Arbutus Software Inc. v. ACL Services Ltd.

2012 BCSC 1834 Arbutus Software Inc. v. ACL Services Ltd. IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Arbutus Software Inc. v. ACL Services Ltd., 2012 BCSC 1834 Date: 20121205 Docket: S112273 Registry: Vancouver Between: Arbutus Software Inc. Petitioner And ACL Services Ltd. Respondent Before: The Honourable Madam Justice Dickson On appeal from Arbitrator, March 8, 2011 BCICAC File No. DCA-1295 Reasons for Judgment Counsel for the Petitioner: D. Crerar Counsel for the Respondent: D. Wotherspoon & G. Cameron Place and Date of Hearing: Vancouver, B.C. July 5-6, 2012; September 26, 2012 Place and Date of Judgment: Vancouver, B.C. December 5, 2012 INTRODUCTION [1] The petitioner, Arbutus Software Inc., appeals the March 8, 2011 award of Thomas Braidwood, Q.C. made in the liability portion of a commercial contract dispute submitted for expedited arbitration (the "Award"). The Award concerns the interpretation of reciprocal restrictive covenants included in an agreement dated February 17, 2003 between Arbutus and the respondent, ACL Services Ltd. (the "Reorganization Agreement"). [2] The Reorganization Agreement was concluded when the two principals and 50% owners of ACL decided they would part company. Its purpose was to reorganize the company and divide existing business and future corporate opportunities in a mutually acceptable way. Pursuant to its terms, amongst other things, Arbutus agreed not to compete with ACL in the field of "Business Assurance Products" and ACL agreed not to compete with Arbutus in the field of "Data Conversion Products". [3] The central issue in dispute was whether Arbutus was prohibited from entering into the audit software market based on the above noted restrictive covenant. The scope and content of the prohibition against ACL marketing or selling Data Conversion Products was also in dispute in Arbutus' counterclaim. [4] The arbitrator was required to interpret the meaning of the defined terms Business Assurance Products and Data Conversion Products in order to address the issues for determination. Arbutus contended that Business Assurance Products are intended for use by upper echelon management and distinct from audit software which facilitates the audit process. It also contended that ACL sold and marketed its product as allowing another program to read converted data contrary to the restrictive covenant with respect to Data Conversion Products. [5] The arbitrator did not accept either of Arbutus' contentions. He concluded that the term Business Assurance Products includes the audit function and, in consequence, found Arbutus had breached the covenant prohibiting it from marketing, selling, distributing or licensing such products. He also dismissed Arbutus' counterclaim alleging that ACL breached the restrictive covenant with respect to Data Conversion Products. Prior to so doing, he declined to order production of documents sought by Arbutus but not produced by ACL. [6] Arbutus applied for and obtained leave to appeal the Award under s. 31 of the Commercial Arbitration Act, R.S.B.C. 1996, c. 55 (the "Act"). The Act permits appeals on any question of law arising out of an arbitral award, either with consent of the parties or leave of the court. Brown J. granted leave to appeal on the essential basis that several errors asserted by Arbutus amounted to alleged failures to apply proper legal methodology in interpreting the Reorganization Agreement. [7] Arbutus also claims on appeal that the arbitrator made errors in the nature of breaches of natural justice and exceeding his jurisdiction when he dismissed the counterclaim and refused to order further document production. Pursuant to s. 30 of the Act leave is not required for an appeal based on alleged arbitral errors of this kind. ISSUES [8] The key issues for determination on this appeal are: i) Did the arbitrator commit an error of law by: a) failing to consider the language of the Reorganization Agreement as a whole; b) relying on purely extrinsic evidence where such evidence is either not permitted or only to be relied upon as a last resort; c) failing to apply the correct legal principles with respect to the interpretation of a restrictive covenant in restraint of trade; or d) failing to apply the correct legal principles with respect to the interpretation of the term Data Conversion Products? ii) Did the arbitrator commit arbitral error by: a) dismissing the counterclaim; b) refusing to order that ACL make further documentary disclosure? FACTS Background [9] ACL sells computer software and associated services. In 2002, it was a leading provider of software designed to facilitate the audit function. Its primary market was external and internal auditors. Its two partners and principal shareholders were Harald Will and Grant Brodie. [10] Audits are performed to determine the validity and reliability of bookkeeping entries and financial information. The goal of an audit is to provide assurance to a business or others reviewing its information regarding the integrity of its financial and other data and the adequacy of its internal controls. [11] Historically, audits were a laborious paper-based process. With the advent of electronic data storage, however, new methods of performing audits were required. With technological advances, they became available. [12] The ACL audit software was such a product. It provided a means by which continuous auditing and monitoring of electronic information could be accomplished. [13] Electronic information is stored in different formats and mediums, not all of which are compatible. The ACL audit software needed to access all forms of stored data and, to achieve such access, included a data conversion capability. This capability facilitated the extraction and conversion of electronic information from one format to another to overcome database incompatibilities. Thus, the ACL software had two key capabilities: data analysis (the audit function) and data extraction (the conversion function). [14] The core idea of the ACL software originated with Hart Will, who was Harald Will's father. Mr. Brodie was Hart Will's student and the primary programmer of all versions of the ACL audit software. Mr. Brodie contributed significantly to developing the original ACL software. He also contributed to its improvement and updating over time. [15] Prior to execution of the Reorganization Agreement, Mr. Brodie was developing modifications to enhance the ACL software data extraction function. The purpose was to allow it to access and convert incompatible data for the use of a separate software product for non-audit purposes. These modifications were known as the Wormhole IP. [16] By 2000 to 2002, ACL's penetration of the audit software market for external and internal auditors was largely complete. The market had yielded no profits in 2001 and 2002 and there was limited room to expand ACL as it was then constituted. However, Messrs. Will and Brodie had different visions for the company's future. As a result a dispute arose between them on how best to manage ACL. [17] Mr. Will wanted to invest in expanding with a new market focus in what he called "business assurance" software. This strategy was directed at the developing need for corporate management to become involved in company auditing and to customize real time continuous auditing and monitoring of transactional data and internal business controls. The target market was CEOs and others involved in the upper echelon management aspect of corporations. The strategy was formulated in the context of major public failures of notable corporations such as Enron in which high level management claimed ignorance of the basic finances of their corporations. [18] Mr. Brodie, on the other hand, wanted to continue the existing ACL focus on the audit software market and thereby attempt to maximize company profit. He was resistant to the idea of investing funds in marketing a new and unproven venture and wanted to reduce the company's risk. Instead, his preference was to continue expanding opportunities around software that was dedicated to the audit market. [19] Both strategies were legitimate, but they were in conflict. A stalemate developed and the partners concluded a "corporate divorce" was required. Each retained counsel and, following extensive negotiations, a deal was struck on how to split the existing business and future corporate opportunities. That deal is encapsulated in the Reorganization Agreement. [20] The arbitrator described the basic terms of the deal that was struck in paragraph 6 of the Award as follows: a) Mr. Brodie was to leave ACL; b) Mr. Brodie was paid approximately $9,000,000.00, including interest; c) Mr. Brodie retained 10% ownership of ACL; d) Mr. Brodie was given shared ownership of ACL's intellectual property, including its software for all of the products and services provided by ACL to date; e) Mr. Brodie would own a software package known as Wormhole IP, including source code that related to legacy data extraction and access; f) Mr. Brodie received a database with all of ACL's customer data; g) Mr. Brodie received the limited right to leverage off of the ACL name in his efforts to market his new software products for a period of three years; h) Each of the parties agreed to stay out of the other's business by granting mutual restrictive covenants; i) Mr. Brodie's exclusive territory was, and is, Data Conversion Product, as defined in what would eventually be called the Reorganization Agreement; and j) Mr. Will's exclusive territory was, and is, Business Assurance Products, as defined in the Reorganization Agreement, and he would retain 90% of ACL. The Reorganization Agreement [21] The Reorganization Agreement was dated February 17, 2003. Its closing date was February 28, 2003. The parties to the Reorganization Agreement were: ACL (referred to as the "Company"); Mr. Brodie and his holding company (collectively referred to as the "Brodie Group"); Arbutus (referred to as "Greenco"); a numbered company (referred to as the "Purchaser"); and Mr. Will, his father and a numbered company referred to as "Newco" (collectively referred to as the "Will Group"). [22] Following the closing date, ACL, the Purchaser and another company amalgamated into a single company. That company retained the name ACL. [23] Pursuant to the terms of the Reorganization Agreement, Arbutus and ACL co-owned the existing ACL audit software, the underlying source code, all user manuals and marketing materials for the ACL software, and the ACL customer database. This was achieved by means of an assignment in the form set out in Schedule B, entitled "Form of IP Transfer/Assignment Documents". Schedule B provided, in part: 1. Assignment The Assignor [old ACL] hereby sells, assigns and transfers to Assignees [Arbutus and new ACL] as a work of joint authorship to be held by the Assignees as co-owners, an undivided, full and complete interest in all proprietary and intellectual property right, title and interest, including the copying and all trade secret and confidential information rights, of the Assignor in and to ... "ACL Software" ... "Additional IP"... 