Prairie Roadbuilders Limited Applicant - v. -, 2019 ABQB 934

Court of Queen’s Bench of Alberta Citation: Prairie Roadbuilders Limited v Flatiron-Dragados-Aecon-Lafarge, A Joint Venture, 2019 ABQB 934 Date: 20191206 Docket: 1901 07435 Registry: Calgary Between: Prairie Roadbuilders Limited Applicant - and - Flatiron-Dragados-Aecon-Lafarge, a Joint Venture Respondent _______________________________________________________ Decision of the Honourable Mr. Justice J.T. Eamon _______________________________________________________ I Overview [ 1 ] The Respondent FDAL was the contractor of a design build road construction project.

On August 1, 2012 FDAL entered into a subcontract for earthmoving work and other services for the project with the Applicant Prairie. Eventually disputes arose and FDAL terminated the subcontract. The parties disagreed over the meaning of the subcontract, and whether Prairie breached the subcontract or FDAL wrongfully terminated the subcontract. The parties submitted the dispute to arbitration. The Arbitrator found Prairie breached the subcontract. He awarded damages to FDAL against Prairie.

[ 2 ] Prairie requests that this Court give permission for Prairie to appeal the Award to this Court on questions of law, under subsection 44(2) of the Arbitration Act , RSA 2000, c A-43 . • Prairie’s first ground of appeal is that the Arbitrator erred in his conclusions about the meaning of a standard form subcontract, which led the Arbitrator to conclude that Prairie did not perform as the subcontract required. Prairie says the

interpretation of this contract is a question of law that can be appealed under the Act . • Prairie’s second ground of appeal is that the Arbitrator committed legal errors by making inconsistent findings on key issues. [ 3 ] FDAL opposes permission to appeal.

It contends the following requirements of subsection 44(2) are not met: • That a question of law be presented. • That the importance to the parties of the matters at stake in the arbitration justifies an appeal. • The determination of the question of law at issue will significantly affect the rights of the parties. [ 4 ] Additionally, FDAL submits: • The parties expressly referred any question of law to the Arbitrator, which bars an appeal under the Act (subsection 44(3)). • The appeal does not have merit. [ 5 ] For the reasons set out below, I refuse permission to appeal.

Only questions of law are eligible for appeal under the Act unless the parties agreed to broader rights of appeal. These parties did not so agree. Most of Prairie’s issues present so-called questions of mixed law and fact, because they are heavily dependent on the custom drafted portions of the subcontract and the factual context in which the parties made their subcontract. Further, subsection 44(3) would bar an appeal from several of those issues if they were questions of law.

The possible questions of law that arise do not meet other requirements for permission to appeal under subsection 44(2): one of them does not present a genuine issue for appeal, and none of them could possibly change the end result of the arbitration. II Background (

a) Introduction [ 6 ] Prairie proposes the following grounds of appeal: The Arbitrator erred in law by incorrectly interpreting provisions of a standard form contract, including

Part 8, SCC 6.1.2, SCC 7.1.2, SCC 7.1.4, SCC 6.6, SCC 3.1.2, SCC 3.1.3, and SCC 3.1.4 of CCA 1-2008 The Arbitrator erred in law by making inconsistent findings on central issues, including by finding that the Subcontract did not entitle FDAL to unilaterally set the

schedule for performance of the earthworks, but then finding that Prairie was in default for failing to follow the

schedule unilaterally set by FDAL. [ 7 ] I will set out the details of these grounds of appeal later. First, it is necessary to understand the fundamental provisions of the subcontract and the underlying factual background which gave rise to the dispute. [ 8 ] The background facts set forth here are drawn from the Award, or reflect terms in the subcontract. Prairie does not contest the Arbitrator’s fact findings in the proposed appeal. (

b) The project [ 9 ] The project was the construction of a highway. [ 10 ] The subcontractor (Prairie) was to provide earthworks, traffic and erosion control, and flagging for a specific area of the project. This area was known as

Section 4 of the North East Anthony Henday Drive. [ 11 ] The project was being designed and constructed by the contractor (FDAL) as part of a public-private partnership project that includes design, build, finance and operate functions in a single agreement. [ 12 ] The design of the work was incomplete when the subcontract was made in mid-2012. The design drawings for the area in which Prairie was to provide work, known as the SR2B drawings, were only 30% complete when the subcontract was made. Both parties expected that final drawings would be developed as the project progressed through the design build process.

(

c) The events leading up to contract termination [ 13 ] Prairie performed initial work under the subcontract in 2012. Prairie was not present on the site for the 2013 construction season, and was to return for the 2014 construction season. [ 14 ] After the subcontract was made (August 1, 2012), one or more revisions of the SR2B drawings were issued. FDAL and Prairie met on January 15, 2014 to deal with overall planning of the work to be done in the coming months. The meeting minutes contemplated that Prairie would provide a

schedule of dates and areas for all remaining grading and subgrade preparation operations, and would start earthwork operations in May 2014. [ 15 ] Further, the minutes set out FDAL’s priority areas for the 2014 construction season. Prairie knew that FDAL expected the bulk of the earthworks would be done in the 2014 construction season, and did not express any dissent when the minutes were circulated. [ 16 ] Disputes soon arose over pricing and scheduling of the work. As the Arbitrator said: … The meeting appears to have been positive and helpful.

However, the promising start to the 2014 discussions began to descend into discord within weeks…. [ 17 ] Prairie requested summaries of roadway design changes since August 1, 2012, changes to field conditions caused by the work of others since Prairie was last on the site, and changes to work already performed by Prairie as the result of an erroneous survey. [ 18 ] Prairie took the position that the subcontract prohibited the subcontractor from performing a change in or addition to the subcontract work without a change order or change directive signed by the contractor.

Therefore, the Prairie was not obliged to do any work other than work agreed to between both parties. In contrast, FDAL took the position that the evolution of the design through the design build process was not a change in the work. Further, the subcontract obliged Prairie to perform the work and any dispute over claims to adjustment of the contract price could be resolved later. [ 19 ] The protracted discussions over contract changes quickly spilled over into issues affecting the work schedule. FDAL was assembling a project

schedule and required information from Prairie to do so. Prairie refused to provide a construction

schedule until it received the information it was requesting. The Arbitrator found that essentially, Prairie took the position that it would provide a

schedule once it knew the scope of the project as it stood in 2014 and how it differed from the SR2B drawings. Moreover, Prairie continued to signal that it would not start work without a change order or change directive under the subcontract. [ 20 ] The Arbitrator found that each side then waited for the other to act. [ 21 ] FDAL issued a change directive for a limited amount of work, which the Arbitrator said did not include work on the “main project”. FDAL did not issue a change directive for work arising from design changes after the SR2B drawings. On May 10, 2014 FDAL notified Prairie that it was in default for failing to perform or

schedule “productive

schedule critical work” that was available to be performed. On June 5, 2014 FDAL issued a second notice of default, asserting that Prairie failed to prosecute the work and perform the subcontract, and failed to adequately mobilize to perform the work. [ 22 ] Prairie responded on June 10, 2014 by providing a proposed construction

