



COURT OF APPEAL FOR BRITISH
COLUMBIA




Citation:



Boxer Capital Corporation v. JEL Investments Ltd
.,









2015 BCCA 24




Date: 20150120

Docket: CA041527;

CA041526;
CA041531

Docket CA041527

Between:

Boxer Capital
Corporation and Yanco Management Ltd.

Respondents

(Appellants)

And

JEL Investments
Ltd.

Appellant

(Respondent)

and

Docket: CA041526

Between:

Boxer Capital
Corporation, Yanco Management Ltd.

and Chung
Properties Ltd.

Respondents

(Plaintiffs)

And

Marine Land
Development Ltd., Jeana Ventures Ltd., Lily Lo, Miriam Pallai, Donald Ruttan,
Norman Chung, Christine Chung, Barbara Marrie, Properties Worldwide Limited, 0765998
B.C. Ltd., Felix Tam, Alicia Tam,

Melvyn Ackerman
Inc., Ronald Robertson, and

all other
defendants not known and collectively referred to as

John Doe and Mary
Doe

Respondents

(Appellants)

And

JEL
Investments Ltd. and Les Sallay

Appellants

(Defendants)





and

Docket: CA041531

Between:

Boxer Capital
Corporation, Yanco Management Ltd.

and Chung
Properties Ltd.

Respondents

(Plaintiffs)

And

JEL Investments
Ltd., Les Sallay and all other defendants

not known and
collectively referred to as John Doe and Mary Doe

Respondents

(Defendants)

And

Marine Land
Development Ltd., Jeana Ventures Ltd., Lily Lo, Miriam Pallai, Donald Ruttan,
Norman Chung, Christine Chung, Barbara Marrie, Properties Worldwide Limited, 0765998
B.C. Ltd., Felix Tam, Alicia Tam,

Melvyn Ackerman
Inc., Ronald Robertson

Appellants

(Defendants)




Before:



The Honourable Chief Justice Bauman

The Honourable Madam Justice Bennett

The Honourable Mr. Justice Willcock




On appeal from:  An
order of the Supreme Court of British Columbia, dated
December 27, 2013 (
Boxer Capital Corporation v. JEL Investments Ltd.
,
2013 BCSC 2366, Vancouver Docket No. S126588).




Counsel for the Appellants, JEL Investments Ltd. and Les
  Sallay:



I.G. Nathanson, Q.C.

J.V. Payne





Counsel for the Respondents, Boxer Capital Corporation and
  Yanco Managements Ltd. and Chung Properties Ltd.:



D.C. Harbottle





Counsel for the Appellants, Marine Land Development Ltd., Jeana
  Ventures Ltd, Lily Lo, Miriam Pallai, Donald Ruttan, Norman Chung, Christine
  Chung, Barbara Marrie, Properties Worldwide Limited, 0765998 B.C. Ltd., Felix
  Tam, Alicia Tam, Melvyn Ackerman Inc., Ronald Robertson:



R.J. Kaardal, Q.C.





Place and Date of Hearing:



Vancouver, British
  Columbia

November 4, 2014





Place and Date of Judgment:



Vancouver, British
  Columbia

January
  20, 2015





Written Reasons by:





The Honourable Chief Justice Bauman





Concurred in by:





The Honourable Madam Justice Bennett





Concurred in by:





The Honourable Mr. Justice Willcock








Summary:

Appeal from an order of a
Supreme Court judge sitting on appeal from a commercial arbitration award. The
judge held the arbitrator had erred in finding that issue estoppel did not
apply. Held: Appeal allowed. The arbitrator did not err in finding that issue
estoppel did not apply. The arbitral award is reinstated.

Reasons
for Judgment of the Honourable Chief Justice Bauman:

I.        Introduction

[1]

This is an appeal from an order of a Supreme Court judge sitting on
appeal from a commercial arbitration award.

[2]

The parties have agreed that the result in this appeal will determine
the result in CA41526 and CA41531, as well.

[3]

Commercial Arbitration is intended to provide a speedy and, in the vast
majority of cases, final determination of the issue or issues between the
parties. The issues between the sophisticated commercial parties in the present
case are not terribly complex. They involve the construction of a joint venture
agreement. Yet I count two separate arbitrations and nine judicial proceedings
to date in this saga. Surely that procedural history is inconsistent with the
objectives of commercial arbitration.

[4]

This appeal serves as a reminder of the importance of judicial restraint
in the review of arbitral awards, at least in the commercial context. When
sitting on appeal from an arbitral award, a courts jurisdiction is narrow. The
inquiry differs fundamentally from a trial, and even from a judicial review of
an administrative decision.

[5]

The applicable legislation is the
Arbitration Act
, R.S.B.C. 1996,
c. 55 (known as the
Commercial

Arbitration Act
until March
2013). Section 31(1) provides that a party may appeal an arbitral award to
the Supreme Court on a question of law if all the parties consent or the court
grants leave. Leave
may be
granted if the court determines that (s. 31(2)):

(a)        the
importance of the result of the arbitration to the parties justifies the
intervention of the court and the determination of the point of law may prevent
a miscarriage of justice,

(b)        the
point of law is of importance to some class or body of persons of which the
applicant is a member, or

(c)        the point of law is of
general or public importance.

[6]

Parties are afforded such narrow scope to appeal arbitral awards because
arbitration is intended to be an
alternate
dispute mechanism rather
than one more layer of litigation (
BCIT (Student Association) v. BCIT
,
2000 BCCA 496 at para. 14,
per
Madam Justice Saunders, emphasis
added).