2. Assignor's Acknowledgment of Complete Assignment The Assignor acknowledges that this is a full and complete assignment and that the Assignees may exercise all the proprietary and intellectual property rights in the ACL Software and Additional IP (collectively the "ACL IP") held by the Assignor prior to the Effective Date except as otherwise agreed in writing between the Assignor and the Assignee. Each Assignee may modify, enhance or create derivative works to the ACL IP in its sole right and in any manner, or incorporate the ACL IP into any other work of otherwise deal with the ACL IP in each Assignee's sole discretion... 4. Assignees' Waivers of Rights It is the express intent of both Assignees that each Assignee may exercise all rights of ownership of the proprietary and intellectual property rights in the ACL IP assigned hereunder without any interference by the other Assignee except as otherwise agreed in writing between the Assignor and the Assignee ... [24] Amongst other things, the Reorganization Agreement included reciprocal restrictive covenants and an arbitration clause. It also included a clause leaving injunctions to the court. [25] The restrictive covenants expire on February 28, 2013. They relate to non-competition in the business areas of Business Assurance Products and Data Conversion Products. Those terms are defined in the Reorganization Agreement as follows: 9.1 Relevant Definitions (a) "Business Assurance Products" means software and consulting services that provide organisations (including the external and internal auditors thereof) with any or all of historical, continuous, real-time monitoring of transactional data and activity within the organizational business processes in order to provide increased assurance about the integrity and completeness of controls and compliance; (c) "Data Conversion Products" means software (including software derived from or included in the Wormhole IP or ACL Software) and/or services utilizing software which convert data in Adabas, DB2 or IMS or data not in a data manager for use by other software applications but does not include software (including the ACL Software and software derived from the ACL Software) which converts data for the software's own use. [26] The restrictive covenant relating to the Company (ACL)'s business is in s. 9.8 of the Reorganization Agreement. It provides, in relevant part: 9.8 Non-Competition with the Company's Core Business (a) During the period commencing on the Closing Date and ending on the Expiration Date, Greenco shall not, except as contemplated by Section 9.9, directly or indirectly, in any manner whatsoever, individually, in partnership, jointly or in conjunction with any person, or as employee, principal, agent, director or shareholder of any person, engage in any business which markets, sells, distributes or licences Business Assurance Products... [27] The restrictive covenant relating to Greenco (Arbutus)'s business is in ss. 9.2, 9.3 and 9.4 of the Reorganization Agreement. They provide, in relevant part: 9.2 Non-Competition with Greenco Core Business (a) During the period commencing on the Closing Date and ending on the Expiration Date, the Company shall not, except as contemplated by Section 9.4, directly or indirectly, in any manner whatsoever, individually, in partnership, jointly or in conjunction with any person, or as principal, agent, director or shareholder of any person, engage in any business which markets, sells, distributes or licenses any Data Conversion Product... 9.3 Non-Competition with Greenco Related Business (a) During the period commencing on the Closing Date and ending on the 3rd anniversary of the Closing Date, the Company, shall not, except as contemplated by Section 9.4, directly or indirectly, in any manner whatsoever, individually, in partnership, jointly or in conjunction with any person, or as employee, principal, agent, director or shareholder of any person, engage in any business which markets, sells, distributes or licences a software product (including the ACL Software and derivatives of the ACL Software) and/or services utilizing software that: (i) provides access to data in Adabas, DB2 or IMS or data not in a data manager; and (ii) analyzes or manipulates the data resulting from that access; for the purpose of utilization of the software or services by an organization's Information Systems group or Information Systems department for that group or department's own use unless incidental to a solution involving Business Assurance Products provided to such organization by the Company or a Restricted Successor in the ordinary course of the Company's Business... 9.4 Exceptions The restrictions in Sections 9.2 and 9.3 shall not prevent or restrict: ... (d) indirect and/or incidental marketing, sale, distribution and licensing by the Company or a Restricted Successor in the ordinary course of its business of a product which is as an integral component of a Business Assurance Product or is incidental to a solution involving a Business Assurance Product but has the attributes of a Data Conversion Product. [28] When Mr. Brodie left ACL he reviewed a draft announcement and declared that he loved it. The announcement advised that he was leaving ACL and starting up an independent company to pursue the data conversion market. It also advised that ACL would continue to pursue its business goals. The Dispute [29] After the Reorganization Agreement was concluded ACL continued to produce its traditional audit software under the name "ACL for Windows", and later "ACL Desktop". In late 2003 it released a software product called "Continuous Controls Monitoring", described as a means to determine whether internal controls are operated as intended and designed. In 2008, it launched a new audit software product called "AuditExchange". [30] For approximately 7 years after the Reorganization Agreement Arbutus pursued the data conversion market. In 2010, however, Arbutus returned to the audit software market when it introduced a product called "Audit Analytics". [31] ACL objected to Arbutus' return to the audit software market based on the restrictive covenant in the Reorganization Agreement relating to Business Assurance Products. In response, amongst other things, Arbutus claimed ACL had breached the restrictive covenant relating to Data Conversion Products by marketing, selling, distributing and licensing products that met this definition. [32] In November, 2010, ACL's counsel issued a cease and desist letter to Arbutus. The dispute was thus crystallised. At Arbutus' suggestion, the parties agreed to an expedited arbitration on liability and followed, if necessary, by a determination on damages. Arbutus also agreed to a voluntary standstill of its audit software marketing activities pending resolution of the liability issue. [33] The parties filed a joint submission to arbitrate on January 18, 2011. [34] The arbitration commenced before Mr. Braidwood, Q.C. 18 days after the joint submission to arbitrate was filed. Prior to its commencement, the parties exchanged pleadings and engaged in a process of reciprocal document disclosure. As is typical in such matters, the pleadings defined the issues for determination by the arbitrator and relevance for purposes of document disclosure. The Arbitration [35] The arbitration on liability was conducted on February 9, 11, and 14-15, 2011. When it commenced, Arbutus sought further document disclosure from ACL in connection with its counterclaim. The arbitrator did not order further document disclosure at that juncture, however, and the arbitration proceeded, as agreed. [36] Counsel made thorough opening submissions, both orally and in writing, at the outset of the arbitration. [37] The parties placed 24 affidavits from 18 witnesses before the arbitrator as the arbitration proceeded. Cross-examination of six of those witnesses took place over the span of two days. Included in the wide-ranging body of evidence before the arbitrator were descriptions of the parties' negotiations and subjective intentions with respect to the Reorganization Agreement. Also included was expert evidence as to the nature and evolution of the audit and assurance software industry. [38] Counsel also made thorough closing submissions, both orally and in writing, at the end of the arbitration. [39] On March 8, 2011 the arbitrator issued the Award. In it, he declined to order further production of documents in connection with Arbutus' counterclaim. He also granted the following declarations: a) Arbutus has breached and continues to breach Article 9.8 of the Reorganization Agreement; b) Arbutus has breached and continues to breach Article 4.7 of the Reorganization Agreement; and c) the counterclaim of Arbutus is dismissed. The Award [40] The award begins with an introductory section in which the arbitrator summarised the background to the dispute and the key issues for determination. He remarked on the large body of evidence presented and outlined the legal principles that guide and limit its use. In so doing, the arbitrator cited numerous appellate authorities on contractual interpretation. He also noted the following principles that applied to his task: a) First and foremost, the words of the contract must govern. Those words are to be interpreted in the light of the whole of the contract. A court or arbitrator looks first to the words of the agreement, aided if necessary by the factual matrix. The relevant factual matrix is generally restricted to circumstances known to both parties that illuminate the meaning a reasonable person would give to the words employed. b) The contract should be interpreted at the time it is written and in the light of the surrounding circumstances. c) The contract must be interpreted in a way that avoids a commercially absurd result and in accordance with business common sense. d) Where words have a peculiar meaning in the industry to which they refer, or are technical words, expert external evidence may be tendered to assist in the interpretation of the words. e) Even