schedule that suggested (for the first time) Prairie would perform the bulk of its work in 2015. The Arbitrator described this

schedule as a “bombshell”, because it departed from any previous discussion of sequencing and staging between the parties and disrupted all previous expectations about how Prairie would perform the subcontract. The Arbitrator observed that it almost defied belief that Prairie would raise this possibility when for the previous two years it had known that FDAL had planned for substantial grading work to be done in 2014. [ 23 ] In response, on June 16, 2014, FDAL provided a

schedule indicating Prairie was expected to start work in May 2014. [ 24 ] Prairie took the position that its only obligation was to effect substantial performance by the contract deadline for substantial completion (October 18, 2015), even if contrary to the contractor’s expressed needs. [ 25 ] FDAL took the position that Prairie breached its obligations to properly stage and coordinate its work under the subcontract having regard to the activities and work of other subcontractors and the contractor’s own forces. [ 26 ] Relations collapsed shortly after. Eventually FDAL terminated the subcontract. (

d) The subcontract form [ 27 ] The subcontract was based on the Canadian Construction Association form CCA 1-2008 Stipulated Price Subcontract. The Arbitrator found that the parties made “significant modifications to the standard form CCA 1 Agreement after a series of careful negotiations”.

Further, “[a]lthough the parties paid close attention to the wording in their negotiations, inconsistencies crept into the final text and difficulties occurred as a result of using a stipulated sum model for what was, in most essential respects, a unit price contract.” [ 28 ] In relation to this last observation, the Arbitrator described the subcontract as an “awkward hybrid”. Although based on CCA’s form for a stipulated price contract, almost 90% of the estimated price of this multi-million dollar contract was calculated on a unit price basis.

The subcontract prescribed unit prices for each cubic metre of excavation of material (called “common excavation”), for each cubic metre of topsoil placement, and for each square metre of preparation of the sub-grade for the future roadway. It prescribed fixed prices for mobilization, traffic flagging and erosion control, and survey layout. (

i) The subcontract work and price

[ 29 ] A major issue related to Prairie’s core obligations under the subcontract, including what work it would perform. [ 30 ] Articles 1B and 3B set out core obligations.

Article 1B contained the language of the CCA form. Sub-article 1.1: the subcontractor “shall … perform the Subcontract Work in a proper and workmanlike manner pertaining to: Earthworks, Traffic and Erosion Control and Flagging for Subcontractor’s Work”. [ 31 ] The term Subcontract Work in that provision means “the construction and related services required by the Subcontract Documents ” (Definitions, para 15). It leads a reader to

Article 3B in the CCA form, which provides a model list of subcontract documents and instructs users to insert a list identifying all other subcontract documents in the parties’ specific situation. The parties deviated considerably from this model structure, by including two negotiated, custom drafted provisions: a statement of the parties’ intention to recognize FDAL’s staging requirements (Article 3B(4)) and a clause addressing future development of the drawings and price adjustment (Article 3B(5)).

Article 3B provided: The following are the Subcontract Documents referred to in

Article 1B of this Subcontract – WORK TO BE PERFORMED. If there is a conflict within the Subcontract Documents, the order of priority is listed below from the highest to lowest; 1. Agreement between Contractor and Subcontractor … 2. Technical sections of the following Alberta Transportation publications … 3.

Those portions of the Prime Contract that describe the physical characteristics of the Work to be performed, the engineering requirements, and specifications of the Work to be performed and the technical procedures for testing and evaluating the quality of the work and establishing compliance with specifications. 4. Those portions of the Prime Contract that describe the management of traffic, and necessary road use restrictions, in order to minimize impact on existing traffic, while performing the Work.

The intent is to recognize necessary staging requirements of the Contractor, in performance of the Work, in the Subcontractors performance of their work. 5. Drawings – SR2B Drawings form the basis of pricing, “Work to be performed” will be per final Drawings, developed through the Design Build process. Changes in pricing due to the development of these drawings and the Design Build process will be addressed as provided for in

Section 2.1.2 [ 32 ] Note that

Article 3B(5) cross-references

Section 2.1.2. The subcontract did not contain a

Section 2.1.2. This led to a dispute over what the parties actually intended to write in

Article 3B(5). Both parties agreed that they did not intend to include the reference to

section 2.1.2, but disagreed over what reference they intended to substitute. [ 33 ]

Article 5 of the CCA form is intended to include the stipulated price.

Article 5.1 in the form provides: The Subcontract Price, which excludes Value Added Taxes, is _______________________________________ ______________________________/100 dollars $_______________ [ 34 ] The parties deleted

Article 5.1 and substituted: The Contract price is defined in Appendix “A” – Contract Price. [ 35 ] Appendix “A” provides 6 categories of services (those mentioned in para 28 above), and for each, the approximate quantities (the fixed price categories were given a quantity of 1), units of measure (or lump sum for the fixed price categories), and unit prices. Appendix “A” provides the quantities are estimated, and the Subcontract Price shall be the final sum of the products of the actual quantities of work performed multiplied by the unit prices, and adjusted as required under the agreement.

Escalation was included in unit prices. [ 36 ] The parties took fundamentally different positions in respect of

Article 3B(5). [ 37 ] Prairie contended that pricing was based on the SR2B drawings, Prairie would perform the work according to the final drawings, and changes in pricing due to the development of the SR2B drawings would be addressed as provided in SCC [subcontract condition] 6.1 of the subcontract. Prairie’s

interpretation requires a change order or change directive for each change in the SR2B drawings during the evolution of the drawings through the design build process. [ 38 ] In contrast, FDAL contended that the subcontract was a unit price contract, as reflected in

Article 5.1 of the subcontract. Therefore, Prairie was entitled to compensation under

Article 3B(5) only for “changes to Prairie’s scope of work, not merely to quantities.” [ 39 ] The distinction between the parties’ respective positions is clarified when one looks to FDAL’s statement of defence. FDAL contended that the scope of work was defined by activities or objectives. An example is the activity of excavation. The subcontract would compensate for any design change in the activity of excavation only where additional quantities were required, and only then at the unit price. Para 7 of FDAL’s statement of defence makes this clear: ...

In fact, Prairie’s unit prices were intended to and did contemplate a wide range of variation in the design of the work, including an entirely different design prepared by a different contractor, as shown by the circumstances surrounding the negotiations between Prairie and FDAL. [ 40 ] The Arbitrator concluded that changes in design that justified an increase in unit price would be adjusted under

Article 3B(5).

Prairie took the risk of escalation through inflation or other external causes, but increased costs through the development of the design would be adjusted. The Arbitrator provided an illustrative example of the latter category: increased costs due to longer hauling distances for particular materials could trigger changes to the pricing model. (ii) Mechanism for price adjustments [ 41 ] The Arbitrator turned to the manner in which the price changes were to be evaluated. The Arbitrator observed that the mechanism for making the adjustment was unclear. As mentioned,

Article 3B(5) provided the changes in pricing would be addressed under

section 2.1.2, but the subcontract did not contain a

section 2.1.2. [ 42 ] Prairie argued that the parties had agreed during their contract negotiations to substitute SCC 6.1 for the phrase “section 2.1.2”.