[7]

This was recently confirmed by the Supreme Court of Canada in
Sattva
Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, a decision released
shortly after the appellant filed its factum in this appeal. In
Sattva
, Mr. Justice
Rothstein for the Court observed that an appeal from an arbitral award takes
place under a tightly defined regime specifically tailored to the objectives of
commercial arbitrations and is different from judicial review of a decision of
a statutory tribunal (at para. 104). In general, parties
choose
to
submit their dispute to arbitration; they also choose the number and identity
of their arbitrator or arbitrators. This means that the judicial review
framework developed in
Dunsmuir v. New Brunswick
, 2008 SCC 9, is not
entirely applicable to appeals from arbitral awards (
ibid.
). For
example, while the
Dunsmuir
framework merely affords deference to an
administrative tribunals factual findings, the
Arbitration Act

forbids
review of an arbitrators factual findings (
ibid
., emphasis added).

[8]

Like the present appeal,
Sattva
dealt with an issue of
contractual interpretation. Mr. Justice Rothstein explained that in most
cases, issues of contractual interpretation will be important only to the
parties themselves, and will not have a broader impact (at para. 51).
However, the role of appellate courts (including the B.C. Supreme Court, when
sitting on appeal from an arbitral award) is generally not to provide a new
forum for parties to continue their private litigation but rather to ensure the
consistency of the law and decide legal issues of public importance (
ibid
.).
Accordingly, our legal system leaves broad scope to tribunals of first
instance to resolve issues of limited application (at para. 52). In sum, the
goals of limiting the number, length, and cost of appeals, and of promoting the
autonomy and integrity of trial proceedings  weigh in favour of deference to
[arbitrators] on points of contractual interpretation (
ibid
.).

[9]

Sattva
held that questions of contractual interpretation should
almost always be regarded as questions of mixed fact and law (at para. 50).
(Historically they were seen as questions of law.) This means that, after
Sattva
,

leave will rarely be granted to appeal an arbitral award on a question of
contractual interpretation. (If
Sattva
had been decided earlier, leave
arguably would not have been granted to appeal the parties initial arbitral
award and this lengthy saga would have been avoided.)

[10]

When leave is granted to appeal an arbitral award, the reviewing court
is bound by the arbitrators factual findings (
Sattva
at para. 104).
The normal palpable and overriding error standard does not apply; the
arbitrators factual findings simply cannot be disturbed. The standard of
review on the question of law under appeal will almost always be reasonableness
(at para. 75). Here the
Dunsmuir
framework does apply (at
para. 106), so the standard would be correctness if, for example, the
question was both centrally important to the legal system as a whole and
outside the arbitrators area of expertise (see
Dunsmuir
at para. 60;
Toronto (City) v. C.U.P.E.
, 2003 SCC 63 at para. 6).

[11]

Finally, when leave is granted to appeal an arbitral award, it is
important for the reviewing court to strictly honour the boundaries of the question
or questions of law on which leave was granted. The appeal is not one at large.
The reviewing court must constantly remind itself of the narrow question or
questions before it, lest it improperly expand its search for error into areas
that go beyond those questions, let alone areas that go beyond the scope of the
dispute referred by the parties to the arbitrator. I proceed on this basis.

II.       Background

[12]

In January 2007, JEL Investments Ltd. contracted to purchase certain
real property in North Vancouver. The down payment was $4 million. JEL
paid a $1.1 million non-refundable deposit and had until 27 August
2007 to secure the remaining $2.9 million.

[13]

JEL contacted Boxer Capital Corporation to inquire whether it was
interested in joining the venture and contributing the remaining capital. Boxer
was interested but was not willing to contribute the full amount. It contacted Yanco
Management Ltd., which also expressed interest in the venture.

[14]

I will refer collectively to Boxer and Yanco as the Boxer Parties, as
their situations are identical in respect of the issues in this appeal.

[15]

The principals of JEL and the Boxer Parties conducted negotiations over
the telephone. This led to a meeting on 10 August 2007. An initial term
sheet proposed that JEL would contribute 50% of the equity and own 50% of the
joint venture, while each of the Boxer Parties would contribute 25% of the equity
and own 25%. The Boxer Parties would loan $1 million to JEL to finance its
equity contribution. JELs share of the profits from the venture would be paid
to the Boxer Parties until the loan was repaid in full.

[16]

JEL rejected this proposal but the parties agreed to an alternative. JEL
would contribute proportionately less equity than the Boxer Parties, but
profits from the venture would be paid to the Boxer Parties as capital
reductions until their capital balances became proportionate to their ownership
stakes.

[17]

On 22 November 2007, the parties entered into a formal Co-Owners
Agreement (the COA). Pursuant to it, JEL contributed 25% of the equity
($765,732) but received 50% of the shares. Each of the Boxer Parties
contributed 37.5% of the equity ($1,148,598) and received 25% of the shares.

[18]

Section 4.7 of the COA sets out the priority schedule for profits. It
provides that, after debt expenses, maintenance of a reserve fund and interest
on shareholder loans, any profits would first be paid to the Boxer Parties to
reduce each of their capital balances to $382,866. This is the amount which is
proportionate to their ownership stakes of 25%, given that JEL contributed
twice that amount for its 50% stake. In other words, s. 4.7 provides that profits
could not be distributed to the parties as shareholders unless and until the
venture distributed $765,732 (being $1,148,598 less $382,866) to each of the
Boxer Parties to make their capital balances proportionate to their ownership
stakes. I will refer to the total amount of $1,531,464 (being double $765,732) as
the Disproportionate Capital.