where the factual matrix is permitted, evidence of negotiations leading up to the contract is not permitted in evidence. Nor is evidence of subjective intent. f) The factual matrix does not include either party's reasons for wanting a particular clause or form of words used in an agreement. The matrix is the genesis, aim and object of the whole transaction, the sort of information or background that might once have been contained in the recital instruments to contracts. g) If application of these principles does not lead to a clear result, it is permissible to look at certain post-contractual activities of the parties, so long as they do not involve a subjective analysis of a party's intent. [41] After reviewing the core principles of contractual interpretation, the arbitrator set out the salient background facts and terms of the Reorganization Agreement. In particular, he quoted the definitions of Business Assurance Products and Data Conversion Products, as well as the sections of the agreement which contain the restrictive covenants at issue. [42] The arbitrator turned next to events that transpired after the Reorganization Agreement was concluded. In particular, he noted that seven years after it was signed Arbutus began marketing software to facilitate the audit process. At paragraph 29, he expressed the following key conclusion in connection with that activity and the restrictive covenant in the Reorganization Agreement: 29. I am firmly of the opinion that when the words comprising the definition of Business Assurance Products are interpreted, in the light of all of the permissible surrounding circumstances, they must include by necessity the audit function, and that at no time did ACL intend to abandon its core business, namely that of providing a software that would facilitate the audit process. [43] The arbitrator went on to expand upon "what was mentioned above" in the Award's next several paragraphs. At paragraphs 39-41, he wrote: 39. I accept Mr. Will's evidence that audit is an essential element of business assurance programs but, of course, the idea of usefulness of this software goes beyond business assurance and encompasses an organization's entire governance, control and risk management framework. This evidence was not challenged in cross-examination. 40. I am satisfied at this stage of the analysis, based on the Reorganization Agreement itself, the surrounding circumstances at the time it was entered into, and the expert evidence of Shayne Gregg that at the core of the business assurance software is the ability to perform the audit function. 41. The analysis and the consideration of the evidence presented could certainly stop at this stage because of my above-stated finding. However, I will discuss a few more aspects of the evidence tendered ... [44] The arbitrator then discussed additional aspects of the evidence that was placed before him. For example, he noted Mr. Will's plan to expand ACL operations to target upper echelons of management developed two years before American legislation mandated CEO-level management of public corporations to understand and confirm knowledge of important systems in their corporation. He also noted, and rejected, Arbutus' submission that to interpret Business Assurance Products as ACL urged was unfair and inconsistent with the parties' intentions. In so doing, he described what Mr. Brodie received in the Reorganization Agreement and remarked the surrounding business considerations. [45] At paragraphs 52-54, the arbitrator noted the benefits acquired by Mr. Brodie pursuant to the Reorganization Agreement. He stated: 52. I am of the opinion that the above assisted Mr. Brodie in a very real and substantial way to embark on his new adventure. It gave him funds, a customer database to which to market his product, and use of the ACL name and design. 53. I am firmly of the view that it would make no business sense whatsoever to, in addition to this, allow Mr. Brodie to compete with ACL and its traditional audit base which was, and is, part of the Business Assurance Products. 54. I do not accept the assertion that when Mr. Brodie, pursuant to the contract, received the customer data base, exclusive use of certain software, and entitlement for three years to use the ACL name, that this meant he was permitted to share in the use of the audit function of the ACL software. I am of the opinion that those items were granted to Mr. Brodie in order to accomplish his new market direction. [46] The arbitrator also commented that his interpretation accorded with common sense and business efficacy as he proceeded on with his analysis. For example, at paragraphs 61 and 63 he stated: 61. I might add that it would offend any sense of business efficacy to say that the reorganization simply left open the question of what was to happen to ACL's core business, namely, assisting in the audit function, when indeed it was that very issue that was on the table. I am further of my view that the interpretation above described is an interpretation that favours a commercially sensible construction. It should also be noted that auditors are specifically mentioned in the definition in section 9.1(a) as a group which is to benefit from the product. Additionally, a review of the company's marketing strategy in and about the time that the Reorganization Agreement was signed clearly indicates that ACL was not leaving the audit market... 63. It is inconceivable that ACL would abandon rather than expand its base source of revenue. [47] The arbitrator expressly considered and rejected several arguments raised by Arbutus in favour of a more restrictive interpretation of Business Assurance Products. In so doing, at paragraph 66 and 67 he stated: 66. Some of the point put forward by the counsel for Arbutus Software Inc. include the following: a) because Arbutus and ACL co-owned existing data conversion software and the existing ACL customer base, that this meant that the activities of the two parties were not entirely separated. I have explained above that these benefits were provided to assist Arbutus in the promotion of its new venture; and b) the definition of "business insurance [sic] products" reads in part ... "in order to provide increased assurance about the integrity and completeness of controls and compliance. These words, it is argued, exclude the audit function in the restrictive covenant. 67. I see no force in arguing that the words "control" and "compliance" somehow do not include audit, particularly when the word "audit" is specifically mentioned in the relevant definition. [48] Finally, the arbitrator considered various documents created before and after the Reorganization Agreement was concluded. He characterized those documents as being consistent with his interpretation. [49] In the result, the arbitrator held that Arbutus had breached its obligation under the restrictive covenant protecting ACL's business. [50] After explaining his conclusion on ACL's claim, the arbitrator turned to the counterclaim brought by Arbutus. He repeated the definition of Data Conversion Products and reviewed the restrictive covenants, together with the exceptions. He went on to describe Arbutus' claim of breach by reference to its submission and pleadings. In particular, he quoted from paragraph 176 of Arbutus' Response as follows: a) Para. 35: contains two allegations, first that ACL incorporates a data export function, and second that ACL has licensed ETL technology from Informatica; and that in both cases these have been "used and to use these data conversion and export functions to sell and provide data conversion services, and market these features, to their customers and potential customers. b) Para. 36: ACL has breached the Restrictive Covenant in its favour including sales to DATEV, ArboNed, United Technologies, Carrefour, Pallas Athena Solutions and Fortislease. c) Para. 37: ACL has not imposed restrictions on its employees from marketing or selling data conversion products or services, nor implemented a service to monitor such sales. d) Para. 38: Arbutus seeks rights of discovery, assessment and accounting in respect of these activities. [51] The arbitrator summarised the evidence of ACL's Vice-President of Development as to how ACL software works and how data is presented. He accepted that unchallenged evidence and rejected the Arbutus contention that the Reorganization Agreement prevents the ACL product from being used to convert data for only its own use, or for use by another program, product or application. In so doing, he referenced the above noted exception in s. 9.4(d) of the Reorganization Agreement from the restrictions with respect to Data Conversion Products. He also found that the aspect of the ACL program Arbutus complained of was not being used in a standalone sense, as prohibited by the restrictive covenant. [52] In paragraphs 99 and 100 of the Award the arbitrator described the nub of Arbutus' allegations of breach of the restrictive covenant, as he understood them. He stated: 99. The nub of Arbutus' complaints appear to be that the reporting of the analytic results turns the ACL software into a "Data Conversion Product" as defined in the Reorganization Agreement. This is not what the words comprising the definition of that creature mean, and indeed is a position which makes no practical sense in the commercial sphere and would fly in the face of business efficacy. The proper interpretation of "Data Conversion Product" does not mean that the parties agreed that ACL software would be permitted to perform all of the tasks for which it was designed, but would stop short of allowing its users to report the information or results through the vehicle of other software. 