In Jammin Rock Resources v. Dowd & Associates, et al., 2020 NBQB 102, Mr. Justice Daniel J. Stephenson denied leave to appeal a cost award which issued in favour of respondents further to their successful pre-hearing motion to determine that claimants’ arbitration was statute-barred. Stephenson J. refused to characterize the arbitrator’s discretion on costs as equivalent to a taxation. Despite objections to the summary evidence provided to and relied on by the arbitrator, Stephenson J. wrote that he was not aware of any jurisprudence mandating that arbitrators must have detailed time summaries as a condition precedent to their ability to award costs and that no provision of the Arbitration Act, RSNB 2014, c 100 mandates that an arbitrator must have detailed computer-generated time summaries prior to allocating costs. The facts also confirmed the arbitrator’s authority to make a determination with final effect prior to the merits hearing and on documentary evidence.
Jammin Rock Resources Inc. (“Jammin Rock”) initiated litigation in Alberta’s Court of Queen’s Bench against two (2) corporations and three (3) individuals in response to which certain defendants successfully applied for a referral to arbitration in New Brunswick as well as a stay of the balance of that litigation involving parties not bound or issues not covered by the agreement to arbitrate.
For more facts and information on the stay application referred to by Stephenson J. at para. 4 of his reasons, see the earlier Arbitration Matters note “Alberta court favours deference to arbitration, holds parties to promise to arbitrate despite inefficiencies created for other litigants” regarding Macdonald v. Burke, 2018 ABQB 534. In that decision, Mr. Justice William A. Tilleman ordered the claims against certain defendants be arbitrated in New Brunswick and exercised his discretion to stay the balance of the Alberta litigation pending the arbitration.
To do so, Tilleman J. traced the evolution of the court’s diminished discretion to grant a stay of litigation, tracking changes to Alberta’s Arbitration Act, RSA 2000, c A-43’s section 7(1) from the earlier, permissive “may” to the current, mandatory “shall”. He acknowledged that the change in wording to section 7(1) now restricted his discretion to those five (5) circumstances listed in section 7(2) and that none of the latter applied on the facts. Despite overlapping facts and issues in the various disputes, he remained unpersuaded that he should exercise his separate, remaining discretion under section 7(5) to allow the court litigation to continue in parallel to the arbitration.
During the proceedings in Alberta, both before Tilleman J. and, earlier, a Master, two (2) issues arose but were not determined. First, the corporate defendant, Dowd & Associates Ltd. (“Dowd & Associates”) was dissolved. Second, defendants raised the issue that Jammin Rock’s claims were statute-barred under a limitation statute. In regard to the first, Tilleman J. expressly anticipated that Dowd & Associate’s status would be determined by the arbitration and have further impacts.
“ Further, there are outstanding issues relating to the status of JDLS and Dowd and Associates, as both are technically dissolved entities. Certain determinations at the arbitration regarding their status could have an impact on the steps and positions taken in the future in the TransCanada claim”.
The issue before Stephenson J. involved a post-award challenge by the unsuccessful arbitration parties who applied for leave under section 45(1) of New Brunswick’s Arbitration Act, RSNB 2014, c 100 to appeal a December 2, 2019 costs award (“Cost Award”).
Following Tilleman J.’s July 18, 2018 decision, Jammin Rock initiated arbitration in New Brunswick against Dowd & Associates, its contractual partner. Jammin Rock and Dowd & Associates negotiated an arbitration protocol with the arbitrator.
Jammin Rock and Dowd & Associates agreed to have the arbitrator determine two (2) issues prior to the hearing on the merits. First, whether Mr. Robert Henry (Bob) MacDonald, Mr. Peter Dowd and Mr. John Dowd were proper parties to the arbitration. Second, the impact, if any, of the Limitation of Actions Act, SNB 2009, c L-8.5. The issues were determined by the arbitrator based on the documentary evidence filed in the arbitration and written submissions.
In an October 15, 2019 decision (“Decision”), the arbitrator determined that (i) Mr. MacDonald was a proper claimant and Mr. Peter Dowd and Mr. John Dowd were proper respondents to Jammin Rock’s arbitration and (ii) Jammin Rock’s and Mr. MacDonald’s claims in the arbitration were statute-barred under section 5(1) of the Limitations Act.
Invited by the arbitrator to provide submissions on costs within thirty (30) days, both sets of parties submitted written argument but only Dowd & Associates, Mr. Peter Dowd and Mr. John Dowd provided an affidavit from Mr. John Dowd.
The arbitrator’s reasons, excerpted in part at para. 8 of Stephenson J.’s decision, lead to an award of 60% of the costs claimed.
Jammin Road and Mr. MacDonald (“Moving Parties”) applied for leave to appeal the December 2019 Cost Award, not the October 2019 Decision. Stephenson J. acknowledged his discretion to grant leave under section 45(1) but only limited to questions of law and then only for those questions regarding which he was satisfied that the importance of the matter(s) to the parties justified an appeal and that their determination would significantly affect the parties’ rights.
Giving a nod first to Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII),  2 SCR 633’s classification of which errors qualified as errors of law, Stephenson J. focused on a case from Ontario which, addressing the convergence of an error of law in the context of a challenge to a costs award, granted leave and the challenge. In that case, Necrovore Inc. v. Andover Land Corporation, 2007 CanLII 34849 (ON SC), a party had achieved “complete success”, had made a favourable offer to settle and had committed no procedural misconduct. Despite that trajectory, the arbitrator, without explanation, made no award of costs. The court agreed that the arbitrator in that case had erred when, declining to award costs, without explanation, contrary to a claimed legal principle of costs following the event, he provided no indication that proper legal principles or considerations were involved in the exercise of discretion.