SCC 6.1 closely tracked the CCA form, and included the following: 6.1.1 The Contractor , without invalidating the Subcontract , may make: .1 changes in the Subcontract Work consisting of additions, deletions, or other revisions to the Subcontract Work by Change Order or Change Directive , and .2 changes to the Subcontract Time for the Subcontract Work , or any part thereof, by Change Order . 6.1.2 The Subcontractor shall not perform a change in or addition to the Subcontract Work without a Change Order or Change Directive signed by the Contractor . (Underlined portions were added by the parties to the CCA form provision). [ 43 ] FDAL did not dispute the parties agreed to remove the reference to

section 2.1.2, but disputed that the parties intended to substitute SCC 6.1. [ 44 ] SCC 6.1 is only a portion of

Part 6 of the Supplemental Conditions, entitled Changes in the Work, of the CCA form. The parties also included substantial portions of the remainder of that form. Those included: (

a) SCC 6.2 (change order) and 6.3 (change directive), which set out the fundamental structure governing changes in the work, particularly the means to ascertain the impact of changes on contract time and contract price. (

b) SCC 6.4.1 and 6.4.4 (concerning concealed or unknown conditions). (

c) Parts of SCC 6.5 (concerning delay). (

d) SCC 6.6, entitled Claims for a Change in Subcontract Price. [ 45 ] SCC 6.6 is the last of the provisions for changes in the work. It contains general obligations concerning claims for changes to the Subcontract Price: (

a) To notify the other party of the claim. (

b) To mitigate and keep necessary records to support the claim. (

c) To submit a detailed account of amount claimed and the grounds of the claim. (

d) To submit interim accounts in some cases. (

e) To reply to a claimant’s claim. (

f) To settle the claim under the dispute resolution provisions of

Part 8. [ 46 ] As can be seen, SCC 6.6 cross-references the dispute resolution provisions of the Supplemental Conditions,

Part 8. The parties substantially rewrote these from the CCA form. The CCA form contains elaborate provisions, divided into two subject matters. (

a) SCC 8.1 calls on the contractor to provide a written “decision” on questions arising under the subcontract. If that does not

settle the issue, the matter proceeds to dispute resolution under SCC 8.2. SCC 8.1.3 requires the contractor, pending settlement of thedispute, to instruct the subcontractor in the performance of the disputed work. It requires the subcontractor to comply with theinstructions, and provides that doing so will not jeopardize any claim and the subcontractor will be compensated for having to carry outsuch instructions if they are later found to have been beyond what the subcontract required. SCC 8.3 makes clear that a party whocomplies with SCC 8.1.3 does not waive any rights. (

b) SCC 8.2 provides for a series of steps to resolve the dispute: negotiation, mediation, and finally, arbitration. [47] The parties struck almost all of

Part 8 from their contract. They substituted the following: 8.1 Any and all disputes, disagreements, controversies, questions, or claims arising out of or in relation to the performance of the Workand \his [sic] Subcontract which arise between the Parties shall be referred to, collectively, as a “Dispute”. 8.2 The Parties undertake to cooperate fully and in good faith attempt to resolve any Dispute by negotiation between their respectiverepresentatives, and further, upon the request of either Party, executive officers of each Party.

If the Dispute is resolved, such resolutionshall be evidenced by an instrument in writing. 8.3 If the Dispute has not been resolved within thirty (30) days of the Parties’ request for executive officer negotiation, the Parties mayagree to submit the Dispute to mediation. The Parties shall bear the cost of any mediation equally. If the matter is resolved throughmediation, such resolution shall be evidenced by an instrument in writing.

Mediation shall be considered to have failed if either Party, atany time, gives written notice to such effect to the other Party. 8.4 Any Dispute which cannot be amicably settled by negotiation or mediation shall be finally resolved by arbitration. [48] The Arbitrator acknowledged that a party seeking rectification must prove its case on the balance of probabilities, on evidencewhich is sufficiently clear, convincing and cogent, and that rectification can occur if by mistake the written agreement does not accordwith the true agreement it was intended to record (Canada (AG) v Fairmont Hotels Inc, 2016 SCC 56 , [2016] 2 SCR 720 atparas 12, 36). [49] He found there was some evidence supporting Prairie’s claim to rectification, but also that the dispute could be resolvedthrough the ordinary principles of contractual

interpretation. The reference to

section 2.1.2 was redundant. He therefore sought theparties’ intentions in dealing with the issue of changes in pricing due to development of the design drawings. He read the entireagreement and found that SCC 6.6 addressed the problem. ... It is clear that they did not intended to ignore changes in pricing due to the development of the drawings, as this would completelyundermine

Article 3B(5). It is therefore necessary to read the entire agreement to see if it contains a mechanism to address this problem.In performing this exercise, the reader encounters SCC 6.6, entitled Claims for a Change in Subcontract Price. That clause is clearlyintended to deal with changes in pricing. SCC 6.6.1 begins with the words “If the Subcontractor intends to make a claim for an increaseto the Subcontract Price”. Surely a reasonable person would conclude from

Article 3B(5) that if the Subcontractor claimed that thedevelopment of the SR2B drawings had resulted in a compensable increase in price, it would be dealt with under SCC 6.6. That is thestated purpose of SCC 6.6. The Subcontractor’s claim could not be ignored, because if it were

Article 3B(5) would be meaningless. Itmight be argued that the Subcontractor should take each request for a change straight to litigation or arbitration, but surely the reasonableperson would conclude that the parties intended to address these questions under a clause designed to deal with any case in which theSubcontractor seeks an increase in the Subcontract price. (iii) Construction

schedule [50] The parties adopted

Article 4 (Schedule) from the CCA form.

Article 4.1 obliges the subcontractor to perform in accordancewith a

schedule provided by the contractor at the time of signing the subcontract, or in accordance with a

schedule mutually agreed ifprovided by the contractor after the signing, or starting on or about June 8, 2012 and substantially performing the work on or aboutOctober 18, 2015. Further, the contractor may reasonably adjust any

schedule or specified timing during the course of the subcontractwork after consulting with the subcontractor. [51] SCC 3.1 pertains to cooperation and coordination where there is also work undertaken by other subcontractors or thecontractor’s own forces.

The parties adopted all of SCC 3.1 from the CCA form, including: 3.1.2 When separate subcontracts are awarded for other parts of the Work, or when work is performed by the Contractor’s own forces,the Contractor shall: .1 provide for the co-ordination of the activities and work of other subcontractors and Contractor’s own forces with the SubcontractWork; … 3.1.3 When separate subcontracts are awarded for other parts of the Work or when work is performed by the Contractor’s own forces,the Subcontractor shall: ... .2 cooperate with other subcontractors and the Contractor in reviewing their construction schedules; and … 3.1.4 Where the Subcontract Documents identify the work to be performed by other subcontractors or the Contractor’s own forces, theSubcontractor shall coordinate and

schedule the Subcontract Work with the work of other subcontractors and the Contractor’s ownforces as specified in the Subcontract Documents. [52] Although not mentioned by the Arbitrator, the parties added a custom drafted provision, which they numbered as SCC 3.10.