100. I am strengthened in this conclusion by the fact that, as described above, the data export function of the program was inherent in the audit-specific ACL software and continues to be an integral part of the ACL software today. Once the ACL software has completed its task, it is nowhere prohibited that the results may then be read by another program. [53] The arbitrator then addressed each of the particularised allegations of breach advanced by counsel for Arbutus. He reviewed the evidence with respect to each, made of findings of fact and, in every case, concluded that no breach had been established. In so doing, he concluded that ACL has no motivation to market or sell Data Conversion Products as this would harm its core assurance product business by confusing the market. [54] In the result, the arbitrator dismissed the counterclaim as advanced. [55] At the end of the Award, the arbitrator dealt with Arbutus' application for further document production. In responding to the application, ACL's counsel advised him that ACL had disclosed 11,785 pages of documents to date and described their general nature. He also advised that Arbutus had disclosed 173 documents. Arbutus was, however, unsatisfied and had demanded production of all documents that used specific words or phrases. One such phrase was "business assurance". Supplemental computer searches revealed that over 202,000 pages were identified using this term. [56] The arbitrator found that ACL's document discovery was satisfactory and noted the additional discovery Arbutus sought would cost approximately $25,000, not including counsel's time. He also noted that the arbitration was conducted on an expedited timeline as an efficient and cost-effective alternative to court proceedings. He went on to say that the demand for further discovery was overbroad and insufficiently supported by an evidentiary foundation that established relevance. [57] The arbitrator concluded that Arbutus' demand for further document discovery amounted to a mere fishing expedition. Accordingly, he did not accede to its application for production of further documents. After the Award [58] On April 6, 2011, Arbutus filed a petition seeking leave to appeal from the Award alleging the arbitrator made 23 enumerated errors. The petition was amended on June 16, 2011 to add 2 grounds of alleged arbitral error. [59] On January 25, 2012, Brown J. granted leave to appeal the Award pursuant to s. 31 of the Act. The neutral citation for her decision is Arbutus Software Inc. v. ACL Services Ltd., 2012 BCSC 107. Leave was not required for that aspect of the appeal based on alleged arbitral error. [60] In her reasons for judgment, Brown J. commented that Arbutus set out the various alleged errors of the arbitrator in its petition in a manner more akin to argument. She expressed the view that such detail was unnecessary to state the essential question of law raised by the appeal grounds pleaded and described that question as "did the arbitrator fail to follow the proper principles, including a failure to apply a fundamental principle of interpretation?" She went on to state four broad legal questions and characterised several complaints raised by Arbutus as imbedded within them. Those four broad questions are set out above as the issues for determination on appeal based on alleged errors of law. [61] ACL applied to the Court of Appeal for leave to appeal the decision of Brown J. granting leave to appeal the Award. [62] On April 13, 2012, the Court of Appeal denied ACL's leave application on the essential basis that the appeal hearing in Supreme Court was scheduled to proceed in less than a month and granting leave would inevitably interfere with the hearing. As events transpired, however, the hearing of the appeal did not proceed in this court on the date scheduled in May, 2012. Rather, the appeal was adjourned to and conducted on July 5 and 6, 2012. [63] On September 26, 2012 I advised the parties of my decision on the appeal, with reasons to follow. LAW Appeals of Arbitral Decisions [64] Public policy requires the court to give substantial deference to decisions made in commercial arbitration. The need for deference arises out of the two principal objectives of arbitration: early finality and a determination made outside the court system. Section 32 of the Act provides: 32 Arbitral proceedings of an arbitrator and any order, ruling or arbitral award made by an arbitrator must not be questioned, reviewed or restrained by a proceeding under the Judicial Review Procedure Act or otherwise except to the extent provided in this Act. [65] Section 31 of the Act allows for an exception to finality of arbitral awards where the arbitrator commits an error of law. There is, however, no automatic right to appeal based on such an error. Rather, leave must be sought and will be granted only if the applicant is able to establish a pure and clearly identified legal question. [66] Section 31 provides, in relevant part: 31(1) A party to an arbitration may appeal to the court on any question of law arising out of the award if a) all of the parties to the arbitration consent, or b) the court grants leave to appeal (2) In an application for leave under subsection (1)(b), the court may grant leave if it determines that 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 ... (4) On an appeal to the court, the court may a) confirm, amend or set aside the award, or b) remit the award to the arbitrator together with the court's opinion on the question of law that was the subject of the appeal. [67] It is not enough for an appellant merely to identify an error of law in an arbitral award. Rather, the error must form part of the reasoning leading to the answer to the question submitted to the arbitrator before an appeal can succeed. Accordingly, an error of law made in obiter dicta will not be reviewable. In addition, court intervention must be justified on the basis enumerated in s. 31(2) of the Act. For this reason, an appellant is not entitled on appeal to challenge as legally incorrect an approach which it supported at the arbitration: Specialist Physicians and Surgeons of B.C. v. General Practitioners of B .C., 2007 BCSC 423; British Columbia v. Canadian Cartographics Ltd., 2007 BCSC 881; Avenue Canadian Ventures, Corp. v. No. 151 Cathedral Ventures Ltd., 2009 BCSC 171; VIH Aviation Group Ltd., v. CHC Helicopter LLC, 2012 BCCA 125. [68] An arbitrator's decision on the admissibility of evidence is subject to a deferential review standard. Arbitrators have a wide discretion to admit evidence they consider to be relevant. The arbitrator's discretionary decision as to admissibility is not reviewable unless it can be shown to be patently unreasonable: InterLink Business Management Inc. v. Bennett Environmental Inc., 2008 BCCA 104; Hayes Forest Services Limited v. Weyerhaeuser Company Limited, 2008 BCCA 31; s. 6(2), the Act. [69] Like trial judges, arbitrators are entitled to have their reasons reviewed based on what they say and not on "speculative imagination". A reviewing court should not attempt to read a decision maker's mind or go beyond what is stated in the reasons to analyse that which is not said when that which is said is legally correct. Although it is necessary for an arbitrator demonstrably to grapple with the difficult issues to be confronted in answering the questions submitted, in so doing the arbitrator need not address every piece of relevant evidence or submission raised at an arbitration: R. v. O'Brien, 2011 SCC 29; Cojocaru (Guardian ad litem) v. British Columbia Women's Hospital & Health Centre, 2011 BCCA 192; Coulter (Guardian ad litem) v. Leduc, [2005] 9 WWR 457. [70] In cases involving the construction of contracts it may be challenging for the reviewing court to confine itself to pure questions of law, but it is critically important. When leave is granted the court must be vigilant to stay within its jurisdiction and not be drawn into an improper factual inquiry. In particular, questions of fact or mixed fact and law are within the sole province of the arbitrator and an appeal judge is not entitled to substitute his or her own reasonable interpretation of a contract for another chosen by the arbitrator. Accordingly, the judge must take care to separate those questions of law properly before the court from questions of fact or questions of mixed fact and law: Hayes Forest Services Limited, supra; Avenue Canadian Ventures, Corp., supra. [71] Although the foregoing is well known and straightforward in principle its application requires cautious consideration. This is so because the construction of a contract may be either a question of law or a question of mixed fact and law. In Athwal v. Black Top Cabs Ltd., 2012 BCCA 108, D. Smith J.A. reviewed some of the recent jurisprudence touching upon the distinction. She stated, in part: [29] Much has been written in recent times about whether the interpretation of a contract raises a question of law or a question of mixed fact and law. In 269893 Alberta Ltd. v. Otter Bay Developments Ltd., 2009 BCCA 37 [Otter Bay], Mr. Justice Chiasson, for the Court, explained that while the meaning of the words of a contract, when viewed objectively and in the context of the factual matrix in which the contract was made, is a question of mixed fact and law, the legal effect of the words of a contract is a question of law. He wrote: [12] In Hayes, this Court referred to and quoted from a number of authorities. Several propositions emerged. They included the following: a trial judge must apply the proper principles of contract interpretation; failure to do so would be an error attracting review on a standard of correctness; determining the factual matrix of a contract is a question of fact; construction of a contractual provision becomes a question of law as soon as the true meaning of the words and the surrounding circumstances have been ascertained. This Court summarized the analysis in para. 44 [of Hayes] stating: [44] In my view, taken broadly, the construction of a contract often is a question of mixed fact and law. Insofar as the task narrowly is to determine the meaning of the words in the contract the matter may be a question of law as was stated in Domtar, but where the factual matrix of the contract is questioned, determining that matrix and its significance is a question of fact. Interpreting the language of the contract in the context of the factual matrix is a question of mixed fact and law. ... [14] In Hayes, this Court expressed the nub of the problem which it was addressing in para. 45: [45] The appeal judge also did not separate the question or questions of law that properly may have been before him from a consideration of the factual determinations of the arbitrator which were not properly before him. [15] In the context of an appeal under the Commercial Arbitration Act, in the absence of legal error in the arbitrator's determination, the court must take the factual matrix as found by the arbitrator. On an appeal such as this, a trial judge's determination of the factual matrix is entitled to deference, but whether by arbitrator or court, the final determination of the meaning of a contractual provision is a question of law. This is not altered by the fact the process leading to that determination may involve questions of fact or mixed questions of fact and law. As noted, the construction of a contractual provision becomes a question of law as soon as the true meaning of the words and the