[19]

Section 7 of the COA is a shotgun clause:

7.1       Trigger: Any Co-Owner (hereinafter called the Offeror)
may give to the other Co-Owners (hereinafter called the Offerees) a written
offer to sell all, but not less than all, of the Offerors Interest in the
Property and Shares owned by the Offeror, specifying:

(a)        the sale price being offered for the Interest;

(b)        the completion date for the sale
and transfer of the Interest (which shall not be less than sixty (60) days from
the date of the offer);

(c)        any other terms and conditions of the sale; and

(d)        that the offer to sell is being
made pursuant to the Part 7 Compulsory Buy-Out provisions of this
Agreement.

7.2       Sale by Offeror. If any of the Offerees accept the
offer to sell by the Offeror, then those Offerees shall purchase, and the
Offeror shall sell to those Offerees, the Offerors interest in accordance with
those Offerees respective JV Interests.

7.3       Purchase by offeror. If
none of the Offerees accept the offer to sell by notice in writing to the
Offeror within thirty (30) days of delivery of the offer to sell to the
Offerees, then the Offeror shall purchase, and the Offerees shall sell, all of
the Interests of the Offerees on the same terms and conditions specified in the
offer to sell, except the price. The sale price for each Offerees Interest
shall be that amount determined by multiplying the sale price offered by the
Offeror to the Offerees by a fraction, the numerator of which is the Offerees
JV Interest, and the denominator of which is the Offerors JV Interest.

[20]

Interest is defined to mean with respect to any Co-Owner, all of that
Co-Owners right, title and interest in this Joint Venture including its
shares, invested capital as shareholder loans and its interest in the Property
(s. 1.1(b)). Sections 7.1 and 7.3 refer to an Interest while
s. 7.2 refers to an interest.

[21]

The COA also contains a mandatory arbitration clause (s. 10.2).

[22]

In the spring of 2008, Yanco sold half its interest in the venture to
Chung Properties Ltd. Nothing in the present appeal turns on this detail and
for simplicity I will ignore it.

[23]

In May 2008, JEL triggered the shotgun clause by offering its 50% interest
to the Boxer Parties for $1.425 million. At this time the project was not yet
profitable and none of the Disproportionate Capital had been paid out to the
Boxer Parties pursuant to s. 4.7. The Boxer Parties declined JELs offer,
meaning JEL was required by s. 7 to purchase their interests.

[24]

A dispute arose as to the price. Relying on s. 7.3, JEL took the
position that it had to pay only $1.425 million, the offer price, for the
Boxer Parties combined 50%. The Boxer Parties took the position that JEL had
to pay $2.19 million, being the offer price of $1.425 million plus
half the Disproportionate Capital (
i.e.
,

$765,732). If JEL
paid $765,732 (the Equalization Amount) to the Boxer Parties, JELs net equity
contribution would effectively increase from $765,732 to $1,531,464 and the
Boxer Parties net equity contribution would effectively decrease from
$2,297,196 to $1,531,464. In a letter to JEL, the Boxer Parties asserted it was
a term of the [COA] (in part, s. 7.1(c)) and an obligation between the parties
that JEL would pay the Equalization Amount as part of the shotgun purchase
price.

III.       Procedural
History

A.       Braidwood Arbitration

[25]

In early 2009, the Boxer Parties referred the matter to arbitration
before Mr. Thomas Braidwood, Q.C.

[26]

The Boxer Parties framed the central issue as whether JEL was required
to pay the Equalization Amount in addition to the $1.425 million as a
term or condition of the completion of the compulsory purchase of the [Boxer
Parties] interests (Claimants Submission, Issue (a)). In their
submissions to Arbitrator Braidwood, the Boxer Parties repeatedly emphasized
that if JEL was not required to pay the Equalization Amount as part of the
shotgun purchase, JEL would realize a windfall.

[27]

Arbitrator Braidwood held that there is an implied term in the COA that
if JEL was required by the shotgun clause to purchase the Boxer Parties
interests, it would also pay the Equalization Amount (to the extent the
Disproportionate Capital had not already been paid out pursuant to s. 4.7)
(the Implied Term). He found that the parties had not, when they entered into
the COA, turned their minds to what would happen in these circumstances. However,
he considered that the COA as a whole suggested it was the parties mutual
intention that JEL could not recoup its capital contribution or earn profits
unless and until the parties capital balances were rendered proportionate to
their ownership stakes. Thus, he concluded that, if the parties had turned
their mind to the issue, they would have immediately agreed that, if JEL was
required by the shotgun clause to purchase the Boxer Parties interests, it
would also pay them the Equalization Amount. Otherwise JEL would receive a
windfall and, in Arbitrator Braidwoods view, that was plainly not the parties
intention. Accordingly, he found the Implied Term to be necessary to give
business efficacy to the parties mutual intentions.

[28]

Arbitrator Braidwood ordered,
inter alia
, that JEL purchase the
Boxer Parties interests for $2.19 million, being the shotgun price of $1.425 million
plus the Equalization Amount of $765,732 (the Braidwood Award).

[29]

Arbitrator Braidwood also ordered the parties to execute an agreement
terminating the COA, confirming their relationship was over. As will become
clear, the way in which I propose to dispose of this appeal renders the
termination agreement irrelevant. Accordingly, I will not discuss it further.