Among other things, it required Prairie to “prosecute the Subcontract Work properly and diligently in accordance with the Subcontract Documents and the directions of the Contractor pursuant to the Subcontract .” [ 53 ] The parties also added a definition of the “schedule” to mean one provided by the subcontractor, to be regularly updated by the parties at least quarterly. However, the parties did not agree on a

schedule at the time of making their contract, or thereafter. (iv) Notice provisions [ 54 ] SCC 7.1.2, adopted by the parties from the CCA form without modification, provides that “[i]f the Subcontractor neglects to prosecute the Subcontract Work properly or otherwise fails to comply with the requirements of the Subcontract to a substantial degree, the Contractor may, without prejudice to any other right or remedy the Contractor may have” give written notice of default. [ 55 ] Other parts of SCC 7.1 provide that if the subcontractor fails to remedy the default as required by the subcontract, the contractor may correct the default at the subcontractor’s expense, or terminate the subcontract. (

e) Nature of dispute [ 56 ] FDAL’s May 10, 2014 notice of default (Burek Affidavit sworn August 12, 2019, p 1388) identified two issues. First, FDAL had requested Prairie to provide a

schedule “addressing the necessary work and coordination, and providing necessary resources, in order to timely perform ...”. Second, there was “productive

schedule critical work” available to be performed, and no resources were on the project or scheduled to come to the project to perform that work. The notice describes this work. [ 57 ] FDAL’s June 5, 2014 notice of default (Burek Affidavit sworn August 12, 2019, p 1599) alleged Prairie failed to prosecute the work and comply with the requirements of the subcontract. It stated that, in spite of the contractor’s numerous requests to adequately mobilize to the project to perform subcontract work, the subcontractor failed or neglected to do so in default of the subcontract. [ 58 ] Prairie contended that FDAL’s two notices of default were deficient. (

a) The opening phrase of SCC 7.1.2 does not create a contract obligation. If the contractor alleges neglect to prosecute the work, it must specify a specific term of the subcontract which has been breached. (

b) The contractor must give sufficient specifics of the breach to enable the parties to understand the behaviour being impugned. [ 59 ] The Arbitrator rejected Prairie’s submissions that the notices of default were deficient. [ 60 ] The Arbitrator found Prairie breached SCC 7.1.2 because it neglected to prosecute the subcontract work properly. It was obliged to work on areas where there had been a change to the SR2B drawings without a change order or change directive.

Prairie’s issue was governed by SCC 6.6 – if the parties did not agree there had been a change, Prairie could make a claim for compensation under SCC 6.6. FDAL assured Prairie on May 29, 2014 that it could make such a claim, yet Prairie persisted in its position that a change order or change directive was required before it would start work. [ 61 ] The Arbitrator also found that although FDAL did not have the contractual right to impose a

schedule on Prairie, this did not allow Prairie to ignore FDAL’s needs when it proposed to perform the bulk of its work in 2015. Prairie’s view that it could

schedule its own work in its own interests as long as it achieved substantial completion by October 2015 rendered the cooperation and coordination provisions of the subcontract meaningless. [ 62 ] The Arbitrator found that Prairie refused to perform the bulk of its work without a change order or change directive. This conduct was a clear example of Prairie failing to prosecute the subcontract work properly. Prairie understood the nature of its breach. It knew it could cure the problem by mobilizing forces to perform work on the areas identified as priorities in 2014, secure in the knowledge that it could pursue its claims for design changes under SCC 6.6. Prairie’s argument that it could

schedule its own work according to its own convenience as long as it met its completion date of October 2015 nullified the subcontract terms dealing with staging, coordination and cooperation. [ 63 ] The Arbitrator concluded there was no doubt this conduct amounted to a substantial breach under SCC 7.1.2. [ 64 ] Further, SCC 7.1.2 preserved common law rights or remedies of the contractor. The Arbitrator concluded that one such right is to terminate a contract where the counter party repudiated the contract by words or conduct evincing an intention not to be bound by the contract.

Such an intention may be derived from refusal to perform, though the party refusing mistakenly believes they are exercising a contractual right ( Guarantee Co of North America v Gordon Capital Corp , [1993] 3 SCR 423 at para 40 ). [ 65 ] The Arbitrator concluded that Prairie’s failure to prosecute the work without a change order or change directive constituted repudiation. III Leave to appeal requirement [ 66 ] The parties’ arbitration agreement does not provide for appeals to the Court. Therefore, subsection 44 (2) of the Act governs the right of appeal. The relevant provisions are:

(2) If the arbitration agreement does not provide that the parties may appeal an award to the court on a question of law, a party may, with the permission of the court, appeal an award to the court on a question of law.

(2.1) The court shall grant the permission referred to in subsection (2) only if it is satisfied that (

a) the importance to the parties of the matters at stake in the arbitration justifies an appeal, and (

b) the determination of the question of law at issue will significantly affect the rights of the parties.

(3) Notwithstanding subsections (1) and (2), a party may not appeal an award to the court on a question of law that the parties expressly referred to the arbitral tribunal for decision. [ 67 ] The Supreme Court of Canada recently dealt with questions of law in appeals of arbitration awards in Sattva Capital Corp v Creston Moly Corp , 2014 SCC 53 , [2014] 2 SCR 633 and Teal Cedar Products Ltd v British Columbia , 2017 SCC 32 , [2017] 1 SCR 688. [ 68 ] Contractual

interpretation usually involves issues of mixed fact and law as it is an exercise in which the principles of contractual

interpretation are applied to the words of the written contract, considered in light of the factual matrix ( Sattva at para 50; Teal at para 47). It may be possible to identify an extricable question of law from within what was initially characterized as a question of mixed fact and law ( Sattva at para 53). Legal errors made in the course of contractual

interpretation include “the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor” ( Sattva at para 53; Teal at para 44). [ 69 ] Courts should exercise caution in identifying extricable questions of law because mixed questions, by definition, involve aspects of law ( Teal at para 45). A narrow scope for extricable questions of law is consistent with finality in commercial arbitration and deference to factual findings of the arbitrator ( ibid ). [ 70 ] The premise of Prairie’s first ground of appeal is that the

interpretation of the subcontract raises issues of law. Prairie relies on Ledcor Construction Ltd v Northbridge Indemnity Insurance Co , 2016 SCC 37 , [2016] 2 SCR 23 at para 24 , where the Supreme Court of Canada recognized an exception to its holding in Sattva that contractual

interpretation is a question of mixed fact and law: … where an appeal involves the

interpretation of a standard form contract, the

interpretation at issue is of precedential value, and there is no meaningful factual matrix that is specific to the parties to assist the

interpretation process, this

interpretation is better characterized as a question of law subject to correctness review. [ 71 ] The Court defined the characteristics of a standard form contract as a “take it or leave it” standard form or one where the contract is sold widely to consumers without negotiation of terms.