surrounding circumstances have been ascertained. [Emphasis added.] [30] Recently, Madam Justice Newbury, writing for the Court in JEL Investments Ltd. v. Boxer Capital Corporation, 2011 BCCA 142 [JEL], endorsed this passage from Otter Bay in determining whether the construction of the contract in that case gave rise to a question of law or mixed fact and law... [balance of paragraph 30 of Athwal omitted] [31] On the issue of whether the application for leave to appeal involved a question of law or a question of mixed fact and law, Newbury J.A. stated: [26] As I have already suggested, the primary error alleged in the case at bar was one of legal methodology - that instead of considering the "objective forms of communication" used by the parties in their contract (see J. Swan, Canadian Contract Law (2006) at 489) to determine what they had intended, the arbitrator examined the evidence of their pre-contractual negotiations, gleaned their subjective intentions from those dealings, and then determined that the implied term was necessary, not to make the contract "operative" but to give effect to their found intentions. This raises a question of law. As Lang J.A. noted for the Ontario Court of Appeal in [MacDougall v. MacDougall 92005), 262 D.L.R. (4th) 120]: To begin with, the trial judge must apply the proper principles of contract interpretation, including consideration of the clause in the context of the entirety of the contract. A failure to follow the proper principles, including a failure to apply a fundamental principle of interpretation, would be an error of law attracting review on the standard of correctness. [at para. 30; emphasis added in JEL.] [27] Similarly, the arbitrator's alleged failure to consider whether the implied term was necessary to give business efficacy to the Agreement, and to have done so in the face of express provisions alleged to be inconsistent with the implied term, raises issues of law. It will not be necessary for a court to refer to the "factual matrix", or to make findings of fact, to determine whether these errors have been made out. [72] As I understand it, the core ideas that emerge from the recent jurisprudence on errors of law related to contractual interpretation in the arbitration context are these: 1. An arbitrator must apply the proper principles of contractual interpretation, including consideration of the clause at issue in the context of the entirety of a contract. An error of legal methodology or failure to use the proper principles is an error of law which is reviewable on appeal. 2. An arbitrator's determination of the factual matrix giving rise to a contract is a question of fact. When an arbitrator interprets the true meaning of a contract's words, viewed objectively in the context of the factual matrix, this is a question of mixed fact and law which is not reviewable on appeal. 3. Once an arbitrator has determined the true meaning of a contract's words the final determination of their legal effect, or the legal relationship between the parties as expressed by the words, is an extricable question of law requiring no reference to the factual matrix which is reviewable on appeal. Principles of Contractual Interpretation [73] In Athwal, supra, the court summarised the basic principles of contractual interpretation. D. Smith J.A. stated, in part, as follows: [42] The contractual intent of parties to a written contract is objectively determined by construing the plain and ordinary meaning of the words of the contract in the context of the contract as a whole and the surrounding circumstances (or factual matrix) that existed at the time the contract was made, unless to do so would result in an absurdity. Where the language of a contract is not ambiguous (that is, when viewed objectively it raises only one reasonable interpretation), the words of the written contract are presumed to reflect the parties' intention. An interpretation that renders one or more of the contract's provisions ineffective will be rejected. [43] Extrinsic evidence to explain the meaning of an unambiguous contractual provision is not admissible. Evidence of a party's subjective intention in executing the contract, or of their understanding of the meaning of the words used in the contract, is not admissible to vary, modify, add to or contradict the express words of the written contract. This is particularly so where a contract contains an "entire agreement" clause. As was noted by the authors of Cheshire, Fifoot and Furmston's Law of Contract, 13th ed. (London, UK: Butterworths, 1996) at p. 127, "the court is usually concerned not with the parties' actual intentions but with their manifested intention." [44] A helpful analysis of this legal principle was provided by Mr. Justice Lowry in Water Street Pictures Ltd. v. Forefront Releasing Inc., 2006 BCCA 459: [23] Recourse to extrinsic evidence to aid in the interpretation of an agreement is the court's last resort. It is only when the intentions of the parties cannot be objectively determined from the words they have chosen to employ, such that there is ambiguity, that the law permits consideration to be given to evidence of their conduct in making their agreement and in fulfilling their obligations. If it were otherwise, the certainty that is essential to documenting commercial transactions would be seriously undermined. The two-step approach to be taken has been succinctly stated by the Manitoba Court of Appeal in Geoffrey L. Moore Realty Inc. v. Manitoba Motor League [2003] 9 W.W.R. 385, 2003 MBCA 71 at para. 26: [26] In brief summary then, to determine the intentions of the parties expressed in a written contract, one looks to the text of the contract as a whole. In doing so, meaning is given to all of the words in the text, if possible, and the absence of words may also be considered. If necessary, the text is considered in light of the surrounding circumstances as at the time of execution of the contract. The goal is to determine the objective intentions of the parties in the sense of a reasonable person in the context of those surrounding circumstances and not the subjective intentions of the parties. If, after that analysis, the text in question is ambiguous, extrinsic evidence may be considered. [24] Thus, the court looks first to the words of the agreement, read as a whole, aided, if necessary, by evidence of the circumstances or what is referred to as the factual matrix existing when the agreement was made. Such evidence is generally restricted to circumstances known to both parties that illuminate the meaning a reasonable person would give to the words employed: Glaswegian Enterprises Inc. v. BC Tel Mobility Cellular Inc. (1997), 49 B.C.L.R. (3d) 317 (C.A.) at paras. 18 to 20. See also Lord Hoffman's discussion of the principles of interpretation in Investors Compensation Scheme Ltd. v. West Bromwich Building Society (1997), [1998] 1 W.L.R. 896 (H.L.) The wording of the agreement must not, however, be overwhelmed by a contextual analysis: Black Swan Gold Mines Ltd. v. Goldbelt Resources Ltd. (1996), 25 B.C.L.R. (3d) 285 (C.A.) at para. 19. ... [46] Thus, evidence of the factual matrix or surrounding circumstances in which a contract is reached is admissible for the purpose of determining the meaning of the words of the contract as they would be understood by an "objective reasonable bystander" in the circumstances of the parties. See G.H.L. Fridman, The Law of Contract in Canada, 5th ed. (Toronto: Thomson Canada Limited, 2006) at 15. Ambiguity is not a pre-condition to the admissibility of such evidence. However, the scope of the contextual evidence must not overwhelm the inquiry into the parties' objective contractual intention or no certainty would be achieved by reducing an agreement to writing. [47] If after the contextual inquiry into the circumstances in which the agreement was reached, the language of the contract remains ambiguous (that is the meaning of the words is vague, inconsistent or in conflict with other provisions of the contract, redundant, or overly general), extrinsic evidence of what was said, done or known by the parties when the contract was made, is admissible for the purpose of determining the parties' common intention. [74] In Hanna Collision Repair (1984) Ltd. v. Insurance Corp. of British Columbia, 2010 BCCA 490, the Court of Appeal dismissed an appeal from an arbitral award in a case involving the construction of a contract. In so doing, the court focused on the nature and purpose of evidence of the factual matrix. Garson J.A. stated: [58] In Jacobsen et. al. v. Bergman et. al., 2002 BCCA 102, 163 B.C.A.C. 266, Mr. Justice Lambert speaking for the majority summarized the principles of contractual interpretation at paras. 3-6: [3] The applicable principles may be stated in this way. It is not sufficient in interpreting a clause in an agreement to look only at the wording of the clause in order to decide on its meaning and application; instead the clause must be examined in its place in the agreement as a whole. Further, the agreement as a whole, and the clause in particular, must be examined in the context of the factual matrix which gave rise to the agreement and against which the agreement and the clause were intended to operate. [4] Just as in statutory interpretation, so also in contract interpretation. The fact that the section or clause seems to have a plain enough meaning when viewed in isolation does not preclude, but indeed requires, an examination of the whole text of the statute or agreement, and a consideration of the section or clause in their place in the whole text and in the factual matrix in which they were intended to operate. That process is required in every case of interpretation of either a statute or an agreement. [5] Of course the process I have described does not detract in any measure from the importance of the words chosen to express the mutual intention of the parties. It merely underlines the view that it is the mutual intention of the party that is being sought and not simply the lexical possibilities inherent in the words chosen to express that mutual intention, perhaps by a third party advisor. [6] It must always be borne in mind that the function of an interpreting court is to give effect to the mutual intention of the parties and not to create an agreement or an obligation that the parties did not intend, merely because they might well have intended it. [59] Applying these principles to this case, I would conclude that the chambers judge was correct when she found the term "roadworthy" did have a meaning. That meaning was properly construed