B.       Dickson Order

[30]

Pursuant to s. 29 of the
Arbitration Act
, the Boxer Parties
applied to Madam Justice Dickson of the Supreme Court for leave to enforce the Braidwood
Award as an order of that Court. Madam Justice Dickson ordered,
inter alia
,
that the Braidwood Award is made an order of the Supreme Court (the Dickson
Order).

[31]

JEL began an appeal of the Dickson Order, but then abandoned the appeal.

C.       Application for Leave to Appeal Braidwood Award

[32]

Pursuant to s. 31 of the
Arbitration Act
,

JEL applied
to Madam Justice Adair of the Supreme Court for leave to appeal the Braidwood
Award. She dismissed the application, with reasons indexed as 2010 BCSC 947.
She held that the issues of contractual interpretation raised by JEL were
issues of mixed fact and law. As noted, leave to appeal is available only on
issues of law (s. 31(1)(b)).

[33]

JEL appealed that dismissal to this Court, which allowed the appeal. With
reasons indexed as 2011 BCCA 142, Madam Justice Newbury for the Court granted
leave to appeal the Braidwood Award on the grounds
only
that the
arbitrator erred in failing to have regard to established principles of law in
deciding that a term should be implied (at para. 31, emphasis in
original).

D.       Appeal of Braidwood Award

[34]

The appeal of the Braidwood Award was heard by Mr. Justice Goepel
(then of the Supreme Court). He allowed JELs appeal.

[35]

With reasons indexed as 2011 BCSC 1526, Mr. Justice Goepel held
that Arbitrator Braidwood had erred in finding the Implied Term. He concluded
the Implied Term is not necessary to give business efficacy to the parties
intentions, and is inconsistent with the express provisions of the COA.

[36]

After setting out the positions of the parties, Mr. Justice Goepel
discussed the law of implied terms. He quoted from this Courts decision in
Olympic
Industries Inc. v. McNeil
(1993), 86 B.C.L.R. (2d) 273 at 278-279, where Mr. Justice
Finch (as he then was) adopted Lord Scruttons comments in
Reigate v. Union
Manufacturing. Co. (Ramsbottom
), [1918] 1 K.B. 592 at 605 (C.A.):

an implied term is not to be
added because the Court thinks it would have been reasonable to have inserted
it in the contract. A term can only be implied if it is necessary in the
business sense to give efficacy to the contract; that is, if it is such a term
that it can confidently be said that if at the time the contract was being
negotiated someone had said to the parties, What will happen in such a case,
they would both have replied, Of course, so and so will happen; we did not
trouble to say that; it is too clear. Unless the Court comes to some such
conclusion as that, it ought not to imply a term which the parties themselves
have not expressed.

[37]

Mr. Justice Goepel found, contrary to Arbitrator Braidwood, that if
the parties had turned their minds to the issue at the time they entered into
the COA, JEL would not have agreed to the Implied Term (at para. 43):

[43]      The factual matrix
makes clear that the implied term would not have been agreed to by JEL. It had
rejected a similar term during negotiations. The initial term sheet
contemplated Boxer Capital and Yanco lending JEL $1 million to fund its capital
contribution. JEL rejected that proposal. In its place, instead of lending
money to JEL, Boxer Capital and Yanco agreed to make a disproportionate capital
contribution to the venture, to be repaid with interest from the ventures
profits in priority to JEL receiving any return from the project. If the
project did not prosper their disproportionate capital contribution would be
lost without any recourse against JEL.

[38]

Mr. Justice Goepel described the Implied Term as the antithesis of
the bargain that the parties made (at para. 45).

[39]

However, Mr. Justice Goepel agreed with Arbitrator Braidwood that
the COA as a whole suggested it was the parties intention that JEL could not
recoup its equity contribution or realize a profit unless and until the Boxer
Parties first recouped the Disproportionate Capital. Mr. Justice Goepel stated
the Implied Term was not necessary to reach this result because, in his view,
while the shotgun clause allows JEL to purchase the Boxer Parties
shares
,
the Disproportionate Capital remains in the project to be paid out to the
Boxer Parties, if and when the project becomes profitable, in accordance with
the priority schedule in s. 4.7 (at paras. 40, 53). Thus, properly
interpreted, the shotgun clause does not operate to fully separate the parties
interests.

[40]

This led the Boxer Parties to request that Mr. Justice Goepel add a
term to his order stating the Disproportionate Capital remains in the project.
Mr. Justice Goepel declined to make such an order. JEL submitted that such
an order would be inappropriate because Mr. Justice Goepel did not have jurisdiction
to interpret the COA. Leave to appeal the Braidwood Award had been granted only
on the question of whether Arbitrator Braidwood had erred in finding the
Implied Term. In supplementary reasons indexed as 2011 BCSC 1767, Mr. Justice
Goepel disagreed, finding he did have jurisdiction to interpret the COA. He
reasoned it was only by interpreting the COA that he could determine whether
the implied term was necessary to give business efficacy to the parties intentions,
i.e.
, whether Arbitrator Braidwood had erred. However, he stated his
order should reflect only the result of his inquiry  that there is no Implied
Term  rather than the reasons for which he had reached that result.

[41]

In the end, Mr. Justice Goepel ordered,
inter alia
, that:

The appeal herein is allowed and
that the provision in the Arbitration Award of Thomas Braidwood, Q.C. dated
March 23, 2009 requiring payment of a capital adjustment in the amount of
$765,732.26 [
i.e.
, the Equalization Amount] to [the Boxer Parties] be
and is hereby set aside.