It may be a standard form used by a single company or one common throughout an industry ( Ledcor at paras 25, 39). [ 72 ] FDAL submits that a standard form construction contract is not a consumer-oriented take it or leave it contract to which Ledcor applies, citing ASC (AB) Facility Inc v Man-Shield (Alta) Construction , 2018 ABQB 130 at para 11 , app dism without reference to the point, 2019 ABCA 379 . [ 73 ] Prairie argues that the Ledcor exception applies more widely than traditional consumer-oriented “take it or leave it contracts.” It emphasizes that a decisive factor in determining whether contract

interpretation raises questions of law is the precedential value of the issue, that is, whether one expects the determination would have impact beyond the parties to the dispute. Those circumstances engage the role of an appellate court in ensuring consistency of the law. [ 74 ] Prairie cites numerous examples of standard forms to which the Courts applied a correctness standard of review to contract

interpretation or distinguished Sattva on various grounds. These include negotiated commercial agreements on standard forms.

Examples include the decisions of the Alberta Court of Appeal in Vallieres v Vozniak , 2014 ABCA 290 (a standard form real estate purchase and sale contract), EnCana Oil & Gas Partnership v Ardco Services Ltd , 2017 ABCA 401 (a standard form master services agreement prepared by a major oil and gas company to be used with its various suppliers of goods and services), and Stewart Estate v 1088294 Alberta Ltd , 2015 ABCA 357 (a freehold petroleum and natural gas lease). [ 75 ] In Stewart , the Court pointed out that a standard form contract can and does allow for a limited amount of negotiation.

In Styles v Alberta Investment Management Corporation , 2017 ABCA 1 at para 19 , the Court said Ledcor creates an exception to the concept that contract

interpretation is a matter of mixed fact and law: ... for standard form contracts and standard form contractual wording where “there is no meaningful factual matrix that is specific to the parties to assist the

interpretation process”. In such cases the precedential value of the decision overrides. Such contracts cannot have one

interpretation in one situation, and another in the next. As a result, the standard of review of standard form wording is correctness: Ledcor Construction Ltd. v Northbridge Indemnity Insurance Co. , 2016 SCC 37 at paras. 24 , 46-8, [2016] 10 WWR 419. [ 76 ] These cases are consistent with Ledcor , where the Court pointed out that the exception is not blindly applied. Depending on the circumstances, the

interpretation of a standard form contract may present a question of mixed fact and law. The Court stated: [48] Depending on the circumstances, however, the

interpretation of a standard form contract may be a question of mixed fact and law, subject to deferential review on appeal. For instance, deference will be warranted if the factual matrix of a standard form contract that is specific to the particular parties assists in the

interpretation. Deference will also be warranted if the parties negotiated and modified what was initially a standard form contract, because the

interpretation will likely be of little or no precedential value. There may be other cases where deferential review remains appropriate. As Iacobucci J. recognized in Southam , the line between questions of law and those of mixed fact and law is not always easily drawn. Appellate courts should consider whether “the dispute is over a general proposition” or “a very particular set of circumstances that is not apt to be of much interest to judges and lawyers in the future ” (para. 37). [Underlining added by Eamon J]

[77] Consequently, where standard form wording is in issue and the party asserting a correctness standard of review demonstratesthat there is no meaningful factual matrix that is specific to the parties to assist the

interpretation process, then the

interpretation of thatcontract is a question of law. [78] An interesting issue, which arises in the present case, is whether the Ledcor exception might apply to contracts whichincorporate standard language which seems independent of the substantial custom content. Sometimes the term “boilerplate” is applied tothat sort of standard language. FDAL points out that contracts must be interpreted as a whole. Further: Even if some provisions remain unchanged from the standard form, they must be interpreted in the context of the rest of the Subcontract,the commercial context, and surrounding circumstances. [79] Ledcor provides two reasons why contractual

interpretation is a question of mixed fact and law subject to deferential reviewon appeal, and observed that those reasons are less compelling in the context of standard form contracts (Ledcor at para 26). First, “aproper understanding of the factual matrix is … often less relevant for standard form contracts, because ‘the parties do not negotiateterms and the contract is put to the receiving party as a take-it-or-leave-it proposition’” (ibid at para 28). Second, the mandate ofappellate courts - “ensuring the consistency of the law” - is advanced by permitting appellate courts to review the

interpretation ofstandard form contracts for correctness (ibid at para 39). The

interpretation itself may have precedential value for future cases (ibid atpara 43). [80] The categories of error of law are probably not closed, in the sense that the characterization of contract

interpretation in Sattvaas a question of mixed fact and law is probably capable of further refinement. It may be that a new exception, based on the reasoning inLedcor, may develop where certain “boilerplate” provisions in negotiated contracts are so common, and essentially independent of thenegotiated parts, that the significance of the factual matrix is weak and judicial

interpretation may have precedential value. [81] Prairie’s second ground of appeal is founded on precedent to the effect that inconsistent findings on a central issue mayconstitute an error of law (KBR Industrial Canada Co v Air Liquide Global E&C Solutions Canada LP, 2018 ABQB 257 at para 28). [82] Prairie’s written brief catalogues several other errors of law which might be committed in the course of contract

interpretation:ignoring applicable principles and governing authorities (KBR at para 39) including failing to remain faithful to the terms of a contractand disregarding a “clear, compelling substantive provision” (ibid at para 48); failing to read a contract as a whole (ibid at para 46); orfailing to consider evidence or making a finding on no evidence (Extreme Excavating & Backhoe Services Ltd v Scott, 2018 ABQB 102at para 11-12). [83] Prairie asserted these types of errors in its other grounds of appeal (Prairie’s written brief, subparas 398(a), (

b) and (d)).During oral argument, Prairie’s counsel clarified that it was only asking to appeal on the two grounds described earlier (para 6 above).The others were abandoned. [84] As is apparent from subsection 44(2.1), Prairie must establish not only that its proposed appeal presents questions of law, butalso that the importance to the parties of the matters at stake in the arbitration justifies an appeal, and the determination of the questionof law at issue will significantly affect the rights of the parties. Then, FDAL may establish that the limitation in subsection 44(3)precludes an appeal.

IV Prairie’s appeal issues [85] Prairie asserts that the Arbitrator erred in law by incorrectly interpreting provisions of a standard form contract, and bymaking inconsistent findings on central issues. Later in these reasons (at para 118), I will describe the inconsistencies alleged in thesecond ground. (

a) Whether Prairie demonstrated errors of law [86] Prairie disputes the Arbitrator’s conclusion that Prairie neglected to prosecute the work, on the ground that the Arbitratorerred in his

interpretation of numerous provisions of the subcontract. [87] First, Prairie challenged the Arbitrator’s

interpretation of

Article 3B(5) and SCC 6.6 so far as he found that these over-rode theneed for a change order or change directive under SCC 6.1.2. [88] Prairie contended it could not proceed with changes to the work absent a change order or change directive, because SCC 6.1.2expressly prohibited it from doing so. Moreover, Prairie could not perform the work under protest or notice of dispute while pursuing itsclaim for additional payment at a later date (Peter Kiewit Sons' Co v Eakins Construction Ltd, , [1960] SCR 361),unless the subcontract permitted it to do so.