by the arbitrator on the basis of the context of the whole of the Agreement, as well as the extrinsic evidence, all of which provided the arbitrator with a factual matrix in which to locate the meaning of the term. [75] The factual matrix which gives rise to an agreement includes the parties' relationship and all relevant facts surrounding the transaction so far as they were known to the parties at or before the date of the contract. This includes, for example, the fact that parties were in negotiations and the reasons for the negotiations, including the commercial objectives of the parties. As stated in Athwal, evidence of the factual matrix is admissible to assist in the objective interpretation of the express language of a contract. Ambiguity is not a precondition to its consideration, so long as the extrinsic evidence is not used to create ambiguity where none exists: Langley Lo-Cost Builders Ltd. v. 474835 Ltd., 2000 BCCA 365; Athwal, supra. [76] Expert evidence may also be admissible to assist in the interpretation of a contract. In particular, expert evidence may be admitted to assist a decision maker in construing the meaning of technical terms or phrases contained in a contract as they may be understood within a trade or industry. That being said, technical terms that are defined in an agreement cannot be given another meaning even if the industry would typically use those words in a different sense: Missilinda of Canada Ltd. v. Husky Oil, 2007 MBCA 24; Dow Chemical Canada Inc. v. Shell Chemicals Canada Ltd. (2010), 477 A.R. 112 (CA); leave to appeal to SCC refused [2010] SCCA No. 234. [77] A non-competition clause is a covenant in restraint of trade. As such, it is to be construed strictly and should be demonstrably reasonable. Prima facie, an ambiguous restrictive covenant included in a contract will be treated as unenforceable, although it must be interpreted in the light of all of the circumstances. Where a restrictive covenant is given in the context of the sale of a business an unduly strict approach to interpretation will not be appropriate: Shafron v. KRG Insurance Brokers (Western) Inc., [2009] 1 S.C.R. 157; Russo v. Field, [1973] S.C.R. 466; Burgess v. Industrial Frictions & Supply Co. Ltd., 1987 CanLII 2722. Arbitral Error [78] Section 30 of the Act provides: 30 (1) If an award has been improperly procured or an arbitrator has committed an arbitral error, the court may (a) set aside the award, or (b) remit the award to the arbitrator for reconsideration. (2) The court may refuse to set aside an award on the grounds of arbitral error if (a) the error consists of a defect in form or a technical irregularity, and (b) the refusal would not constitute a substantial wrong or miscarriage of justice. (3) Except as provided in section 31, the court must not set aside or remit an award on the grounds of an error of fact or law on the face of the award. [79] An "arbitral error" is defined in s. 1 of the Act as follows: "arbitral error" means an error that is made by an arbitrator in the course of an arbitration and that consists of one or more of the following: (a) corrupt or fraudulent conduct; (b) bias; (c) exceeding the arbitrator's powers; (d) failure to observe the rules of natural justice. [80] The jurisdiction of an arbitrator is founded upon the arbitration agreement, the pleadings and the questions posed by the parties. The arbitrator acts without jurisdiction, and thus commits arbitral error, if he or she makes a decision that was not referred for adjudication: Hanna Collision, supra; BC Gas Inc. v. Westcoast Energy Inc., [1990] B.C.J. No 2924 (S.C.) [81] Natural justice requires an arbitrator to act with procedural fairness. The concept of natural justice can mean different things in different cases, however, and the standard will vary to suit the circumstances. For example, natural justice may be denied where the arbitrator fails to give a party the opportunity to present its case, refuses to admit relevant evidence, or fails to deal with all issues for determination. In addition, depending upon the circumstances, a failure to order production of necessary documents may amount to a breach of the rules of natural justice: Williston Navigation Inc. v. BCR. Finav No. 3 et. al. (2007), 69 B.C.L.R. (4th) 187; Amos Investments Ltd. v. Minou Enterprises Ltd., 2008 BCSC 332. [82] In Westnav Container Services Ltd. v. Freeport Properties Ltd., 2009 BCSC 184, rev'd 2010 BCCA 33, leave to appeal ref'd, [2010] S.C.C.A. No. 95, Silverman J. summarised the sorts of breaches of natural justice that have been recognised in the commercial arbitration context. He stated: [63] Recognised breaches of natural justice in commercial arbitration include: a) failure of the tribunal to comply with a general duty of fairness; b) failure by a party to give proper notice of the arbitration or of the appointment of an arbitrator; c) manifestly unfair or unequal treatment of a party by the arbitrator; d) failure by the arbitrator to give a party the opportunity to present its case or to respond to the other party's case; e) viewing or taking of evidence by the arbitrator outside of the knowledge of the parties; f) failure by the arbitrator to admit relevant evidence; g) failure to deal with all the issues before the tribunal; and h) uncertainty or ambiguity as to the effect of the Award. [citations omitted] DISCUSSION Did the arbitrator commit an error of law by failing to consider the language of the Reorganization Agreement as a whole? [83] Arbutus submits the arbitrator erred in law by failing to consider the language of the Reorganization Agreement as a whole, as required by the authorities. According to Arbutus that language unambiguously permitted both parties to continue selling the audit software that they co-owned pursuant to the contract's terms. Rather than interpreting the Reorganization Agreement in this manner, however, Arbutus says the arbitrator ignored key provisions and departed from the contract's plain language, thereby committing an error in legal methodology. Such an error is an error of law and thus subject to appellate review. [84] Although Arbutus frames the question as one of law its submission on appeal includes a wide ranging factual inquiry. In some respects, it approaches the appeal as though it were a de novo hearing. For example, findings of fact related to the surrounding circumstances are challenged and an alternate interpretation of the definition of Business Assurance Products is said to be appropriate. For ease of analysis, each of the examples presented under this heading is summarised below and addressed individually. [85] Before turning to the individual examples, however, a general comment is in order. Arbutus appears to assert that the language of the Reorganization Agreement considered as a whole can lead to only one reasonable interpretation: that which it urged at arbitration and repeated on appeal. In my view, this assertion is misconceived given the factual matrix found by the arbitrator. At bottom, Arbutus' real complaint is that he did not see the evidence in the manner it argued was most realistic. While this was no doubt disappointing from Arbutus' perspective, the arbitrator was entitled to take a contrary view. [86] The first example Arbutus relies upon concerns the parties' co-ownership of the ACL audit software, audit software code, audit software user manuals and marketing materials, and audit-focused database. According to Arbutus, the arbitrator ignored the express and unlimited co-ownership granted by the Reorganization Agreement in this regard. Given that co-ownership, Arbutus says the arbitrator's conclusion that it was not entitled to compete in the audit software market due to the restrictive covenant makes no sense either legally or practically. It goes on to say the arbitrator interpreted Business Assurance Products in a manner that rendered the co-ownership provisions entirely ineffective. [87] Arbutus submits that this error was one of legal methodology. It also submits the arbitrator relied upon his own view of what made business sense despite the inherent conflict between that view and the plain language of the contract. This, too, it says, was an error of law. [88] This submission is flawed in at least two respects. [89] First, the Reorganization Agreement does not grant unlimited co-ownership of the ACL audit software to the parties, as submitted by Arbutus. Rather, title was taken by both subject to what they otherwise agreed in writing. The restrictive covenant was plainly such an agreement. If, properly construed, it limited ownership rights to the ACL software such a limitation fell within the terms of the Reorganization Agreement considered as a whole. [90] Second, the arbitrator did not ignore the co-ownership provisions. On the contrary, he expressly referred to the shared ownership and stated his opinion as to why it made business sense. He interpreted the meaning of Business Assurance Products taking into account the contract's co-ownership provisions together with the surrounding circumstances. In so doing, he applied the correct legal methodology. His conclusion on the true meaning of those words was one of mixed fact and law which is not reviewable on appeal. [91] Arbutus next submits the arbitrator proceeded on the erroneous basis that the word "audit" was mentioned in the definition of Business Assurance Products. This error is located at paragraph 67 of the Award. In fact, however, the word "audit" is not part of the relevant definition. On the contrary, the definition includes a reference to "auditors", but not to "audit". According to Arbutus, this apparent misapprehension was a troubling error. [92] I do not accept that the arbitrator proceeded on the basis the word "audit" is part of the definition of Business Assurance Products. It is clear from a reading of the Award as a whole that paragraph 67 simply contains a typographical error. It is also clear that the arbitrator was well aware of the actual definition. The definition is correctly reproduced earlier in the Award and the fact that "auditors" is specifically mentioned in it is referenced in paragraph 61. [93] Arbutus goes on to submit that the arbitrator ignored the absence of the words "audit", "ACL Software", ACL audit software", "all existing ACL business" and "exclusive right to sell to auditors" in the definition of Business Assurance Products. It says the parties could easily have included those words had they intended to incorporate the audit function in the restrictive covenant, but they did not. Given the plain language of the Reorganization Agreement regarding co-ownership, Arbutus says their absence was an important consideration for interpretation purposes and relies on Athwal, supra, in support of its submission. According to Arbutus, the arbitrator's failure expressly to consider the absence of these words amounts to an error in legal methodology. [94] I do not accept that the arbitrator ignored the absence of the words identified by Arbutus. He referenced the principle that the absence of words may be taken into account in the interpretation exercise and was presented with this submission by Arbutus at the arbitration. I do not doubt that he considered it in the course of reaching his decision. Given his factual findings, however, it is not surprising that he did not expressly deal with the submission any further. [95] The arbitrator made several key findings with respect to the circumstances surrounding the Reorganization Agreement. For example, he found that the audit market was ACL's core business and that its known intention was to expand, not abandon, its existing base: see paras. 