[42]

No appeal was taken from this order (the Goepel Order).

[43]

The parties concluded the shotgun purchase. JEL paid the undisputed $1.425 million.
The Equalization Amount was placed in trust.

E.       Ghikas Arbitration

[44]

On 22 December 2011, the Boxer Parties commenced Supreme Court action
S118836 against JEL (and a number of other parties) to recover the Equalization
Amount from JEL (among other purposes). Pursuant to s. 15 of the
Arbitration
Act
, JEL applied to Mr. Justice Savage (then of the Supreme Court) for
a stay of that action. He granted the stay, with reasons indexed as 2012 BCSC
684.

[45]

JEL referred the matter for arbitration before Mr. Gerald Ghikas, Q.C.

[46]

JEL sought a declaration that the Boxer Parties had no continuing
interest of any kind in the venture. The Boxer Parties initially took the
position that JEL had no right under the COA to refer this matter to
arbitration, given that it had already been arbitrated and appealed. They
wished to pursue their Supreme Court action. However, the Boxer Parties ultimately
withdrew this objection and argued the merits before Arbitrator Ghikas.

[47]

The Boxer Parties raised the defence of issue estoppel. They submitted
that JEL was estopped, by the decisions of both Arbitrator Braidwood and Mr. Justice
Goepel, from arguing that the Boxer Parties did not have a continuing interest
in the venture.

[48]

Arbitrator Ghikas considered (at para. 38) the requirements for issue
estoppel articulated by Lord Guest in
Carl Zeiss Stiftung v. Rayner &
Keeler Ltd. (No. 2)
, [1967] 1 A.C. 853 at 935, adopted by the Supreme
Court of Canada in
Angle v. M.N.R.
, [1975] 2 S.C.R. 248 at 254
, per
Mr. Justice Dickson (as he then was):

(1)        That the same question
has been decided; (2) that the judicial decision which is said to create the
estoppel was final; and (3) that the parties to the judicial decision or their
privies were the same persons or the parties to the proceedings in which the
estoppel is raised.

[49]

On the meaning of same question, Arbitrator Ghikas quoted (at
para. 38) this Courts decision in
Re Cliffs Over Maple Bay Investments
Ltd.
, 2011 BCCA 180 at paras. 31-33,
per
Madam Justice Newbury:

[31]      There is also the
well-known formulation of issue estoppel given by Middleton J.A. in
McIntosh
v. Parent
[1924] 4 D.L.R. 420 (Ont. C.A.):

When a question is litigated,
the judgment of the Court is a final determination as between the parties and
their privies.
Any right, question, or fact distinctly put in issue and
directly determined
by a Court of competent jurisdiction as a ground of
recovery, or as an answer to a claim set up, cannot be re-tried in a subsequent
suit between the same parties or their privies, though for a different cause of
action. The right, question, or fact, once determined, must, as between them,
be taken to be conclusively established so long as the judgment remains.

[32]      The narrow wording (directly
determined) adopted in these and other authorities, however, has not been
construed as strictly as one might expect. In
Danyluk
[
v. Ainsworth
Technologies Inc.
,

2001 SCC 44]
,
Binnie J. for the
Court stated at para. 54 that issue estoppel applies to the issues of
fact, law, and mixed fact and law that are
necessarily bound up
with the
determination of that issue in the prior proceeding. This would seem to echo
the formulation provided by Lord Shaw in
Hoystead
[
v. Taxation
Commissioner
, [1926] A.C. 155 (J.C.P.C.)]:

Parties are not permitted
to begin fresh litigations because of new views they may entertain of the law
of the case, or new versions which they present as to what should be a proper
apprehension by the Court of the legal result either of the construction of the
documents or the weight of certain circumstances. If this were permitted
litigation would have no end, except when legal ingenuity is exhausted. It is a
principle of law that this cannot be permitted, and there is abundant authority
reiterating that principle.

Thirdly, the same principle 
namely, that of setting to rest rights of litigants, applies to the case where
a point,
fundamental to the decision
, taken or assumed by the plaintiff
and traversable by the defendant, has not been traversed. In that case also a
defendant is bound by the judgment, although it may be true enough that
subsequent light or ingenuity might suggest some traverse which had not been
taken. The same principle of setting parties rights to rest applies and
estoppel occurs.

The wording used in
Hoystead
(where it was held that
issue estoppel applied not only to the admission of a fact fundamental to the
first decision, but also to an erroneous assumption as to the legal quality of
that fact) which I have underlined above was approved in
Angle, supra
,
at 255, and by this court in
Morgan Power Apparatus v. Flanders
Installations Ltd
. (1972) 27 D.L.R. (3d) 249, at 252.

[33]      Lange [
The Doctrine of Res Judicata in Canada
,
3rd ed. (Markham: LexisNexis, 2010)] (see 58-65 and the cases cited therein)
suggests that an extended form of issue estoppel has been adopted in some
provinces such that any question that could have been decided or could have
been raised at the first proceeding, will be barred in the second. However,
this approach has not received appellate approval in this province, and when it
has been used, seems not to have led to a different result than the traditional
approach.

[Emphasis added by Madam Justice
Newbury.]

[50]

Arbitrator Ghikas concluded that neither Arbitrator Braidwood nor Mr. Justice
Goepel had decided the same question as was before him.