It contended that SCC 6.6 is a mere notice provision that does not purport to define therequirements of a successful claim or preserve the rights of Prairie if it proceeded with changed work in violation of SCC 6.1.2. [89] Prairie further points out that

Part 8 of the CCA form (SCC 8.1.3 and 8.3, described at para 46 above) is the mechanism thatpermits a subcontractor to continue work in the event of a dispute. In the present case, the parties deleted those provisions. [90] Has Prairie presented a question of law? The Arbitrator’s conclusion presents a question of mixed fact and law unless theparties’ contract (or perhaps portions of it) is a standard form contract governed by Ledcor or some similar exception. If an exception tothe Sattva approach to contract

interpretation applies, then Prairie would satisfy the first requirement for an appeal under section 44(2).(As I mentioned above, Prairie no longer asserts as discrete grounds of appeal that the Arbitrator erred in defining contract

interpretationprinciples or the Arbitrator committed some extricable or covert error in applying the principles.) [91] I accept Prairie’s assertion that the CCA form is widely used in the construction industry throughout Canada and that arbitral

or judicial

interpretations of the form are of significant interest to the industry. However, the question whether the answer to the parties’ dispute in the present case has precedential value lies in the degree of departure of their subcontract from the CCA form ( Ledcor at para 48). [ 92 ] The Arbitrator made numerous findings which bear on this question. [ 93 ] The parties operated in a specific factual matrix while negotiating and modifying what was initially a model form contract.

The project was a design build project, the SR2B drawings were only 30% complete when the contract was made, and the parties understood the drawings would evolve during the design build project. The Arbitrator considered there could be design changes that affected quantity only, for which Prairie would be paid a unit rate, and design changes that affected Prairie’s costs, which could require adjustment to unit pricing.

He also considered the nature of the project, that it was “a long and complex project, involving a [sic] many interdependent components.” [ 94 ] As to the use of the CCA form, the Arbitrator found that the parties conducted careful negotiations (Arbitration Award at p 2). They made significant modifications to the CCA form ( ibid ). Large sections of the CCA form were struck out and replaced by 9 pages of substituted provisions ( ibid ). Inconsistencies crept into the final text ( ibid ).

The contract was an awkward hybrid resulting from using a stipulated sum model for what was, in most essential respects, a unit price contract ( ibid ). The contract contained a critical cross- reference to a provision which did not exist (Award at p 6). [ 95 ] Other contract provisions also support the need for the project to continue expeditiously in order to maintain the complex coordination and staging necessary to coordinate the interdependent components of the project.

The Arbitrator did not specifically mention these, but they clearly demonstrate the significance of the specific factual matrix in the present case. (

a) Article 3B(4): “… The intent is to recognize necessary staging requirements of the Contractor, in performance of the Work, in the Subcontractors performance of their Work.” (

b) SCC 3.10, described at para 52 above. (

c) Additional Supplementary Conditions: “2. Subcontractor will work cooperatively with Contractor, and others, involved in construction of other elements of the Project….” (Affidavit of Mr. Burek sworn August 12, 2019 at pp 1725, 1732; Affidavit of Mr. Detsky sworn August 27, 2019, Exhibit “B” at pp 70, 77). [ 96 ] These circumstances explain the need for

Article 3B(5), and the parties’ rationale for a price adjustment due to “the development of these drawings and the Design Build process...” (the entirety of

Article 3B(5) is quoted at para 31 above). They also explain the need for the project to move expeditiously, without unnecessary delay from disputes, and bear on the Arbitrator’s conclusion that SCC 6.6, in the specific context of this custom drafted contract in this case, solved the problem posed by the Kiewit case. [ 97 ] The Arbitrator recognized the obvious link between the custom drafted

Article 3B(5) and the language the parties took from

Part 6 of the Supplemental Conditions of the CCA form. He said: … However, it is important to apply the fundamental precept that contractual

interpretation requires an examination of the contract as a whole, not just a consideration of the specific words in dispute. As Cromwell J. stated in the Tercon case, “[t]he key principle of contractual

interpretation here is that the words of one provision must not be read in isolation but should be considered in harmony with the rest of the contract and in light of its purposes and commercial context.” One commentator has noted that as a corollary, “meaning must be given to all the words in a contract” and that a court “should reject an

interpretation that would render one of its terms ineffective.” [footnotes deleted] [ 98 ] These propositions are well founded in case law. It is not enough to argue that the parties left remnants of a model form in their contract.

It remained open to the Arbitrator to conclude that the parties, objectively speaking, intended that their contract language, taken from whatever source and interpreted in the context of the whole contract and the factual matrix, would serve their needs. [ 99 ] Prairie relied heavily on SCC 6.1 in support of its argument that SCC 6.6 was not a mechanism that solved, for Prairie, the prospect of not being paid for work because of the decision in Kiewit , and that a mere notice provision like SCC 6.6 is not sufficient to displace it. [ 100 ] The Arbitrator’s reasons are not very explicit about why SCC 6.1 did not apply, but there is an arguable path to his outcome.

SCC 6.1, 6.2 and 6.3 cover changes to the work where the parties do not have a pre-existing agreement to price (or time) adjustments arising from changes in the work. In contrast, the changes that the Arbitrator was addressing arose in circumstances where a price adjustment was already agreed under Art 3B(5).

Specifically, he found that the main dispute over contract changes arose from work affected by changed drawings and Prairie’s position that it could not start such work (Award at pp 19, 25), and further that Prairie refused to perform the bulk of its work under the subcontract because it was precluded from doing so on the basis of its incorrect

interpretation of SCC 6.1.2 ( ibid at p 25). [ 101 ] It was open to the Arbitrator to conclude that the parties did not objectively intend SCC 6.1.2 to apply to disputes over the application of

Article 3B(5) of their custom contract, and changes from the contemplated development of the drawings after the subcontract was signed therefore were not contemplated in any of SCC 6.1, 6.2 or 6.3. [ 102 ] Further, the Arbitrator was obviously not persuaded that the Kiewit line of cases applied to bring the project to a grinding halt while the parties arbitrated the issue whether the work under the SR2B drawings was inside or outside the scope of the subcontract. The factual matrix is significant because the parties contemplated from the outset of the subcontract that these drawings would evolve during

the design build project and that changes to pricing might be necessary. [ 103 ] Why then, would they objectively intend that their agreed upon solution in

Article 3B(5) could be defeated or severely curtailed in the event the subcontractor alleged a change in work? The Arbitrator must have considered the combined effect of

Article 3B(5) and SCC 6.6 in concluding that the parties objectively intended that Prairie must perform the work provided in the evolving or evolved drawings before questions of pricing were resolved. [ 104 ] While the Arbitrator did not explain whether he considered the deletion of SCC 8.1.3 and 8.3 of the standard form, he does not need to explain all of the details leading to his conclusion. There is nothing in his reasons to suggest that he ignored or overlooked the any relevant circumstances arising from the parties’ negotiations.