Turning to the record before him, Stephenson J. recorded the Moving Parties’ critique of the manner in which the arbitrator had relied on only an affidavit to which the series of invoice pages issued by the respondents’ lawyers. The evidentiary record therefore contained “a series of account statements, a total fee amount and a statement that such fees were in relation to the Arbitration, and nothing more”.
The Moving Parties claimed that information was insufficient and ought to have provided more details such as timekeeper particulars, applicable hourly rates, details of what work was done and when. They argued that, in doing so, the arbitrator had committed an error like that made in Necrovore Inc. v. Andover Land Corporation.
Stephenson J. resisted the Moving Parties’ submissions, qualifying their underlying approach as equating the role of an arbitrator to a taxation officer. He acknowledged the availability of related procedures to tax under the An Act Respecting the Law Society of New Brunswick, SNB 1996, c 89 as well as section 56(1) of the Arbitration Act applicable to the fees and disbursements of an arbitrator. That said, Stephenson J. determined that “none of that has anything to do with an arbitrator setting costs in an arbitration proceeding”.
Stephenson J. referred back to the arbitrator’s reasons on costs, pointing out that the arbitrator had discussed the substance of the arbitration, the issues and the parties’ positions and their respective successes, was “clearly … familiar with the factual matrix of the matter before him, and cognizant of the complexity of the legal issues dealt with by the parties”, aware that Alberta litigation remained active. “He takes all of that into account in his decision to award costs at 60% of the Stewart McKelvey aggregate fee total”.
In summing up, Stephenson J. added that the exacting approach to evidence in an arbitral costs award insisted on by the Moving Parties was unsupported by the case law.
“ Bottom line, it is a thorough piece of legal reasoning reflecting how and why [the arbitrator] arrived at the Cost Award. Further, I am not aware of any jurisprudence mandating that arbitrators (or judges for that matter) must have detailed time summaries in front of them as a condition precedent to their ability to award costs. As an aside, it has not been that many years since “Sundry” accounts or” to professional services rendered during a prescribed period” were the norms for billing purposes. Quite simply, no provision of the Act (or Rule 59 for that matter) mandates that an arbitrator or a court must have detailed computer-generated time summaries in front of them prior to effecting an award of costs. To the contrary, as noted in the passage from the Cost Award referenced above, and reflected in Rules 59.01 and 59.02, arbitrators and courts have wide discretion to award costs. This is also clear from the Necrovore decision”.
Perceiving the Moving Party’s challenge as a challenge to the arbitrator’s discretion, Stephenson J. declared that he saw no error in the manner in which the arbitrator exercised his discretion in making the Cost Award and, if there had been, he refused to exercise his own discretion to grant leave.
urbitral note – First, it is worth noting that the determination made by the arbitrator on the limitation issue, leading to the Cost Award, was determinative of the dispute. Decided before trial and on a documentary record, the Decision issued by the arbitrator confirms that the arbitral procedure includes dispositive motions.
As mentioned in part at para. 32 of the arbitrator’s excerpted reasons, reproduced at para. 8 of Stephenson J.’s decision, the arbitrator contrasted the respective motions made by the parties. “However, it is also the case that the Initiating Parties’ motion was more akin to an interim motion, while that of the Responding Parties was more akin to a trial inasmuch as it resulted in a final determination of the proceedings. Hence the latter was the more substantively significant of the two”.
Second, at para. 28 of his excerpted reasons, the arbitrator expressly resisted following the courts’ scale of costs when awarding costs in the arbitration, writing that those “rules and that practice have no application in arbitrations pursuant to the Arbitration Act”.
Third, at para. 14 of his reasons, Stephenson J. recognized that “Counsel for the Moving Parties was impressive, articulate and presented compelling arguments” despite Stephenson J. being unable to “entertain same”. In response to those arguments, Stephenson J. made two (2) key affirmations in his reasons: First, that “none of that has anything to do with an arbitrator setting costs in an arbitration proceeding”. Second, despite such able argument and presumably fully briefed on relevant case law, the Moving Parties’ exacting approach to proof of costs was unsupported in the case law, or at least as submitted by the Moving Parties.
“Further, I am not aware of any jurisprudence mandating that arbitrators (or judges for that matter) must have detailed time summaries in front of them as a condition precedent to their ability to award costs”.
Fourth, at para. 34 of his own reasons on costs, the arbitrator did flag the limitations on the evidence provided in support of the costs claimed, clearly incorporating that difficulty into his eventual allocation of 60% of the costs claimed.
Fifth, Stephenson J. did record, at para. 9, personal hardship grounds raised by Mr. MacDonald and agreed that “[o]ne can sympathize with Mr. MacDonald’s personal circumstances, but they cannot become a ground to challenge the award of costs in their own right”. He remarked that the Moving Parties had pursued arbitration despite knowing about the limitation argument raised in the Alberta proceedings. “In this sense, the Moving Parties must be regarded as having made the decision to move forward with the Arbitration in New Brunswick with their eyes wide open”. The corporate Jammin Road and the individual arbitral claimant were together liable for payment of the Cost Award.