BC Court of Appeal permitted the respondent leave to appeal a commercial arbitrator’s decision. The Arbitration Act only allows leave to appeal on questions of law, and the court determined that the question raised by the respondent was one of law, since it related to contractual interpretation and whether something was or reasonably ought to have been within the common knowledge of the parties at the time of the execution of the contract. The Supreme Court of Canada ruled that contractual interpretation issues involving mixed fact and law, such as whether something was or reasonably ought to have been within the common knowledge of the parties at the time of the execution of the contract, are properly questions of fact. Accordingly, as the respondent’s appeal was based on a question of fact and not law, it should not have been granted leave. The appellant’s appeal was allowed.

Administrative law – Decisions of administrative tribunals – Arbitration Board – Arbitration and award – Judicial review – Appeals – Leave to appeal – Test – Compliance with legislation – Jurisdiction of court – Standard of review – Reasonableness simpliciter

Sattva Capital Corp. v. Creston Moly Corp., [2014] S.C.J. No. 53, 2014 SCC 53, Supreme Court of Canada, August 1, 2014, McLachlin C.J. and LeBel, Abella, Rothstein, Moldaver, Karakatsanis and Wagner JJ.

Sattva entered into an agreement that required Creston to pay it a finder’s fee of US $1.5 million in relation to the acquisition of a mining property which could be paid in shares and/or cash. The parties disagreed on which date should be used to price the shares. The parties went to arbitration to resolve their dispute and the arbitrator found in favour of Sattva. Creston sought leave to appeal the arbitrator’s decision pursuant to section 31(2) of the Arbitration Act.

Leave was initially denied, but Creston successfully appealed that decision and was granted leave to appeal the arbitrator’s decision by the British Columbia Court of Appeal. That decision by the British Columbia Court of Appeal was the subject of the appeal at the Supreme Court of Canada level.

The Supreme Court of Canada held that appeals from commercial arbitrators’ decisions are narrowly circumscribed under the Arbitration Act. In order for leave to be granted under the Act, it has to be sought on a question of law. The Court noted that, historically, determining the legal rights and obligations of parties under an agreement was considered a question of law. However, the Court said the historical approach should be abandoned and contractual interpretation issues involving mixed fact and law, such as whether something was or reasonably ought to have been within the common knowledge of the parties at the time of the execution of the contract, are questions of fact. The Supreme Court of Canada found that the Court of Appeal erred in finding that the construction of the agreement constituted a question of law. Given that Creston’s application for leave to appeal raised no question of law, leave should not have been granted. Sattva’s appeal was allowed with costs throughout.

This case was digested by Kara L. Hill of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact her directly at khill@harpergrey.com or review  her biography at http://www.harpergrey.com.

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