First Appeal Of An Arbitration Award Under Section 59 Of British Columbia's New Arbitration Act

• Published date: 17 November 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Arbitration & Dispute Resolution
• Law Firm: Osler, Hoskin & Harcourt LLP
• Author: Uday Kumar

Overview

In Escape 101 Ventures Inc. v. March of Dimes Canada, 2022 BCCA 294, the British Columbia Court of Appeal (BCCA) held that a material misapprehension of evidence that is central to the reasoning process underlying an arbitral award is an extricable question of law under section 59(2) of the Arbitration Act, S.B.C. 2020, c. 2. Further, an error of law does not have to be apparent on the face of (or within the four corners of) an arbitrator's award, and the reviewing court is entitled to look beyond an arbitrator's award and reasons.

The decision reflects that factual issues involving misapprehension of evidence may give rise to an appeal of an arbitral award on a question of law. Absent a compelling indication that the arbitrator made an error of law that was central to their underlying reasoning, however, courts are reluctant to interfere with an arbitral award. It should be noted that this was the first appeal of an award under the Arbitration Act which came into force in September 2020. The BCCA's judgment will form the basis for the development of future jurisprudence on this topic.¹

Background

In April 2017, the appellant (Escape 101 Ventures Inc.) and the respondent (March of Dimes Canada) signed an agreement under which the appellant sold its employment assistance and community counselling services business to the respondent (the Agreement). The purchase price under the Agreement included an "earnout" clause worth up to $1.1 million, which provided that the respondent would pay the appellant a percentage of some revenues earned from the business over five years. The Agreement did not address whether new contracts generated by the business during the five-year period would be excluded for the purposes of the earnout calculation. In 2018, the respondent won a bid for a new contract (the Contract). The Contract came into effect in April 2019. The respondent did not reflect the revenue earned under the Contract in the earnout calculations required under the Agreement. The appellant disputed the respondent's approach and commenced arbitration.

The arbitration proceeded by way of a virtual hearing. In April 2021, an award was rendered in favour of the respondent. The arbitrator found that the appellant failed to object to the non-disclosure of revenues generated from the Contract until May 2019, and that this post-contractual conduct constituted an informed acceptance by the appellant that the Contract would not be included in the earnout...