[51]

According to Arbitrator Ghikas, the claim before Arbitrator Braidwood
was for an order that JEL pay the Equalization Amount as part of the purchase
price under the shotgun clause. At that time it was common ground among the
parties that the shotgun clause would fully separate their interests. By
contrast, the claim before him was for a declaration that the Boxer Parties had
no continuing interest in the project after the operation of the shotgun
clause.

[52]

Arbitrator Ghikas then carefully analyzed the reasoning of Mr. Justice
Goepel. He indicated that Mr. Justice Goepels reasons must, in a sense,
be deconstructed to distinguish his decision on the matter before him from
his reasoning and to determine the extent to which his reasoning was or was not
fundamental to his decision (at para. 50). Mr. Justice Goepels
conclusion that the parties would not obviously have agreed to the Implied Term
was clearly fundamental to his decision. It was on this basis that he held
Arbitrator Braidwood had erred in finding the Implied Term. However, according
to Arbitrator Ghikas, nothing that followed was fundamental to Mr. Justice
Goepels decision. In particular, Mr. Justice Goepels conclusion that the
Boxer Parties retained a continuing interest was not fundamental to his
decision because it was not necessary to support his holding that Arbitrator
Braidwood had erred (at para. 52).

[53]

Arbitrator Ghikas went on to consider the extended form of issue
estoppel discussed in
Cliffs Over Maple Bay
, holding that it too would
not apply (assuming such a doctrine indeed exists in this province).

[54]

Arbitrator Ghikas conducted his own analysis of the COA (para. 73).
He concluded that, properly interpreted, the COA provides that the
Disproportionate Capital became JELs property when it purchased the Boxer
Parties interests for $1.425 million pursuant to the shotgun clause.

[55]

In the result, Arbitrator Ghikas declared that the Boxer Parties had no
continuing interest of any kind in the venture, including any right to be paid
the Disproportionate Capital (the Ghikas Award).

F.       Application for Leave to Appeal Ghikas Award

[56]

Pursuant to s. 31 of the
Arbitration Act
,

the Boxer
Parties applied to Mr. Justice Leask of the Supreme Court for leave to
appeal the Ghikas Award. He granted leave, with reasons indexed as 2013 BCSC
678.

[57]

JEL appealed Mr. Justice Leasks granting of leave. This Court
dismissed the appeal, with reasons indexed as 2013 BCCA 297. Leave to appeal the
Ghikas Award was granted on the question of whether Arbitrator Ghikas erred in
law by holding that the doctrine of
res judicata
did not apply to the Braidwood
Award and Goepel Order (at para. 1).

G.      Appeal of Ghikas Award

[58]

The appeal of the Ghikas Award in Supreme Court was heard by Mr. Justice
Abrioux. With reasons indexed as 2013 BCSC 2366, Mr. Justice Abrioux held
that Arbitrator Ghikas had erred in holding that issue estoppel did not apply.
Accordingly, he allowed the Boxer Parties appeal.

[59]

Mr. Justice Abrioux held that Arbitrator Ghikas had erred in taking
overly narrow views of the question which was before him and those which had
been before Arbitrator Braidwood and Mr. Justice Goepel (at para. 56).
Mr. Justice Abrioux stated that the real issue had been the same throughout,
namely whether the $1.425 million shotgun purchase price included the
Disproportionate Capital such that if JEL paid $1.425 million to the Boxer
Parties, the Boxer Parties would have no remaining interest of any kind in the venture
(at paras. 57, 71).

[60]

Arbitrator Braidwood and Mr. Justice Goepel both answered this
question in the negative, albeit for different reasons. Arbitrator Braidwood
held JEL had to pay the Equalization Amount (to compensate for the
Disproportionate Capital) at the time of the shotgun purchase, in addition to
the $1.425 million. Mr. Justice Goepel disagreed, holding that JEL
only had to pay $1.425 million at the time of the shotgun purchase.
However, he also held that the Disproportionate Capital remained in the project
and, if the project became sufficiently profitable, would have to be paid out
to the Boxer Parties according to the priority schedule in s. 4.7 of the
COA.

[61]

According to Mr. Justice Abrioux, Arbitrator Ghikas reached a
different conclusion on the same issue (at para. 60). He found that the
$1.425 million included the Disproportionate Capital in the sense that if
JEL paid $1.425 million to the Boxer Parties, they would have no further
interest in the project.

IV.      Grounds
of Appeal

[62]

JEL appeals to this Court. The material grounds of appeal are that Mr. Justice
Abrioux erred by:

a)

holding that the
reasons of Mr. Justice Goepel granted rights to the Boxer Parties beyond
those contained in those portions of the Braidwood Award and Dickson Order
which remained extant following the Goepel Order; and,

b)

holding that the
reasons of Mr. Justice Goepel supported a finding that issue estoppel
applied in the circumstances of this case.

V.       Summary
of the Positions of the Parties

[63]

In essence, JELs position is that all issues were settled, and the
litigation should have stopped, after the Goepel Order. It says the effect of
the Goepel Order was to set aside the term of the Braidwood Award and Dickson
Order requiring JEL to pay the Equalization Amount as part of the shotgun
purchase price. It emphasizes that it was common ground among the parties
before Arbitrator Braidwood and Mr. Justice Goepel that the shotgun
purchase would fully separate the parties interests, whether or not the price
included the Equalization Amount. Accordingly, JEL says that after it paid
$1.425 million and the shotgun purchase closed, the parties interests
were fully separated and the dispute was over.

