J. Q.B. A.D. 1996 No. 209 J.C.S.C. IN THE QUEEN'S BENCH JUDICIAL CENTRE OF SWIFT CURRENT IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 45 OF THE ARBITRATION ACT, 1992, S.S. 1992, c. A-24.1 IN RESPECT OF THE ARBITRATION AWARD DATED NOVEMBER 4TH, 1996 IN RESPECT OF RAIL CONTRACTORS LTD. AND N.M. PATERSON AND SONS LIMITED BETWEEN: N.M. PATERSON SONS LIMITED and RAIL CONTRACTORS LTD. and MURRAY WALTER ARBITRATOR K. Bazin for the appellant ("Paterson Sons") R. Hale for the respondent ("A Rail Contractors") JUDGMENT BAYNTON J. May 23, 1997 Paterson Sons appeals an arbitration award respecting contract dispute between it and Rail Contractors. Background Facts The contract in issue concerns the construction of spur rail line by Rail Contractors to Paterson Sons' grain terminal in Swift Current. term of the contract provides that either party can refer any dispute respecting their contractual obligations to arbitration. dispute arose between the parties respecting the performance of the contract and both parties agreed to resolution of the dispute by arbitration. They each retained legal counsel, agreed on an arbitrator, and defined the issues to be resolved. The arbitrator heard two days of viva voce evidence, admitted several documents as exhibits, received written legal briefs from counsel, and subsequently rendered written decision that dealt with all the issues before him. His award was favourable in most respects to the position taken by Rail Contractors. The Arbitration Process court judgment is often the only means by which the parties to contract can resolve dispute respecting its performance. The provisions of The Arbitration Act, 1992, S.S. 1992, c. A-24.1 clearly indicate that it was designed to provide an alternate, more expeditious, and less expensive means of obtaining binding resolutions of contractual disputes. The only condition of its availability to the parties is that they agree to submit to it. Section 38 provides that an award binds the parties unless it is varied or set aside pursuant to s. 45 or 46. Section 18(2) provides that an arbitrator can determine questions of law. Section 22(1) provides that an arbitrator is not bound by the rules of evidence and has the power to determine the admissibility, relevance and weight of any evidence. The Scope of Review of an Arbitration Award Appeal Section 46 enables the court to set aside an award in prescribed circumstances that pertain to excess of jurisdiction, the incapacity of one of the parties, fraud, and other like matters. Section 45 sets out the right to appeal and the scope of review by the court. Almost any matter can be appealed provided the arbitration agreement so provides. But in the absence of an appeal provision in the agreement, no appeal can be brought without leave. Leave can only be granted if the court is satisfied that: (a) the importance to the parties of the matters at stake in the arbitration justify an appeal; and (b) the determination of the question of law at issue will significantly affect the rights of the parties. The scope of review of "leave" appeal is limited to question of law. In the case before me, there is no provision in the arbitration terms of the contract for an appeal. Paterson Sons accordingly was required to obtain leave to bring this appeal and my review of the arbitrator's award is restricted to questions of law. In his fiat grantingleave, Wimmer J. characterized Paterson & Sons' first proposedground of appeal (i.e. whether the arbitrator "applied thecorrect measure of damage") as one of law. He characterizedthe second ground, (i.e. whether "there was any evidence tosupport a finding of fact") as one of law as well. In Canadian Paperworkers Union, Local 1120 v. Prince Albert Pulp Co., 1986 CanLII 3224 (SK CA), [1987] W.W.R. 628 (Sask. C.A.) at pp. 640- 641 the court stated: At common law, the award of an arbitration board could only be set aside for error of law if it was bad on its face, and the court was confined to review of the award itself, together with any document incorporated by reference. In C.N.R. v. C.P. Ltd., 1978 CanLII 1975 (BC CA), [1979] W.W.R. 358 (B.C.C.A.) at p. 367 the court stated: If an allegation of error is to form basis for setting an award aside or remitting it to the arbitrators, it must be established that the arbitrators made an error; that the error was on point of law; that the face of the record shows that the error was made; that the decision on the point of law formed part of the reasoning leading to the answer to the question submitted and that the point of law was not the very question referred to arbitration. The parties do not disagree with these stated principles but they do disagree as to what constitutes an error of law. An error respecting evidence can in some instances constitute an error of law. As set out in the fiat of Wimmer J., it is question of law whether there is any evidence to support the finding of facts. But it is aquestion of fact whether the arbitrator made the correctdecision on the evidence presented. On appeals from decisions of court, unreasonable findings of facts that constitute palpable and overriding errors can be set aside. On judicial reviews of decisions of tribunals, patently unreasonable decisions can also be set aside. But no authority was cited to me by counsel for the appellant to indicate that such findings of fact can be set aside on an appeal under s. 45 of The Arbitration Act, 1992. On an appeal of an arbitration award, the court has only the record before it. The record is comprised of the arbitrator's decision and written reasons, the exhibits, and counsel's legal submissions. It does not include transcript of any of the viva voce testimony that was heard by the arbitrator during the two day hearing. Obviously, the arbitrator's award was based in part on that testimony. It is not available to the court as it would be in the case of an appeal from court judgment. Accordingly, even if some of the findings of fact are not well explained in the arbitrator's reasons, or are not borne out by the exhibits alone, the appeal court is not entitled to "rehear" the case or substitute its own view of the evidence and consider what it would have done had it been the arbitrator. It cannot delve into the evidence in an attempt to determine whether or not the arbitrator's findings of fact are "supported" by the evidence or are "contradicted" by the evidence as it is invited to do by the appellant. It can only vary or set aside the award if the arbitrator has made an error of law. The whole purpose and objective of the arbitration process would be undermined if party who was unhappy with the award could have the dispute reheard in court of law. Parties who want their dispute resolved by the courts should not agree to submit those disputes to arbitration. Analysis of the Arbitration Award I have determined from a review of the record thatthe findings of the arbitrator with which the appellant takesissue, do not involve questions of law but rather involvequestions of fact. As well, the errors complained of are thevery questions that were referred to the arbitrator fordetermination. The