With this post, Arbitration Commentaries begins a new initiative to bring its readers reports on noteworthy arbitration law and practice developments in important jurisdictions outside the United States. In this commentary, Barry Leon, Chair of the International Arbitration Practice Group at Perley, Robertson, Hill & McDougall LLP in Ottawa, Canada (www.perlaw.ca ), and John Siwiec, an associate in that Group, report on a significant recent case from the British Columbia Court of Appeal on the importance of arbitration being expeditious and providing finality — an important appellate court policy pronouncement at a time when users of arbitration, arbitral institutions and arbitration practitioners are focused on the importance of controlling the cost and reducing the length of arbitration. Barry Leon and John Siwiec may be reached via the e mail links found on the Perley, Robertson website (linked above).
Recently, a unanimous British Columbia Court of Appeal upheld a lower court decision precluding a party from appealing a domestic arbitral award where the appeal would be based on an argument inconsistent with one it advanced before its arbitral tribunal. In doing so, the Court stated that the arbitration process is meant to be expeditious and provide finality.
In VIH Aviation Group Ltd. v. CHC Helicopter LLC, 2012 BCCA 125, the B.C. Court of Appeal held that:
Where parties have chosen arbitration as the method of resolving disputes under a contract, they are expected to present their cases fully before the arbitration panel. Allowing a party to change its position on appeal can be subversive of the arbitration process.[1]
In seeking leave to appeal the arbitral award, VIH Aviation Group Ltd. and Cougar Helicopters Inc. (“Cougar”) changed its position on the method that should be used to interpret the parties’ contract. The B.C. Court of Appeal upheld the lower court’s denial of leave to appeal on discretionary grounds under B.C.’s Commercial Arbitration Act, RSBC 1996, c 55 (“CAA”).
Legislative Framework
The CAA applies to domestic arbitration and is to be distinguished from B.C.’s International Commercial Arbitration Act, RSBC 1996, c 233 (“ICAA”), which incorporates the 1985 UNCITRAL Model Law on International Commercial Arbitration (“Model Law”).
One of the distinguishing features of the CAA compared to the ICAA is that arbitral awards can be appealed to B.C.’s Supreme Court (the trial level court) on questions of law. In contrast, the only recourse against an arbitral award under the ICAA is the prescribed grounds in Model Law Articles 34 and 36, which do not include errors of law.
At the center of the B.C. Court of Appeal’s ruling was the extent of the B.C. Supreme Court’s discretionary power in granting or refusing leave to appeal from an arbitral award under the CAA. Section 31(2) of the CAA states:
In an application for leave … the court may grant leave if it determines that
(a) the importance of the result of the arbitration to the parties justifies the intervention of the court and the determination of the point of law may prevent a miscarriage of justice,
(b) the point of law is of importance to some class or body of persons of which the applicant is a member, or
(c) the point of law is of general or public importance.
[emphasis added]
The applicant must demonstrate that the appeal will be on a question of law.
The Dispute
The dispute arose out of a joint venture agreement between Cougar and CHC Helicopter International Inc. (“CHC International”) under which the two companies would provide helicopter services to offshore oilfields in Newfoundland. At the time the agreement was made, CHC International directly owned substantial assets that would be used in the helicopter operations. However, following a restructuring, Cougar asserted its right to terminate the agreement alleging that CHC International had transferred substantially all of its assets.
CHC International’s corporate successor, CHC Helicopter LLC, referred the matter to arbitration seated in Vancouver under the CAA. The arbitral tribunal held that Cougar’s purported termination was invalid and that the joint venture agreement remained in force.
The Parties’ Positions in the Arbitration
The main issue in the arbitration was whether CHC International’s restructuring triggered the termination clause in the joint venture agreement that provided a party the option to terminate the agreement in the event the other party “sold or transferred all or substantially all of its assets”.
The parties differed in their interpretation of “all or substantially all” in the clause although they agreed that the words required a purposive interpretive approach, which included both a quantitative and qualitative analysis of the corporate restructuring. The parties differed on the qualitative effects of the restructuring.
The tribunal found in favour of CHC Helicopter LLC, finding that the restructuring was not qualitatively significant.
Leave to Appeal
In seeking leave to appeal the arbitral award before the B.C. Supreme Court, Cougar’s main assertion was that the tribunal erred in law in failing to interpret the termination clause in the joint venture agreement in accordance with its plain and ordinary meaning – that CHC International’s restructuring led to a “transfer of all or substantially all of the assets” within the plain and ordinary meaning of the words – as opposed to interpreting it using a purposive approach.
The judge accepted that Cougar’s proposed appeal raised an issue of law, and cited B.C case law for the proposition that a failure to apply proper principles of interpretation to the construction of a contract is an error of law. He also found that the criteria for granting leave under Section 31(2)(a) of the CAA, noted above, were met.
Although the statutory criteria had been satisfied, the judge declined to exercise his discretion in favour of granting leave. The judge’s primary motivating factor in refusing leave was that Cougar’s proposed argument on appeal would be inconsistent with the argument it advanced in the arbitration.
Cougar appealed the trial judge’s refusal of leave to appeal to the B.C. Court of Appeal. Cougar contended that its position regarding the interpretation of the joint venture agreement was not inconsistent but a refinement of its previous position.
Potential Subversion of Goals of Arbitration as Ground for Refusing Leave to Appeal
The B.C. Court of Appeal agreed with the judge of first instance that Cougar’s proposed argument on appeal conflicted with its argument before the arbitral tribunal. The Court then considered whether the trial judge erred in treating the change of position as a proper basis on which to refuse leave to appeal.
After reviewing the goals of arbitration, the Court of Appeal found that the trial judge did not err and held that “allowing a party to change positions too readily on an arbitration appeal risks subverting the goals of the arbitration process, which is designed to be expeditious and provide finality.” (VIH Aviation Group Ltd. v. CHC Helicopter LLC, 2012 BCCA 125, at para. 48.)
The affirmation by the B.C. Court of Appeal of the importance of arbitration being expeditious and providing finality is a welcome appellate court policy pronouncement at a time when users of arbitration, arbitral institutions and arbitration practitioners are focused on the importance of controlling the cost and reducing the length of arbitration.
[1] VIH Aviation Group Ltd. v. CHC Helicopter LLC, 2012 BCCA 125, at para. 10.
