sims’ claims for extra compensation and time, and awarded the Ministry damages for delay. AL Sims sought leave to appeal the arbitral award under section 59 of the New Act. AL Sims argued that the arbitrator had forgotten, ignored, or misconceived evidence in a manner that affected the result, giving rise to reviewable legal errors under section 59.
Justice Dickson dismissed the application for leave to appeal and upheld the arbitral award. The key issue was the scope of appealable legal errors in an arbitral award, namely, whether the misconception of evidence that affected the result amounts to a legal error automatically, or only if it is plainly clear on the face of the award. AL Sims argued the former for a broader scope of appeal. The Ministry argued the latter for a narrower scope on the theory that section 59 of the New Act (which sets out the circumstances in which a party may appeal an arbitral order) is more restrictive than under the old Arbitration Act, RSBC 1996, c 55 [the “Old Act”].
Justice Dickson took notice of the concurrent appeal under section 59 of the New Act in 101 Ventures, which was the first reported decision under the New Act. The BC Court of Appeal in 101 Ventures allowed the appeal of an arbitral award, finding that the arbitrator materially misapprehended the evidence which affected the result and thus made a legal error subject to appeal.
Justice Dickson noted that while 101 Ventures was being appealed to the Supreme Court of Canada, he was bound by that decision and agreed with it in any event. Accordingly, Justice Dickson affirmed the general proposition that a material misapprehension of evidence going to the core of the outcome of an arbitral award can amount to an extricable legal error, subject to an appeal under section 59.
Justice Dickson rejected AL Sims’ characterization of the arbitrator’s decision as legal errors. Rather, he found that AL Sims’ various complaints only engaged issues of procedural fairness or were simply unfounded, none of which gave rise to legal errors. Justice Dickson found that the arbitrator’s decision included were unreviewable findings of fact, or were otherwise only capable of being overturned on an application to the BC Supreme Court to set aside the award on grounds of procedural fairness (under section 58 of the New Act).
The application for leave to appeal was dismissed.
AL Sims provides a rare comparison of the New Act to the Old Act within the context of a construction dispute. The decision remains faithful to the Old Act in ruling that arbitral awards are owed considerable deference, subject only to legal errors. But, it raises a proposition from the BC Court of Appeal which may be difficult to reconcile with the Supreme Court of Canada’s teaching in Sattva, namely: as a question of law will rarely arise in a contract interpretation since the decision is typically only of interest to the parties, in most cases arbitrators’ decisions on interpretation issues will be given considerable deference, and only be reviewable if they do not meet “the reasonableness threshold of justifiability, transparency, and intelligibility” (a higher threshold than “considerable deference”).
In adopting the legal proposition from 101 Ventures that “material misapprehensions of evidence” give rise to legal errors, AL Sims represents another potential step away from the “considerable deference” standard taught in Sattva to a “correctness” standard when reviewing arbitral awards. This is because arguably, any sort of consideration of the evidence would necessarily involve findings of fact, such as the interpretation of the meaning of contract terms. This would represent a change in the current framework which calls for considerable deference to arbitrators’ decisions.
If 101 Ventures makes its way to the Supreme Court of Canada, it may be that the Supreme Court finds that AL Sims and 101 Ventures are consistent with and simply clarified Sattva. Until then, owners, developers, contractors, and consultants should be alive to dispute resolution clauses when entering into their construction contracts. Many construction contracts contain mandatory arbitration provisions to resolve disputes as a means of providing confidentiality, efficiency, and finality compared to traditional court proceedings. A broader scope of review of an arbitral award could theoretically detract from these benefits of arbitration—making them more costly, uncertain, and public. The New Act does provide some flexibility to parties to protect against such concerns including, for example, by permitting the parties to opt out of appeal rights altogether. This option has its own drawbacks, however.
Ultimately, construction stakeholders should consider if they need to modify standard-form arbitration clauses to reflect their goals in utilizing such provisions.