Prairie’s arguments proceed from the faulty premise that the standard form SCC 8.1.3 and 8.3 exhaust the possible contractual responses to disputes over the scope of work. Those sections may well be the response best preferred by a drafting committee, but the fact the parties chose not to incorporate them in their custom contract does not mean that the parties did not objectively intend to deal with the implementation of

Article 3B(5) in some other way. Moreover, the possible significance parties’ deletion of model language in the present case is substantially weakened by the voluminous and complex revisions to the whole of the CCA form, the inconsistencies which crept into the subcontract, and the ambiguous cross-reference to a provision which did not exist. [ 105 ] I do not review these arguments as any conclusion on the merits of the Arbitrator’s

interpretations. I review them to demonstrate the importance of the factual matrix to this negotiated, custom drafted contract. The Applicant has not demonstrated that the factual context was immaterial to the Arbitrator’s

interpretations, and there is no reasonable prospect that an appeal would provide precedent for other, negotiated commercial contracts or cases where the parties decide to adopt the entire CCA form. [ 106 ] I see no basis to apply Ledcor to the question whether the subcontract provided for continuation of the work pending resolution of a dispute over

Article 3B(5). Rather, the following from para 48 of Ledcor is apt in the present case: ... [D]eference will be warranted if the factual matrix of a standard form contract that is specific to the particular parties assists in the

interpretation. Deference will also be warranted if the parties negotiated and modified what was initially a standard form contract, because the

interpretation will likely be of little or no precedential value.... [ 107 ] Second, Prairie argues that the Arbitrator erred by misinterpreting SCC 3.1.2, 3.1.3, and 3.1.4. [ 108 ] The Arbitrator found that FDAL was not entitled to unilaterally impose a

schedule on Prairie. The Arbitrator then responded to Prairie’s argument that its sole obligation in relation to the timing of its work was to substantially complete its work by October 18, 2015. He said: The Subcontract makes it clear that Prairie’s obligations were not restricted to meeting its own completion date of October 2015. SCC 3.1.4 requires the Subcontractor to coordinate and

schedule its own work with the work of other subcontractors and the Contractor’s own forces. SCC 3.1.2 requires the Contractor to provide for the coordination of the activities and work of other subcontractors and the Contractor’s own forces.

Section 3.1.3 requires the Subcontractor to cooperate with other subcontractors and the Contractor in reviewing the construction schedules. In essence, Prairie’s view that it could

schedule its own work in its own interests as long as it achieved substantial completion by October 2015 rendered the coordination and cooperation provisions of the subcontract meaningless.... [ 109 ] Prairie submits that the staging proposed by the contractor cannot take precedence over the staging proposed by the subcontractor because both are to participate as equals. Further, the staging and cooperation provisions cannot override the express scheduling provisions of

Article 4 of the subcontract. Rather, Prairie is contractually entitled to the whole of the time under the contract to perform, and ample case law authority supports that proposition. Prairie submits that in effect, the Arbitrator allowed for the unilateral imposition of a

schedule by FDAL. [ 110 ] If the factual matrix or the negotiated nature of the subcontract did not materially affect the

interpretation of

Article 4, and

Part 3 of the supplemental conditions, then perhaps a question of law arises. [ 111 ] However, the subcontract is so heavily negotiated and contains so many intertwined custom provisions, that the exception in Ledcor does not apply and an appeal does not present any prospect of a decision having precedential value. [ 112 ] It was open to the Arbitrator to conclude that SCC 3.1.4 required Prairie to coordinate and

schedule its work with the work of others. That

interpretation would be influenced and reinforced by the custom drafted provisions of

Article 3B(4) and Additional Supplementary Condition 2, and would also depend on whether the content of the portions of the prime contract referenced in the definition of subcontract documents in

Article 3B identify the work to be performed by others. [ 113 ] These considerations would deprive an appeal from the Award of any precedential value. This aspect of the proposed appeal presents issues of mixed fact and law, not issues of law. [ 114 ] Third, Prairie asserts the Arbitrator committed errors of law in interpreting and applying SCC 7.1.2 and 7.1.4. [ 115 ] The Arbitrator’s

interpretation of SCC 7.1.2 presents the following questions:

(1) Does SCC 7.1.2 impose an obligation on the subcontractor to prosecute the subcontract work properly?

(2) What is the required content of any notice issued under SCC 7.1.2? If SCC 7.1.2 presents an issue of law, then the application of SCC 7.1.4 presents the same issue because it is dependent on the contractor issuing a valid notice. [ 116 ] As mentioned earlier, the categories of error of law are probably not closed, and perhaps the Ledcor exception will be extended by appellate courts to certain provisions in negotiated contracts that are common, and essentially independent of the negotiated parts. The wording of SCC 7.1.2 may be an example.

It is extremely common “boilerplate” and I have a hard time thinking of any factual matrix in the present case, or any relationship between SCC 7.1.2 and the custom drafted provisions, which would have a bearing on its

interpretation.

[ 117 ] Prairie cites several cases outlining the requirements for the content of a valid notice under SCC 7.1.2, some of which impose a set of strict criteria on the content of the notice. It appears the Arbitrator applied a less strict test. It is not for me to decide at this stage which approach is correct. I am prepared to assume, without deciding, that the meaning and notice requirements of SCC 7.1.2 present questions of law. I address below whether these questions are material. [ 118 ] Finally, Prairie asserts two errors of law arising from inconsistent findings: (a) “The arbitrator agreed with Prairie that the Subcontract did not entitle FDAL to unilaterally set the

schedule for performance of the earthworks, but then found that Prairie was in default for failing to perform the Subcontract Work in accordance with a

schedule directed by FDAL”. (b) “The arbitrator agreed with Prairie that Prairie was expressly prohibited from proceeding with Changes in the Work, without either a Change Order or Change Directive, but found that Prairie could overcome this prohibition by filing a claim for the pricing of the Changed Work.” [ 119 ] On its face, the first alleged error qualifies as an error of law (para 81 above). However, it is based on a misinterpretation of the Arbitrator’s reasoning. The Arbitrator did not find Prairie in breach for failing to perform work in accordance with a

schedule directed by FDAL. The Arbitrator found that Prairie’s refusal to perform the bulk of its work without a change order or change directive, together with Prairie’s refusal to cooperate in staging and coordination, was a substantial breach within the meaning of SCC 7.1.2. [ 120 ] Consequently, the ground of appeal is hypothetical. I do not accept that any genuine or arguable question of law arises in respect of the Arbitrator’s actual findings. Even if it did, the resolution of that issue is immaterial.

Later in these reasons, I explain why. [ 121 ] I refuse to characterize the second alleged error as an error of law. The Arbitrator’s conclusions are not inconsistent. The Arbitrator did not find there was a change in the work within the meaning of SCC 6.1.2 as Prairie asserts. He observed that the question whether there were changes in the subcontract work proved to be peripheral (Award at p 14). He simply found that SCC 6.1.2 did not apply to matters arising from evolutions of the design drawings after the subcontract was signed. In substance, Prairie’s issues on this point are the same contract

interpretation issues arising under its first ground of appeal. (

b) Whether leave should be granted on any issues of law [ 122 ] I concluded that the Arbitrator’s

interpretation and application of SCC 7.1.2 and 7.1.4 might present an issue of law (para 117 above). [ 123 ] I am satisfied that the matters at stake in the arbitration are of sufficient importance to the parties to justify an appeal relating to SCC 7.1.2 and 7.1.4. Feehan J (now JA) reviewed the relevant considerations and authorities in Alberta Medical Association v Alberta Health Services , 2019 ABQB 82 at paras 63-70 . A high standard should be applied and leave to appeal should not be given lightly. A significant, but not necessary, consideration is whether the parties have an ongoing relationship.