appellant's submission refers extensively to the evidence presented to the arbitrator. It constitutes in effect an invitation to the court to retry the case that was heard and determined by the arbitrator. a. The First Ground of Appeal The two grounds of appeal set out in the two notices of motion filed in connection with this appeal and with leave to appeal, each allege errors of law on the part of the arbitrator. But there is significant difference in the wording of the grounds described in the first and second notices of motion. On the leave application before Wimmer J., the first ground alleges that the arbitrator "erred in law in (sic) its application of the law of damages as to construction contracts when assessing damages". On this appeal, the first ground alleges that the arbitrator "erred in law by not awarding damages based on the cost of performance, and/or in the alternative, the difference in cost to the builder". In their written submissions to the arbitrator, counsel cited two lines of case authorities that set out the principles applicable to the determination of the measure of damages in "building cases". The vexing question in such cases is usually whether the measure of loss is to be valued on the basis of cost of performance (i.e. of bringing the system up to the standard originally intended) or in the diminution in value of the building (i.e. the difference between the commercial value of the plant as built and as it ought to have been built). One of the cases cited by counsel to the arbitrator was SEDCO et al v. William Kelly Holdings Ltd., 1990 CanLII 7822 (SK CA), [1990] W.W.R. 134 (Sask. C.A.), case that affirms the above statement at pp 162-63. It also holds that although the cost of performance is the prima facie measure of damages, considerations of reasonableness are capable of displacing it, as for example when the cost of performance is disproportionately high relative to the value of what is or might be achieved through performance. The arbitrator acknowledged that he was bound by the SEDCO case and he purported to apply it to the dispute before him. The ballast supplied and installed by the respondent for the spur line met the standards required by Canadian Pacific Railway and as well met the original tender specifications. But the ballast did not meet the specifications set out in the contract itself. It was on this basis that the arbitrator found the respondent in breach of its contract with the appellant. The cost of replacing the specified higher grade of ballast is substantial. Some estimates placed the cost in excess of $100,000. Applying the law to the evidence, the arbitrator held that the diminution of value option was the appropriate measure of damages. He did so on the basis that the cost of replacing the ballast was disproportionately high relative to the value of what might be achieved through its replacement. He reached this conclusion on his finding of fact that considerations of reasonableness displaced the prima facie cost of performance measure. Although he acknowledged that "there was little evidence tendered in this regard" he did not make his finding in the absence of any evidence. Counsel for the appellant quite properly acknowledged (in his legal brief to the arbitrator) that the considerations of reasonableness were factual and not legal issues. By now adding the phrase"difference in costs to the builder" to the first ground inthe appeal, does not convert the issue from one of fact to oneof law. b. The Second Ground of Appeal The second ground of appeal on the leave application alleges that the arbitrator erred in law "in (sic) its award of damages for winter construction, in that the award is unsupported by the evidence and in direct contradiction to the evidence of the Respondent". On the appeal the wording was changed slightly to read "in his calculation as to damages awarded for increased costs of winter construction, the award being in contradiction of and unsupported by the evidence." (emphasis added). Again, the real complaint here is not an error of law on the part of the arbitrator, but an alleged error in findings of fact made by the arbitrator on the evidence presented respecting the increased costs of winter construction. This is not case where there is an absence of any evidence to support the finding of facts. There was someevidence upon which the arbitrator could make a finding offact. For the reasons stated previously, the appeal court cannot delve into the evidence to attempt to determine whether or not the arbitrator's findings of fact are "supported" by the evidence or are "contradicted" by the evidence. Respondent's Motion for Enforcement of Award Upon being served with the appellant's application for leave to appeal, the respondent replied by bringing notice of motion under s. 50 of The Arbitration Act, 1992 to enforce the arbitrator's award as an order of this court. The fiat of Wimmer J. stayed that motion pending the disposition of this appeal. The appellant does not oppose the enforcement motion as such but questions the award itself by means of this appeal. have now disposed of the appeal. As none of thebars set out in the Act continue to apply, I am required by s.50(3) to give judgment enforcing the award. decline to award costs to the respondent respecting the enforcement application as it was premature in the circumstances and in any event would not likely have been required. Conclusion The appeal is dismissed and the award is confirmed. The respondent's application for costs on solicitor and client basis is denied. Failing agreement between the parties, the appellant shall pay the respondent's taxed costs on this appeal on party and party basis. The respondent'sapplication for enforcement of the award is granted withoutcosts.
The contract for the construction of a spur rail line to the grain terminal provided that either party could refer any contract dispute to arbitration. The Arbitrator's award favoured the A &amp; E Rail Contractor's position. Leave to appeal had been granted. At issue was were whether the arbitrator applied the correct measure of damages and whether there was any evidence to support the findings of fact. HELD: The appeal was dismissed and the award was confirmed. The respondent's application for enforcement of the award was granted without costs. 1)The issues were questions of fact not law. The errors complained of were the same questions referred to the arbitrator for determination. Adding the phrase 'difference in costs to the builder' did not convert the issue from one of fact to one of law. The wording on the second issue was changed slightly to read 'in his calculation as to damages awarded for increased costs of winter construction'. There was some evidence upon which the arbitrator could make a finding of fact. 2)As none of the bars set out in the Act applied the court was required by s50(3) to give judgment enforcing the award.  3)The application for costs on a solicitor and client basis was denied. Failing agreement between the parties, the appellant would pay the respondent's taxed costs on the appeal on a party and party basis.