British Columbia Court of Appeal determines misapprehension of evidence going to the core of the Award remains an extricable error of law giving rise to a right of appeal

Facts

The Appellant, Escape 101 Ventures Inc. ("Escape"), and the Respondent, March of Dimes Canada ("March of Dimes"), entered into an Asset Purchase Agreement (the "Agreement"), which provided for March of Dimes to make payments to Escape based on a quarterly revenues formula. Escape and March of Dimes disputed whether the formula included revenues from additional work (the "Additional Work") awarded to March of Dimes after the date of the Agreement. This dispute was referred to arbitration.

The arbitrator dismissed Escape's claim that the revenues derived from the Additional Work should be included in the formula for payments. In the award, the arbitrator noted that Escape failed to object to March of Dimes' revenue calculations in quarterly reports prior to receipt of the July 2019 quarterly report. The arbitrator made this determination despite the fact that there were no revenues derived from the Additional Work prior to that noted in the July 2019 quarterly report.

Decision

The Court held that the arbitrator misapprehended the evidence as to when the Additional Work began to generate revenue and when that revenue should have been noted in the quarterly reports provided to Escape. This misapprehension was central to the arbitrator's reasoning and conclusions, and constituted an extricable error of law.

Appellate review under section 59 of the Arbitration Act remains limited to extricable questions of law. Extricable questions of law are not limited to those having precedential value and include misapprehension of facts central to the decision. While an arbitral tribunal has discretion in deciding evidentiary matters, mistaken evidentiary findings, are not immune to appellate review where those errors play an essential part in the reasoning process for the outcome. Further, the Court noted that errors of law are not limited to those on the "face of the award" and can include errors resulting from evidentiary matters forming part of the reasons.

Analysis

This was the first reported decision under the recently promulgated Arbitration Act S.B.C. 2020, c. 2. It affirms that the new Arbitration Act does not alter the subject matter for appellate review of an arbitrator's decision, namely extricable errors of law. It likewise confirms that a misapprehension of evidence is an extricable error of law subject to appellate review.

The main takeaway is that arbitrators are not insulated from incorrect determinations of facts, where such determinations are central to a decision and not peripheral. Parties must approach an arbitration understanding this possible ground for appellate review. If parties under the jurisdiction of the B.C legislation wish to avoid appellate review on these grounds, they must draft their arbitration agreements to exclude appeals on questions of law.