In a recent decision the British Columbia Court of Appeal upheld the integrity of the arbitral process, denying a party's attempts to raise new evidence and new issues in a judicial review of an arbitral award. The court held that such matters could – and should – have been addressed before the arbitrator. The decision highlights the risks that a party may face if it does not diligently participate in arbitration proceedings and affirms the narrow scope of judicial review of arbitral awards in British Columbia.
In On Call Internet Services Ltd v Telus Communications Company(1) the appeal court upheld the lower court's refusal to set aside (and denial of leave to appeal) the arbitrator's final award. Taking the position that the arbitration proceedings should be terminated due to an alleged breach of confidentiality by Telus, On Call chose not to participate in the arbitration proceedings subsequent to an interim decision by the arbitrator confirming his jurisdiction. After the final award was issued in Telus's favour, On Call attempted to undo the consequences of its choice not to participate and sought to introduce new arguments and evidence before the court of appeal.
The court concluded that On Call's approach misconceived the proper role of an appellate court and the narrow parameters for judicial review set out in the Arbitration Act,(2) which governs domestic arbitrations in British Columbia. The court held that On Call must live with the consequences of its decision not to participate in the arbitration; in essence, it was the author of its own (alleged) misfortune.
Telus provided wholesale internet services to On Call, which in turn serviced customers in remote areas of British Columbia. An ongoing billing dispute between the parties came to a head when Telus threatened to suspend certain services if the alleged arrears were not paid. The parties agreed to resolve "the outstanding issues between them" through arbitration.
On Call first claimed that the arbitration agreement was invalid and challenged the arbitrator's jurisdiction. The arbitrator disagreed and issued an interim decision confirming his jurisdiction. When Telus informed the industry regulator, the Canadian Radio-Television Telecommunications Commission, of the jurisdiction decision, On Call then sought to have the arbitration terminated on the basis that Telus had committed a fundamental breach of confidentiality. On Call was ultimately unsuccessful in this challenge, but in the interim, the arbitration proceeded with On Call refusing to participate. On Call did not seek a stay of the arbitration, despite the arbitrator's direction that it should do so if it expected to halt the arbitration.
Telus succeeded in the arbitral proceedings and On Call sought to have the award set aside alleging that the arbitrator had erred in relying on certain affidavit evidence and in considering the arbitration agreement to be a lawful contract. In the alternative, On Call claimed that these errors were 'errors of law' and requested leave to appeal the arbitrator's findings. On appeal, On Call also raised a number of additional issues which were not argued before the arbitrator or the lower court.
On Call's primary argument before the lower court and on appeal was that the arbitrator erred by accepting and relying on an affidavit submitted by Mr Telfer, a Telus employee. On Call claimed that Telfer made a material misrepresentation in his affidavit. Although the arbitrator was apparently aware of On Call's objections to this evidence, On Call submitted no evidence of its own to counter or discredit the Telfer affidavit. Instead, On Call argued that the arbitrator should have conducted an independent investigation before relying on the allegedly questionable affidavit. When this argument failed, On Call sought to introduce fresh evidence before the Court of Appeal.
In dismissing the appeal, the court emphasised that On Call had failed to recognise:
- the objects of arbitration;
- the limited scope of judicial review of a domestic arbitral award (which, unlike in the international context, includes errors of law); and
- the proper role of an appellate court.
As a result of its numerous unsuccessful applications before the arbitrator, the regulator and the British Columbia courts, On Call was criticised for creating "a process antithetical to the private, efficient, economical and final objects of arbitration proceedings".
The court applied the Supreme Court of Canada's test(3) for admitting fresh evidence and concluded that On Call had not exercised an appropriate degree of due diligence. Not only could On Call have obtained its responding affidavit materials at an earlier date, it could have participated in the arbitration and cross-examined Telfer on his affidavit. The arbitrator was the fact finder and in the best position to resolve any evidentiary conflicts. In any event, as the evidence related to the factual matrix underlying the arbitrator's decision, it was not open for court review and therefore could not be challenged on appeal. The court also declined to consider the new issues argued by On Call on appeal. The court held that it did not have a sufficient evidentiary record or findings of fact to determine the issues and that it would not be in the interests of justice to do so.
The court also considered On Call's objection to the arbitrator's reliance on the Telfer affidavit. The court affirmed the lower court's decision upholding the arbitrator's award. The arbitrator did not commit an arbitral error by accepting the Telfer affidavit and by not independently investigating issues to which On Call had only alluded. Moreover, the Telfer affidavit spoke to factual matters within Telfer's knowledge and the arbitrator had other evidence before him to support it. Finally, since On Call could not point to any errors of law concerning the Telfer affidavit, the lower court could not have erred in refusing to grant leave on a question of law that was not argued before it.
The appeal was dismissed with costs to Telus, as none of the many issues raised by On Call were meritorious.
On Call confirms the high degree of deference granted to the arbitral process in British Columbia.
While On Call was entitled to take the position that the arbitration had been terminated, its failure to take appropriate precautions in case that position was found to be wrong – as it was – is not for courts to remedy. The arbitrator specifically directed that On Call should seek a stay of the arbitration if it wished to halt the arbitration until the termination question was settled. The court of appeal also noted a number of options that would have been open to On Call to seek to protect its legal interests (eg, it could have attended the first day of the arbitration hearing to reserve its right to appeal the termination decision, to tender the affidavit evidence it possessed or to seek an adjournment of the arbitration proceedings to gather additional evidence to challenge to the Telfer affidavit). On Call's failure to do any of these things left it without a defensible basis for challenging the arbitrator's decision.
A party that refuses to participate in arbitration proceedings on the basis of its position that it is not obligated to, runs a risk of adverse consequences if its position is later determined to lack merit.
For further information on this topic please contact Debbie Asirvatham or Craig R Chiasson at Borden Ladner Gervais LLP by telephone (+1 604 687 5744), fax (+1 604 687 1415), or email (email@example.com or firstname.lastname@example.org).
(2) RSBC 1996, c 55. The International Commercial Arbitration Act, RSBC 1996, c 233, has even narrower review parameters that are consistent with the principles set out in the United Nations Commission on International Trade Law Model Law and the New York Convention.
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