Appealing an arbitral award is a difficult task. Under s. 31 of the Commercial Arbitration Act, to get leave to appeal, the appellant must not only identify a pure error of law, but must also satisfy the court that an appeal may be necessary to “prevent a miscarriage of justice” or is otherwise of particular importance to the public. Errors of mixed fact and law are not sufficient.
Even when these criteria are satisfied, the decision to grant leave is still discretionary and the court can consider any relevant factor. As BCCA explained in VIH Aviation Group Ltd. v. CHC Helicopter LLC, 2012 BCCA 125, one factor that may preclude leave is asserting a position on appeal that is inconsistent with the position taken in the arbitration.
In this case, the issue was the construction of a termination clause that could be invoked when a party “has sold or transferred all or substantially all of its assets”. The Appellant sought to rely on this clause after the Respondent completed a tax-motivated restructuring that resulted in its assets being transferred to subsidiaries and affiliates.
In the arbitration, both sides urged the panel to apply a purposive approach to construction of this clause. In particular, the Appellant argued that:
... the term “substantially all” has a very well established meaning in the authorities. It means assets sufficiently significant to the core business of the transferor that their sale “strikes at the heart of the corporate existence and purpose”.
After the panel found against it, the Appellant sought leave on the basis that the panel committed an error of law “in failing to interpret [this clause] in accordance with its plain and ordinary meaning.” It argued that transfer of assets to subsidiaries “was a “transfer of all or substantially all of the assets” within the plain and ordinary meaning of the words.”
The chambers judge, relying on JEL Investments Ltd. v. Boxer Capital Corporation, 2011 BCCA 142 and Grace Residences Ltd. v. Whitewater Concrete Ltd., 2009 BCCA 144, agreed that “a failure to apply proper principles of interpretation to the construction of a contract is an error of law.” He also agreed that if the Appellant was successful on appeal, the court’s intervention may prevent a miscarriage of justice. Nevertheless, he exercised his discretion to refuse to grant leave, finding that:
One purpose of arbitration is for the parties to resolve their disputes expeditiously. It is a significant consideration on this leave application that the very error that the petitioners complain of was advanced and endorsed by them before the arbitrators.
The Court of Appeal agreed with the chambers judge’s reasoning and held that:
(1) the “plain and ordinary” interpretation argued on appeal was inconsistent with the purposive approach urged in the arbitration;
(2) a change in position was a relevant consideration on a leave application, particularly since “there is an important distinction to be drawn between raising a new issue on appeal and resiling from a position deliberately taken before the tribunal of first instance”; and
(3) “Where parties have deliberately preferred arbitration as the method for resolving disputes, it is to be expected that they will fully argue their cases in that forum” and “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”.
As always, lawyer beware, and choose your arguments with care.