An appeal where a monetary award only is in issue is eligible for permission to appeal. Mr. Burek describes in his affidavit the serious financial impact that the damages award will have on Prairie. It is unnecessary to repeat the details. The matter was and is high stakes for Prairie. [ 124 ] I am not satisfied that the determination of the question of law at issue will significantly affect the rights of the parties as required under subsection 44(2.1)(

b) of the Act . The question of law is immaterial because there is no hope that it would affect the damages award against Prairie. Regardless whether SCC 7.1.2 or 7.1.4 applied, the Arbitrator found that Prairie repudiated the subcontract under common law principles. This finding cannot be appealed, unless there is some extricable error of law arising from it. [ 125 ] Prairie argued that the Arbitrator misconstrued the issue when he observed that the key issue was whether Prairie failed to prosecute the subcontract “properly”.

It is apparent from the Arbitrator’s reasons that this observation had no material bearing on his conclusion that Prairie repudiated the subcontract. [ 126 ] Prairie cannot overcome the Arbitrator’s finding of fact that: ... In the present case, Prairie refused to perform the bulk of its work under the Subcontract because in its view it was precluded from doing so on the basis of a highly unlikely

interpretation of SCC 6.1.2. It maintained the position that it could not perform most of the earthmoving portion of the project without a Change Order or Change Directive, even when FDAL pointed out that SCC 6.6 clearly answered its concern. ... [ 127 ] Further, the Arbitrator found that Prairie persisted in this position for months after the events of June 2014, after FDAL assured Prairie that it could give notice under SCC 6.6 and preserve its position, and after FDAL asked it to cooperate, to work and to perform.

The Arbitrator also found that Prairie did not dissent from FDAL’s expressions of its need for earthworks in the 2014 construction season, and that Prairie’s explanation of why it remained silent was disingenuous. [ 128 ] The Arbitrator observed that the subcontract expressly preserves common law remedies. He concluded that Prairie’s refusal to prosecute the work without a change order or change directive amounted to repudiation of the subcontract at common law (Award at pp 26-27): ... Prairie’s refusal to perform in the absence of a Change order or Change Directive may have resulted initially from a mistaken

interpretation of the contract, but that mistake was no longer operative after May 29 [2014]. Prairie’s failure to prosecute the work except on its own

interpretation of the contract constitutes repudiation at common law, even where Prairie believed it was exercising a contractual right.

[ 129 ] It is clear that the Arbitrator found as a fact that Prairie refused to perform the bulk of its work under the subcontract not because of a

schedule dispute, but because it incorrectly insisted on a change order or change directive. Not only did he say so in the above quoted passage but also, he stated early in his reasons that the scheduling issue proved to be peripheral (Award at p 14). It was further open to the Arbitrator to find that the facts constituted repudiation, that is, as evincing an intention not to be bound by the subcontract. [ 130 ] Even if an appeal concerning SCC 7.1.2 and 7.1.4 were successful, Prairie is left with these findings of fact and mixed fact and law. Prairie could challenge these by identifying an extricable error of law. Prairie says the Arbitrator’s

interpretation of

Article 3B(5) and SCC 6.6 is the required error of law, but, as I concluded earlier in these reasons, that issue only presents a potential error of mixed fact and law. The Act does not permit an appeal of such an issue under subsection 44(2). [ 131 ] The same would be true of the alleged inconsistency of the Arbitrator’s finding on the issue whether FDAL was entitled to impose a contract

schedule on Prairie and his finding that Prairie was in breach of cooperation and staging obligations. Even if the Arbitrator’s findings concerning scheduling and staging did not survive an appeal because they were internally inconsistent (which they are not), the findings that Prairie repudiated the subcontract arising from its insistence on a change order or change directive before performing the bulk of the work would survive. (c) Subsection 44(3) [ 132 ] Subsection 44(3) bars permission to appeal if the parties expressly referred a question of law to the arbitrator.

I am mindful of two principles in applying subsection 44(3). [ 133 ] First, I must consider the questions referred in the relevant referral instrument, typically a notice to arbitrate. I would not consider the legal arguments which invariably find their way into the pleadings following a reference to arbitration to be an express reference under subsection 44(3). Parties are entitled to argue law in arbitration proceedings; indeed, the arbitrator is expected to apply the law ( Act ,

section 31) and would expect to hear the parties on what the law is and how it should be applied. The mere reference to a legal issue in a pleading, just as in a subsequent written or oral argument in the arbitration, is not a reference of that issue to arbitration.

If it were, subsection 44(3) would gut subsection 44(2) of any application. [ 134 ] Second, I would apply the narrow view of subsection 44(3): “It is only where the parties have identified and referred to the arbitrator a discrete legal issue that s. 44(3) will operate to bar an appeal in respect of that issue” ( Capital Power Corporation v Lehigh Hanson Materials Limited , 2013 ABQB 413 at para 44 ; Contract Policy Committee v FortisAlberta Inc , 2012 ABQB 653 at paras 77 , 89; Driscoll v Hautz , 2017 ABQB 168 at para 19 ; KRB at paras 60-62; Alberta Medical Association at paras 57-62 ). [ 135 ] The original referral (Prairie’s Notice to Arbitrate) did not submit questions of law.

Prairie’s Supplement to the Notice to Arbitrate and Reply to FDAL’s Statement of Defence is drastically different. Paras 1 through 17 thereof appear to be the Supplement to the Notice to Arbitrate. These expressly refer the following questions to arbitration: (

a) The meaning and application of

Article 3B(5). (

b) The application of SCC

Part 6 to the SR2B drawings. (

c) The meaning and application of SCC 6.1.1, and whether pricing of changes is determined under

Article 5 or SCC

Part 6. (

d) The meaning and application of SCC 6.1.2. (

e) The power of FDAL under the subcontract to impose a schedule, and the requirement that it can only do so with Prairie’s consent or by change order. [ 136 ] These allegations are cast in a manner very similar to the manner in which legal questions were cast in the referral of issues arising from the 1997 integrated operations agreements in the Contract Policy case. There, Veldhuis J (now JA) found that questions of

interpretation had been referred and an appeal was barred. [ 137 ] If the matters described in para 135 were questions of law, they are barred under subsection 44(3). That leaves nothing of significance for the proposed appeal. V Conclusion [ 138 ] The application is dismissed. The parties may arrange to make submissions on costs. Heard on the 9 th day of October, 2019. Dated at Calgary, Alberta this 6 th day of December, 2019.

J.T. Eamon J.C.Q.B.A. Appearances: Robert Q. Grant, QC for the Applicant Lowell A. Westersund, QC, Joshua Fraese, and Samantha Stokes for the Respondent