In the decision of Bollhorn v. Lakehouse Custom Homes Ltd., 2024 BCCA 192 (the Decision), a full division of the BC Court of Appeal reviewed an application for leave to appeal an arbitrator’s decision.
The underlying dispute involved the construction and sale of a house by the respondent. Unhappy circumstances during construction led the appellant to commence an action seeking an order for specific performance and damages. After a summary trial, the BC Supreme Court ruled in favour of the appellant by granting the order for specific performance of the contract at the agreed-upon price, including a 6% markup on change orders (the Order). The Order did not specifically mention “downgrades” or “deficiencies” in the construction, but the reasons for judgment referred to “downgrades” in declining to make any adjustments for these items.
During the final walk-through, which was a few days before completion, the appellant identified deficiencies. The respondent, however, did not rectify them. Relying on the arbitration clause in the agreement between the parties, the appellant commenced an arbitration at the Vancouver International Arbitration Centre (VanIAC) and sought compensation for the deficiencies. The parties had agreed to an arbitration clause that incorporated VanIAC’s Domestic Arbitration Rules (the Rules), which included an Expedited Procedure for claims under $250,000.
The VanIAC arbitrator dismissed the proceeding on the basis that the subject matter of the arbitration was res judicata, because in the arbitrator’s view, the question of the appellant’s entitlement to “compensation for the deficiencies” was “the very question” that had been determined by the summary trial judge. It is interesting to note Madam Justice Newbury’s comments in parathesis at paragraph 15 of the Decision where she states:
(I note that [the appellant’s] notice of application for summary trial had not sought any order concerning the deficiencies, which of course were not known until just before the completion of the conveyance. Thus they could not have been argued in the Supreme Court action. […])
The appellant sought leave to appeal the arbitrator’s decision. Saunders J.A., sitting in chambers, questioned whether the arbitrator’s decision constituted an “award” under s. 59 of the Arbitration Act, SBC 2020, c. 2 (the Act), which permitted appeals from arbitral decisions on questions of law. She referred this matter to the Court of Appeal.
VanIAC applied for leave to intervene in the leave application, given the relevance of the Rules to the underlying issue, but not in the appeal itself. In particular, R27 of the Rules states:
For arbitrations brought under an arbitration agreement entered into on or after September 1, 2020 that provide for arbitration under these Rules, the parties expressly agree that there shall be no appeal on a question of law from an Award issued under the Expedited Procedure, unless consented to by both parties. [Emphasis added.]
The Court of Appeal granted intervenor status to VanIAC given the force and effectiveness of the Rules were directly at issue. The Court concluded that the arbitrator’s decision constituted an “award” because the effect of the arbitrator’s decision on res judicata was substantive and final. The Court was also satisfied that the appellant had raised a question of law, that is, whether the doctrine of res judicata was properly applied.
The Court of Appeal, however, concluded that R27 of the Rules barred the appellant from bringing the proposed appeal, which would have normally been accepted under the Act. The Court accepted VanIAC’s submissions that the Rules for Expedited Procedures are intended to “prevent lengthy and expensive appeal proceedings that detract from the finality, expediency, affordability, and efficiency of the proceedings.” The Court dismissed the appellant’s application for leave to appeal.