The recent decision of the British Columbia Court of Appeal in Chriscan Enterprises Ltd. v. St. Pierre, 2016 BCCA 442, reminds those who elect to resolve their business disputes through arbitration that decisions of the arbitrator, even those touching on the fairness of procedures, will generally be final and not subject to review by the courts. As the Court noted, the “scope to appeal arbitral awards is narrow because arbitration is intended to be an alternate dispute resolution mechanism, rather than one more layer of litigation.”
The Court of Appeal’s Decision
The appellants, the St. Pierres, contracted with the respondent, Chriscan Enterprises Ltd., in 2004 for the construction of a house. The project was completed in 2006, but some issues arose concerning Chriscan’s failure to obtain competitive bids for some of the work (the “Overcharge Issue”) and certain alleged deficiencies relating to the driveway (the “Deficiency Issue”). The contract contained an arbitration clause which required the parties to submit their disagreements to arbitration.
The St. Pierres attempted to have the Overcharge Issue heard by the courts, arguing breach of fiduciary duty, but were directed back to the arbitration process. The arbitrator rejected the St. Pierres’ breach of fiduciary claim, ruling that the issue was one of breach of contract. The St. Pierres did not seek to amend their Statement of Claim at that time, and the arbitrator continued to hear and decide the Deficiency Issue. The St. Pierres later made an application to amend their Statement of Claim to allege the Overcharge Issue through breach of contract. The arbitrator allowed the amendment, finding that the delay in bringing the application to amend was explained by other steps taken in the litigation and that Chriscan would suffer no substantial prejudice. By this time, the parties had made no fewer than four court applications in the dispute.
The Chambers Judge granted leave to appeal the amendment decision. He was of the view that the proposed appeal was on a point of law, and that the importance of the decision to the parties justified the court’s intervention. Citing reasonableness as the standard of review, the Chambers Judge allowed the appeal.
The Court of Appeal disagreed with this characterization. Writing for a unanimous Court, Savage J.A. held that the issue of whether to allow the amendment was a question of mixed fact and law and that leave to appeal should not have been granted. Rule 22 of the Domestic Commercial Arbitration Rules of Procedure provides a permissive power to arbitrators to allow amendments to pleadings. It sets out two situations where the arbitrator may not allow the amendment: (i) where the delay is prejudicial; or (ii) where the amendment is beyond the terms of the agreement. Any finding as to delay is therefore a finding of fact. The Chambers Judge improperly rejected this factual finding when he substituted his own finding that to allow the amendment would be a manipulation of the adversarial process.
The Court addressed Chriscan’s several other arguments including res judicata, estoppel, waiver, and abuse of process. On the res judicata issue, the Court held that it was clear that the Overcharge Issue was never dealt with on the merits and that the initial jurisdiction decision served only to eliminate the St. Pierres’ claim in breach of fiduciary duty. The breach of contract issue remained extant, although not pleaded. The Court commented that it was inappropriate to treat the parties’ arbitral process as being the same as an action in the courts, where a final entered order ends the jurisdiction of a trial judge. The parties chose to “litigate in slices” and discrete issues were dealt with at different times. As a result, no finding was made in respect of the breach of contract issue. With respect to waiver and estoppel, the Court accepted the arbitrator’s conclusion that the St. Pierres had not, either by their words or conduct, abandoned their contractual claim. As for abuse of process, the Court rejected this claim summarily, repeating that the amendment decision was a question of mixed fact and law.
The Bottom Line
The Court of Appeal reminds us that parties submitting to arbitration subscribe to “the whole package that comes with it.” The Arbitration Act limits the Courts’ role in reviewing arbitral decisions to true questions of law, and the courts will apply the deferential standard of reasonableness, even on important matters of procedure. Choosing arbitration means choosing to be bound by the Arbitration Act, the Domestic Commercial Arbitration Rules of Procedure, and the discretion of the arbitrator chosen.