Court remitted an arbitrator’s decision regarding a dispute of transfer of fishing licences to be heard by a different arbitrator

19. August 2014 0

Administrative law – Decisions of administrative tribunals – Arbitration and award – Interpretation of contract – Fisheries – Licences – Judicial review – Evidence – Standard of review – Reasonableness simpliciter – Failure to provide reasons

Layman Estate v. Layman, [2014] N.J. No. 181, 2014 NLTD(G) 66, Newfoundland and Labrador Supreme Court, June 20, 2014, G.D. Butler J.

A father (“Patrick Layman”) and son (“Bruce Layman”) were fishermen in 1998. Patrick Layman held a 300 crab pot licence (the “Large Licence”) and Bruce Layman held a smaller licence that was primarily used for cod fishing (the “Small Licence”).

In 1998, the father and son signed a Contract which included an agreement to transfer the Large Licence to Bruce Layman so that he could fish for crab, and Patrick Layman could use the cod fishing licence.

When Patrick Layman died on July 11, 2012, his wife was appointed Administrator of his Estate. Under the terms of his Will, his wife was to inherit his entire Estate. However, if she had predeceased him, his Will would have left the Large Licence to his son, John and the Small Licence to his son, Bruce.

The contract that had been reached between Patrick Layman and Bruce Layman prior to Patrick’s death provided that “if for any reason Bruce or Patrick die or are otherwise unable to fish the licences transferred…, the transferor shall be entitled to re-call the licences transferred so that they re-vest back in the transferor”.

It was agreed that any dispute arising under the agreement would be determined by arbitration pursuant to the Arbitration Act, R.S.N. 1990.

The dispute about the licences was referred to arbitration and a written award was released in July 2013 determining that the Estate had no right to recall the Large Licence.

Patrick Layman’s Estate then sought to have the award set aside and remitted back to another arbitrator. Bruce Layman did not file a response. Unfortunately the arbitration hearing was not recorded and counsel were not in agreement before the Court about what evidence had been put before the Arbitrator. The Arbitrator’s notes were reviewed by counsel and the Court gave either party an opportunity to make further submissions if they felt that the notes clarified the issue about what evidence had been placed before the Arbitrator.

The Applicant filed some supplementary submissions but the Respondent did not.

Evidence was presented to the Arbitrator suggesting that the purpose of the right of recall of the licences was that the “last man standing” would get both licences. Bruce Layman testified, at arbitration, that he never considered that there was any condition attached to the transfer of the Large Licence that would require him to give it up if his father died. The individual who had drafted the contract, a Mr. Robert Regular, testified that he had no idehy the right of recall provision was in the agreement.

The Court concluded that a reasonableness standard should apply to the decision of the Arbitrator, since the dispute between the parties was private and involved interpretation of an unusual contract between them. The nature of the question was one of contractual interpretation and, although the Arbitrator did not have more expertise than the Court on this type of question, reasonableness should still apply because of the general trend in jurisprudence limiting the standard of correctness to questions of jurisdiction pure law or other constitutional nature.

The Court held that the arbitration award should be set aside as unreasonable. The Arbitrator found that paragraph 1 of the contract was not ambiguous but the Court, upon reading the same clause, felt that ambiguity was evident. For example, there were at least two possible meanings for the term “transferor” leaving the meaning of the clause difficult to determine. The first possible interpretation would be to treat either party to the Contract as the “transferor”. In this interpretation, on the death of Patrick Layman as “transferor” of the Large Licence, his Estate would have the right to recall the Large Licence. However, another interpretation would suggest that the “last man standing” would hold both licences and there would be no right of recall. This interpretation involved the term “transferor” referring to the licence affected on the death of the transferee and not on the death of the transferor. If Patrick Layman died and could not fish the Small Licence, then Bruce Layman was entitled to recall it. But, on Patrick Layman’s death, his Estate could not recall the Large Licence.

Thus the Arbitrator’s conclusion that there was no ambiguity did not fall within the range of acceptable and rational solutions defensible in respect of the fact and the law.

The award did not contain an analysis of how the contract clause, read alone, or read with the contract as a whole, or read with consideration of the circumstances under which it was executed, might assist in the interpretation of the clause. There was evidence before the Arbitrator of post‑contractual behaviour.  For example, the Will provided that if Patrick Layman’s wife survived him, she would inherit his entire Estate. However, if she predeceased him the Small Licence was to go to Bruce Layman and the Large Licence to John Layman. The Arbitrator rejected the Will as irrelevant evidence. The Arbitrator’s decision about the relevance of the Will did fall within the range of possible outcomes that were defensible in respect of the facts and the law.

However, the Arbitrator should have considered the relevant evidence of John Layman confirming that subsequent to the signing of the Contract, Patrick Layman knew that he could not sell the Small Licence because the Small Licence was subject to the Contract’s right of recall. The Arbitrator failed to reference this evidence.

Rather, the Arbitrator’s conclusion rested on the fact that Bruce Layman had invested considerable funds into the Large Licence and the presumption that he would not have done so if he knew that the licence could be recalled. The Arbitrator was in error in relying on the suggestion that the bargain had been improvident as evidence that should provide the interpretation of that portion of the Contract.

Further, the Arbitrator concluded that no interpretation of the Contract would give Patrick Layman’s Estate the right of recall upon his death. However, there was no explanation for this conclusion. The Arbitrator’s reasons were not adequate to determine whether the result fell within the range of possible outcomes and therefore the Arbitrator’s decision had to be set aside and remitted to be heard by a new arbitrator.

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