Construction projects often involve many parties and moving parts. Therefore, it is not uncommon for issues to arise, such as those relating to construction deficiencies or payment. While many disputes can be resolved through litigation in court, a courtroom may not always be the most effective forum. While familiar with the law, judges may not have the specialized knowledge needed to make a finding in a construction dispute. For this reason, many construction contracts and/or collective agreements contain arbitration provisions to determine how potential disputes will be resolved.

Despite the inclusion of arbitration provisions, parties must consider the potential outcomes of arbitration and whether they want to incorporate appeal rights. In a recent case from the Court of Appeal of Alberta, the parties discovered just how high the threshold is for obtaining permission to appeal an arbitration award.

Parties submit construction dispute to arbitration

In Pilgrim v. True-Line Contracting Ltd, the parties became involved in a dispute regarding a construction project and submitted it to arbitration. The arbitrator required the parties to provide their Will-Say statements (i.e. witness lists and witness statements) by December 1, 2021. However, the applicants (Pilgrim) failed to meet the deadline, repeatedly sought (and missed) extended deadlines, and failed to respond to certain correspondence. The arbitrator warned them that “failure to engage in these discussions may have an impact on your ability to seek remedies.”

The Will-Say deadline was eventually extended to March 1, 2022. However, the deadline was again missed by the applicants.

Respondent seeks dismissal of claim due to repeated missed deadlines

The respondent submitted an application to the Alberta Court of King’s Bench on March 2, 2022, seeking dismissal of the applicants’ claim due to their failure to adhere to several deadlines under section 27 of the Arbitration Act.

Section 27 of the Arbitration Act allows a tribunal to dismiss a claim if the commencing party fails to submit a statement in accordance with the timeline set by the arbitrator, subject to a satisfactory reason provided by the commencing party. Further, the arbitrator may make an award based on the evidence presented to him if the commencing party does not provide documentary evidence or does not appear.

Applicants retain new counsel and request further extensions of time for response

The arbitrator requested a response from the applicants but indicated he would decide the application based on the information presented to him regardless. Again, the applicants failed to respond.

On March 17, 2022, the applicants requested another extension to allow them time to retain counsel. The following day, their new lawyer advised the arbitrator that she would confirm whether she had been retained. The arbitrator responded to the parties advising that he was out of office until March 28, 2022, and would address this application upon his return.

Arbitration issued award against applicants

The arbitrator informed the applicants’ new counsel that she was free to provide submissions on the application. However, he was already in the process of writing the award. Counsel told the arbitrator on March 30, 2022, that she would provide the Will-Say statements by April 4, 2022. However, the respondent argued against the extension.

On April 4, 2022, at 8:16 AM, the arbitrator issued the award against the applicants. Later that day, he received the applicants’ Will-Say statements. However, they did not provide submissions in response to the section 27 application.

Chambers justice declines to set aside arbitration award

The applicants argued two main issues to the chambers justice at the Court of King’s Bench, specifically that:

  • The award should be set aside on procedural grounds pursuant to section 45(1)(g) and (g) of the Arbitration Act; and
  • The applicants should be granted leave to appeal based on a substantive error in the arbitration award with respect to section 44 of the Arbitration Act.

The chambers justice declined to set aside the award after finding that the applicants were not treated “manifestly unfairly or unequally”. The judge noted the applicants were given ample opportunities to present their case, provided with proper notice, and the arbitrator followed the outlined procedures in the agreement and the Arbitration Act.

On the second issue, the chambers justice found no procedural unfairness or breach of natural justice. Therefore, the judge found no error of law concerning the arbitrator’s award. Further, the proposed appeal would not involve issues beyond the party. Finally, the chambers justice found that the high threshold for granting leave to appeal an arbitration award under section 44(2.1) was not met.

Applicants seek permission to appeal to the Court of Appeal

The applicants subsequently sought permission to appeal the chambers justice’s decision. The Court of Appeal considered the following four factors when deciding whether to grant such permission:

  1. Is the issue reasonably arguable?
  2. Is deciding the issue likely to affect the result of the litigation?
  3. Is the answer likely to be of interest to others or likely to influence later suits?
  4. Is there any independent reason not to re-litigate the question or to limit the scope of the appeal?

None of these factors alone are conclusive. However, the Court of Appeal found that none of these were met. The Court found that the applicants had not established that the issue was reasonably arguable. It agreed with the chambers justice’s finding that the applicants were given many opportunities to present their case and were not treated unfairly.

The Court also determined that a decision on the two grounds raised by the applicants would not impact the arbitration award.

Court of Appeal declines to hear appeal of arbitration award

The Court determined that the applicants had not established that the procedural questions specific to the facts of this case would be of interest to others, nor would they likely influence other matters. Finally, the Court found no compelling reason to allow the litigation to continue since there was no reasonable prospect of unfairness.

For these reasons, the Court of Appeal declined to grant the applicant’s permission to appeal the chambers justice’s decision. The Court also highlighted that the Court of King’s Bench is the “primary appellate court for arbitration matters,” and it is the “policy of the courts to encourage settlement of disputes.”

It is essential for parties to know that the Court of Appeal will take a hard line and apply a high threshold when deciding whether or not to grant permission to a second level of appeal concerning cases that originated in arbitration. In light of this, parties should consider whether they want appeal rights incorporated into their construction contracts when considering arbitration as a dispute resolution option.

The Construction Litigation Lawyers at DBH Law in Calgary Provide Trusted Legal Advice

The experienced construction lawyers at DBH Law are equipped to offer you the legal advice you need in a modern construction environment. We understand that various types of disputes may arise throughout the lifespan of a construction project, which is why we work tirelessly to resolve issues quickly and efficiently. To schedule a consultation with a member of our construction litigation team, contact us online or by phone at 403-252-9937.