29, 36-37 and 64-65 of the Award. He also found that what was to happen to ACL's core business was the "very issue on the table" for negotiation. Further, he noted that auditors are mentioned in the definition of Business Assurance Products as a group which is to benefit from such products: para. 61. [96] The foregoing findings are part of the factual matrix that gave rise to the Reorganization Agreement. As is apparent from the authorities, the factual matrix includes the parties' relationship, the reasons for their negotiations and their commercial objectives: see, for example, Langley Lo-Cost Builders Ltd, supra; Athwal, supra. The arbitrator applied correct legal methodology when he considered these facts in interpreting the true meaning of the words of the Reorganization Agreement, viewed objectively and in context. His conclusion as to their true meaning is a question of mixed fact and law which is not reviewable on appeal. [97] In addition, in my view the arbitrator's interpretation is reasonable. At best, Arbutus puts forward an alternate reasonable construction for the meaning of Business Assurance Products based on the absence of the words noted. As MacKenzie J. (as she then was) stated in Avenue Canadian Adventures, Corp. at para. 72, however: ...It is not within the court's jurisdiction to substitute another reasonable interpretation in place of the one chosen by the Arbitrator, no matter how strenuously that alternative interpretation is advanced by counsel. [98] Arbutus also submits that the arbitrator ignored the qualifying phrase found in the Business Assurance Products definition: "... in order to provide increased assurance about the integrity, reliability and completeness of controls and compliance". This definition contains two crucial qualifiers: i) "in order to provide increased assurance..." and ii) "about the integrity, reliability and completeness of controls and compliance". According to Arbutus, these qualifying phrases must mean something, but the arbitrator's interpretation gives them no significance. In fact, however, they were tied directly to the new requirements that upper echelon management ensure properly functioning monitoring and control systems were in place. That being so, properly interpreted, the definition of Business Assurance Products does not include a conventional audit. [99] In support of its submission, Arbutus points to various items of evidence admitted at the arbitration. For example, Arbutus emphasizes that a Mr. Brownlee gave unchallenged evidence that ACL itself equated "Business Assurance" with the new requirements applicable to upper echelon management. It also says that contemporaneous documents indicate substantially the same thing. [100] I do not accept that the arbitrator ignored either the qualifying phrase referenced or the submission Arbutus advanced with respect to its meaning. On the contrary, he specifically addressed this point in the Award: see, for example, paras. 66 and 67. However, amongst other things, he found as a fact that audits concern assurances as to the integrity, reliability and completes of controls and compliance: see para. 17. He interpreted the meaning of the definition of Business Assurance Products in the light of this finding and, in so doing, made no extricable legal error. [101] Again, I conclude that the arbitrator's interpretation of the true meaning of the words, viewed objectively and in the context, is a question of mixed fact and law which is not reviewable. That being said, I accept that the meaning of Business Assurance Products advanced by Arbutus is a reasonable alternate interpretation taking into account the evidence that was presented. Indeed, in my view the alternative interpretation urged by Arbutus is, in many respects, persuasive. As already noted, however, the task of the reviewing court is not to substitute a different reasonable interpretation for that chosen by the arbitrator. The public policy objective of arbitral award finality would be seriously compromised if it were otherwise. [102] Arbutus submits further that the arbitrator ignored the entire agreement clause in the Reorganization Agreement. Where an agreement contains such a clause, contextual evidence must be approached with special care: Athwal, supra, para. 21. In this case, however, the Award makes no mention of the entire agreement clause. According to Arbutus, that omission represents a failure on the arbitrator's part to apply proper principles of contract interpretation. [103] It is true that the arbitrator did not refer to the entire agreement clause in his analysis. Given the key issues for determination, however, this is not surprising. A decision maker need not refer to every factual or legal point raised by a party: O'Brien. Rather, he or she must demonstrably grapple with the issues to be confronted in order to answer the questions submitted for arbitration. That is what the arbitrator did in this case. [104] The key questions to be addressed were the true meaning of Business Assurance Products and Data Conversion Product, viewed objectively in the context of the factual matrix. The arbitrator applied the proper principles in undertaking this interpretation exercise. After so doing, he reached the firm opinion that the definition of Business Assurance Products includes the audit function. Once he ascertained the true meaning of those words, he determined, correctly, that the restrictive covenant had been breached. [105] Finally, Arbutus submits the arbitrator ignored the qualifying phrase in the restriction of use of the ACL name and trademarks in s. 4.7 of the Reorganization Agreement "... indicating affiliation with the company in respect of the business, service, or product of Greenco [Arbutus] ..." The Award is silent on several aspects of the evidence and argument presented on this issue. In these circumstances, Arbutus says the arbitrator made an error or law. [106] I do not accept this submission. At paragraph 80 of the Award the arbitrator quoted the precise phrase identified by Arbutus and expressed the view that it was clear. In these circumstances it can hardly be said that he ignored the phrase in question. The arbitrator did no more than issue a declaration in the precise terms of the restrictive clause 4.7 found in the Reorganization Agreement. In my view, he did not err in so doing. Did the arbitrator commit an error of law by relying on purely extrinsic evidence where such evidence is either not permitted or only to be relied upon as a last resort? [107] Arbutus submits the arbitrator erred in law by relying on extrinsic and impermissible evidence that did not form part of the factual matrix. In particular, he relied on the evidence of Shayne Gregg that the term "assurance" is used by accountancy firms to include their audit divisions; Harald Will's statements regarding his subjective intention to stay in the audit software market; post-contractual communications; and evidence as to business efficacy. According to Arbutus, while the factual matrix may be considered in the interpretation process the contract's words are paramount and must not be overwhelmed by a contextual analysis. That is, however, what Arbutus says happened in this case. [108] The first example Arbutus points to is the evidence of Shayne Gregg, a chartered accountant. In paragraphs 36 and 40 of the Award the arbitrator made it clear he relied heavily on Mr. Gregg's expert evidence in reaching his conclusion that the audit function is at the heart of business assurance. Arbutus submits, however, that Mr. Gregg's evidence was both inadmissible and irrelevant. This is so because the definition of assurance he described did not apply in 2003 and the threshold to establish notorious trade usage of the term "assurance" was not met. In addition, Arbutus says the parties specifically defined the term Business Assurance Products in a distinctly different sense. [109] I do not accept that the arbitrator relied upon Mr. Gregg's evidence in the manner asserted by Arbutus. In particular, he did not admit it as opinion evidence regarding the meaning of the term Business Assurance Products within the audit software industry. Rather, the arbitrator used Mr. Gregg's evidence to help illuminate the nature or custom of the specialised market in which the Reorganization Agreement was concluded. Evidence regarding the commercial backdrop to a contract is admissible to assist a decision maker in discerning the parties' objective intentions, understood in the proper context: see Athwal, supra. The arbitrator did not err in admitting or using the evidence in this way. [110] Arbutus next points to Harald Will's evidence of his subjective intention that ACL would remain in the audit software market. In its submission, the arbitrator relied improperly on this evidence in interpreting the term Business Assurance Products. Arbutus says this error is apparent in paragraph 29 of the Award, where the arbitrator states "... at no time did ACL intend to abandon its core business, namely that of providing a software that would facilitate the audit process". In addition, according to Arbutus much of the evidence admitted with respect to Mr. Will's subjective intention supported the opposite conclusion. In the circumstances, the arbitrator's reliance on Mr. Will's 2011 statements as to his 2003 intention amounts to an error in law. [111] I do not accept that the arbitrator relied upon the Will evidence in the impermissible manner submitted by Arbutus. In paragraphs 13-15 