[64]

In JELs submission, Mr. Justice Goepel exceeded his jurisdiction
by publishing reasons for judgment containing dicta to the effect that the
Disproportionate Capital would remain in the venture to be paid out to the
Boxer Parties pursuant to s. 4.7, if the venture became sufficiently
profitable. JEL notes that it could not appeal from this finding, as it was not
reflected in the Goepel Order. It says this finding led the Boxer Parties to
abandon their earlier position and assert that, notwithstanding the shotgun
sale, they retained a contractual right to be paid the Disproportionate Capital
pursuant to s. 4.7. It was on the basis of this position that the Boxer
Parties commenced action S118836, which JEL succeeded in staying in favour of
the arbitration giving rise to the present appeal.

[65]

In a sense, the Boxer Parties agree the litigation ought to have ended
after Mr. Justice Goepels decision  though they take a very different
view of the significance of that decision. In their submission, Mr. Justice
Goepels decision established that, even after the shotgun sale, they retained
the right under s. 4.7 of the COA to be paid the Disproportionate Capital,
if and when the venture became sufficiently profitable. They say he had
jurisdiction to make this finding because it was necessary for him to interpret
the COA to determine if Arbitrator Braidwood had erred. They emphasize that JEL
did not appeal Mr. Justice Goepels decision.

[66]

The Boxer Parties say they commenced action S118836 only because it
seemed there was a risk that the Disproportionate Capital would be paid out,
but not to them. (JEL had brought in new co-owners.) Arbitrator Ghikas
considered the same issue as had been before Mr. Justice Goepel and
Arbitrator Braidwood: who owns the Disproportionate Capital? Mr. Justice
Abrioux was correct to conclude issue estoppel applied.

VI.      Discussion

[67]

I begin my discussion by observing that the analysis in this matter has
been complicated by the description, in some of the decisions below and even
the parties submissions, of the sum of $765,732 as the disproportionate capital
. In fact, this is only
half
the
Disproportionate Capital.

[68]

The Disproportionate
Capital is the amount by which the Boxer Parties equity contribution to the
venture ($2,297,196) exceeds the amount which is proportionate to their
ownership stake of 50%, given that JEL contributed
$765,732 of equity in
exchange for its ownership stake of 50%. In other words, the Disproportionate
Capital is $1,531,464, being
$2,297,196
less
$765,732. This is confirmed by the fact that the Boxer Parties
enjoy priority under s. 4.7(d) to $1,531,464 of the ventures profits, not
only $765,732 of the ventures profits.

[69]

$765,732, which I have defined as the Equalization Amount, is
the sum that, in the Boxer Parties
submission, JEL is required by the COA to pay to the Boxer Parties as part of
the shotgun purchase price (in addition to the $1.425 million). The
Equalization Amount is only half the Disproportionate Capital because it is
JEL, rather than the venture itself, that (allegedly) must pay it to the Boxer
Parties. If JEL paid
$765,732 to the Boxer Parties, JELs net equity
contribution would effectively increase from $765,732 to $1,531,464 and the
Boxer Parties net equity contribution would effectively decrease from
$2,297,196 to $1,531,464. This is proportional, given that JEL and the Boxer
Parties both owned 50% of the venture (before the shotgun sale).

[70]

Although Mr. Justice Goepel agreed with Arbitrator Braidwood that
the COA as a whole suggested it was the parties intention that JEL could not
recoup its contribution or realize a profit unless and until the Boxer Parties
first recouped the Disproportionate Capital, their decisions lead to very
different results.

[71]

The Braidwood Award requires JEL to pay $2,190,732 to the Boxer Parties,
after which they would have no remaining interest in the venture. This would
permit the Boxer Parties to recover almost their entire investment of
$2,297,196, irrespective of the ventures success or failure.

[72]

A very different result flows from the decision of Mr. Justice
Goepel, assuming (without deciding) that it was effective in conferring a
continuing interest on the Boxer Parties. His decision requires JEL to pay $1,425,000
to the Boxer Parties, after which they would remain entitled to be paid
$1,531,464 (the true Disproportionate Capital) from the venture, pursuant to s. 4.7,
if the venture became sufficiently profitable. If the venture did ultimately
succeed,
the Boxer Parties would
receive $2,956,464, plus interest on the Disproportionate Capital pursuant to s. 4.7(e).
This represents

a
significant return on their original investment.

[73]

With this clarifying
explanation, I turn to discuss the issues in this appeal.
It is
necessary to recall exactly what those issues are because, respectfully, some
of us have lost sight of the narrowness of the issues and ventured opinions
which go well beyond them. What has been lost in the process are the benefits
that all acknowledge flow from commercial arbitration and restrained judicial
review of its fruits, arbitral awards.

[74]

The first step, reflecting this focus on specificity, is to recall the
narrow issue before Mr. Justice Goepel because it defines, in my view, the
scope of any issue estoppel that arises. The sole issue before Mr. Justice
Goepel was whether Arbitrator Braidwood erred in law in finding the Implied
Term. This issue does not call for a construction of the COA generally; many
issues tied to the meaning and operation of the COA are not included in the
narrow compass of the sole issue properly before Mr. Justice Goepel.

[75]

If the parties had not chosen to include a mandatory arbitration clause
in the COA and the Boxer Parties had commenced a Supreme Court action rather
than arbitration, many issues might have been harboured in that action and the
scope of any issue estoppel might have been substantially broader. Of course,
that is not what happened. The parties did agree to resolve any disputes
through arbitration. As a result, the only issue before Mr. Justice Goepel
in Supreme Court was whether Arbitrator Braidwood erred in law in finding the
Implied Term.

[76]

After holding that Arbitrator Braidwood did so err, Mr. Justice
Goepel went on to construe the COA generally in an effort to deal with his
concern that JEL would realize a windfall if it was able to exercise the
shotgun clause without paying the Equalization Amount. He found that the
Disproportionate Capital remained in the venture to be paid out to the Boxer
Parties pursuant to s. 4.7, if the venture became sufficiently profitable.
However, what must be asked is whether, for the purposes of issue estoppel, this
finding is part of the question Mr. Justice Goepel decided. In other
words, was JEL estopped by this finding from seeking a declaration from
Arbitrator Ghikas that the Boxer Parties had no continuing interest?

[77]

Angle
and
Cliffs Over Maple Bay
establish that the question which is
said to give rise to an estoppel must not arise collaterally or incidentally,
or be one which must be inferred by argument from the judgment in question. Rather,
the question must be so fundamental to the substantive outcome that the latter
cannot stand without the former (
Angle
at 255). The question must be necessarily
bound up with the substantive outcome (
Cliffs Over Maple Bay
at
para. 32).

[78]

As noted, an implied term can be found only if (
Olympic Industries
at
278-279):

it can confidently be said that
if at the time the contract was being negotiated someone had said to the
parties, What will happen in such a case, they would both have replied, Of
course, so and so will happen; we did not trouble to say that; it is too clear.

Mr. Justice
Goepel concluded this was
not
the case with respect to the Implied Term.
(
I note parenthetically that I make no comment as to the merits of that conclusion,
which is not itself on appeal.) In my view, that is all that was fundamentally
necessary to dispose of the narrow question before him. B
y that point in his reasoning, Mr. Justice
Goepel had concluded 
that the arbitrator erred in failing to have
regard to established principles of law in deciding that a term should be
implied, as Madam Justice Newbury framed the question on appeal. Accordingly,
I agree with Arbitrator Ghikas that Mr. Justice Goepels conclusion that
the Boxer Parties retain a continuing interest was not a fundamental part of
his reasoning, nor was it necessarily bound up with the substantive outcome.

[79]

Indeed, Mr. Justice
Goepel himself recognized this, at least implicitly, when he refused to include
his continuing interest construction in his order (at para. 10 of his supplementary
reasons):

[10]      That said, I do not
accept [the Boxer Parties] submission that the order should amend the award of
the arbitrator by adding a provision that sets out my interpretation of the
agreement. The issue before the arbitrator was whether the capital adjustment
had to be paid as a condition of the buy-sell agreement. After implying a term
into the agreement, he held that the amounts that must be paid included the
capital adjustment of $765,732.26. I have found that the arbitrator erred in
his interpretation of the agreement. As a result of that error, I have set
aside the arbitrators award insofar as it concerns the payment of the capital
adjustment.

[80]

It is also significant that it was common ground before both Arbitrator
Braidwood and Mr. Justice Goepel that the Boxer Parties would have no
further interest in the venture after the shotgun purchase closed, whether the
price was $1.425 million (as in JELs submission) or $2.19 million
(as in the Boxer Parties). This is evident from the Boxer Parties repeated
submission that, if the price did not include the Equalization Amount, JEL
would realize a windfall. This submission makes sense only if the purchase
would leave the Boxer Parties with no further interest. The fact that Mr. Justice
Goepels continuing interest construction departed from the common position
of the parties provides further support for the view that it was not a
fundamental part of his reasoning, nor was it essential to his holding on the
only issue properly before him.

[81]

We come at last to the
decision on appeal by Mr. Justice Abrioux. I stress again the narrow
question before him, whether
the arbitrator erred in law by holding
that the doctrine of
res judicata
did not apply to the decisions of
Arbitrator Braidwood and Mr. Justice Goepel.

[82]

Mr. Justice Abrioux characterized the issues before Arbitrator
Braidwood, Mr. Justice Goepel and Arbitrator Ghikas in the broadest
possible terms. He stated that the real issue had been the same throughout
and was whether the $1.425 million shotgun purchase price included the
Disproportionate Capital such that if JEL paid $1.425 million to the Boxer
Parties, the Boxer Parties would have no remaining interest of any kind in the
venture (at paras. 57, 71).

[83]

Respectfully, Mr. Justice Abrioux erred in characterizing the issues
so broadly, and in finding that they had been the same throughout. When the
issues are properly framed, it becomes apparent that they are quite different. The
issue before Arbitrator Braidwood, as defined by the parties who chose to
submit their dispute to him, was whether the shotgun purchase price under the
COA was $1.425 million or $2.19 million. The issue before Mr. Justice
Goepel, as defined by this Courts decision granting leave to appeal, was
whether
Arbitrator Braidwood
erred in failing to have regard to established principles of law in deciding
that a term should be implied. Finally, the issue before Arbitrator Ghikas, again
as defined by the parties, was whether the Boxer Parties had a continuing
interest in the venture. These are different issues.

[84]

I therefore agree with Arbitrator Ghikas that the doctrine of issue
estoppel did not apply. It was open to Arbitrator Ghikas to construe the COA
afresh on the continuing interest issue. It is not for this Court to review the
merits of his decision in this regard. His decision is the last word on the
interpretation of the COA.

[85]

For these reasons, I
would allow the appeal and reinstate the Ghikas Award.

The Honourable Chief Justice Bauman
ˮ

I
AGREE:

The Honourable Madam Justice Bennett
ˮ

I
AGREE:

The Honourable Mr. Justice
Willcock
ˮ