of the Award, he cited correct legal principles regarding the use of subjective intention evidence and in paragraph 29 he expressly referred to his consideration of the permissible surrounding circumstances. When he went on to note that ACL intended to remain in the audit market he was referring to its objectively manifested intention, as discerned given the parties' commercial aims. This reference does not reveal an error of legal methodology with regard to his use of Mr. Will's evidence. [112] Arbutus points further to several references in the Award to post-contractual conduct of the parties. These include the ACL memorandum announcing Mr. Brodie's departure, his post-contract sales activities and his emails of December 2005 and May 2010. Arbutus submits such extrinsic evidence is admissible only as a last resort to resolve a genuine ambiguity contained in the contract. No such ambiguity existed in the Reorganization Agreement. Accordingly, the arbitrator's reliance upon post-contractual conduct amounted to an error of legal methodology. [113] This submission misconceives the arbitrator's use of the post-contractual conduct evidence. At paragraph 15 of the Award he cited the correct principle and at paragraphs 29 and 40 stated he had reached his conclusion without referring to post-contractual conduct. He went on, however, to say that the post-contractual conduct evidence reinforced his conclusion reached through the proper interpretive process. At most, his comments on post-contractual conduct evidence are obiter dicta and thus unreviewable. [114] Arbutus' final submission under this ground is that the arbitrator relied heavily on "business efficacy" that was external to the Reorganization Agreement. Extrinsic evidence of this sort is unnecessary and unhelpful unless the words of a contract are ambiguous; however, the words of the Reorganization Agreement were not. That being so, according to Arbutus the arbitrator erred in law in using his sense of business efficacy as the dominant guiding interpretive tool in constructing the contract. This amounted to an error of law. [115] I do not accept that the arbitrator misused his finding as to business efficacy in interpreting the Reorganization Agreement. Good business sense is a factor which a decision maker is entitled to consider in interpreting a commercial contract. If the finding as to business efficacy is not reasonably supportable on the evidence a legal error will be established. In this case, however, the arbitrator's finding is well supported. In addition, his conclusion regarding business efficacy and the meaning of the contract's words is one of mixed fact and law. Did the arbitrator commit an error of law by failing to apply the correct legal principles with respect to the interpretation of a restrictive covenant in restraint of trade? [116] Arbutus submits the arbitrator erred in law by failing to apply correct legal principles in interpreting the Business Assurance Products and Data Conversion Products restrictive covenants. Such clauses are a restraint of trade and must be reasonable and unambiguous. Rather than interpreting the restrictive covenants narrowly, however, the arbitrator applied a broad and expansive interpretation. In so doing, he found the Business Assurance Products restrictive covenant encompassed potentially all aspects of the business rather than limiting it to a narrow protected area of activity. He also found the Data Conversion Products restrictive covenant limited Arbutus to this form of activity rather than simply providing for a narrow protected area of activity. [117] According to Arbutus, the parties did not intend to demarcate two "silos" of permitted activity and limit each side to its respective area. Rather, they intended to leave areas of the business that fell outside the restrictive covenants' narrow terms open for mutual co-existence and competition. This is apparent, Arbutus says, on the plain wording of the Reorganization Agreement. As a result of the arbitrator's failure to apply correct legal methodology in interpreting the restrictive covenants narrowly, however, he committed an error of law. [118] I do not accept this submission. The arbitrator did not interpret the Reorganization Agreement as restricting either party to a "silo" of permitted activity. Rather, he interpreted it as restricting each from engaging in the impermissible area of activity as defined. The arbitrator referred to the leading appellate authorities on interpreting restrictive covenants, applied them to the facts and concluded that the restrictive covenant regarding Business Assurance Products, understood in context, was reasonable. In so doing, he applied correct legal methodology and answered a question of mixed fact and law. Did the arbitrator commit an error of law by failing to apply the correct legal principles with respect to the interpretation of the term Data Conversion Products? [119] Arbutus submits that the arbitrator committed four errors of contractual interpretation methodology when interpreting the words of the restrictive covenant relating to Data Conversion Products. According to Arbutus, those errors were: reading in an exception for "unofficial marketing and sales"; reading in an exception for "results not data"; reading in an exception allowing use by a third-party program within the software bundle; and finding that DATEV's use of ACL fell under s. 9.4(d), as being "incidental to a Business Assurance Product". In consequence, Arbutus says the arbitrator nullified its protections under the Reorganization Agreement. This amounted to an error in law. [120] Arbutus approached this ground of appeal by focusing heavily on the evidence and arguing that it supported different conclusions than those reached by the arbitrator. In so far as an extricable error of legal methodology can be discerned from the argument it is that the arbitrator failed to apply the interpretive principle that effect should be given to all contractual provisions and an interpretation that renders one of them ineffective should be rejected. In this case, however, the arbitrator interpreted Data Conversion Products in a manner that rendered the restrictive covenant ineffective and thus committed a legal error. He also read in exceptions amounting to unexpressed terms by necessary implication where it was not necessary to do so in order to give the contract business efficacy. [121] I do not accept that the arbitrator's interpretation of Data Conversion Products rendered the restrictive covenant ineffective or that he read in exceptions as Arbutus alleges. Rather, he interpreted the true meaning of the words of the Data Conversion Products restrictive covenant more narrowly than Arbutus urged, taking into account the surrounding circumstances. The inherent function of the ACL software was one important aspect of the factual matrix considered by the arbitrator. Given the words of the contract and the facts found, he concluded that ACL's conduct was not captured by the Data Conversion Products restrictive covenant. [122] In my view, the arbitrator's interpretation of the restrictive covenant was reasonable and well supported by the evidence. Even if I were persuaded the alternate interpretation urged by Arbutus was more persuasive (which I am not), I would not be entitled to substitute my view for his. At most, Arbutus has raised a question of mixed fact and law. Did the arbitrator commit arbitral error by dismissing the counterclaim? [123] Arbutus submits that the arbitrator committed arbitral error by dismissing the counterclaim although a final adjudication was not sought in the pleadings. In so doing, he denied Arbutus the opportunity to make its case, denied Arbutus a fair hearing and breached the rules of natural justice. [124] According to Arbutus, ACL failed to produce many documents relevant to the counterclaim despite acknowledging their existence. This failure made it impossible for Arbutus to prove its counterclaim. In these circumstances, Arbutus says it was entitled to the discovery and accounting remedies sought in its pleadings so that it could establish and quantify the breaches and damages: see, for example, D. Fogell Associates Ltd. v. Esprit De Corp (1980) Ltd., (9 May 1997) Vancouver C94575 (BCSC). Rather than affording this opportunity, however, the arbitrator summarily dismissed the counterclaim. [125] I do not accept that the arbitrator committed arbitral error by dismissing the counterclaim. He was asked to adjudicate the dispute referred for arbitration based on the arbitration agreement and the pleadings produced by the parties. The joint submission referred to the Arbutus allegation that ACL had breached the restrictive covenant regarding Data Conversion Products. The parties submitted the matters in dispute for determination and agreed that an expedited arbitration would proceed in two stages. [126] By agreement, the first stage of the arbitration involved a determination of the liability issues raised by the claims of each party. As noted, Arbutus sought a declaration that ACL had breached the restrictive covenant regarding Data Conversion Products in its counterclaim. It also asserted that it could establish its entitlement to such a declaration based on documents produced to date and other evidence presented at the arbitration. In addition, it agreed to proceed despite the arbitrator's refusal to order ACL to produce more documents at the outset. [127] At the conclusion of the arbitration Arbutus submitted the evidence presented proved ACL had breached the restrictive covenant regarding Data Conversion Products. The arbitrator did not agree. He carefully reviewed the evidence adduced, heard lengthy submissions and concluded that Arbutus had not established any breach of the restrictive covenant regarding Data Conversion Products. [128] The arbitrator's conclusion was based largely on his interpretation of the scope of the restrictive covenant regarding Data Conversion Products. In particular, he did not accept Arbutus' argument that the aspect of the ACL software program involving data conversion was used in a prohibited sense. This was an issue he was asked by the parties to determine. As ACL submits, the arbitrator cannot be said to have made an arbitral error in deciding that Arbutus had failed to prove the case it had pleaded and pursued: Hanna Collision Repair (1984) Ltd., supra, paras. 42-29. Did the arbitrator commit arbitral error by refusing to order that ACL make further documentary disclosure? [129] Arbutus submits that the arbitrator committed arbitral error by refusing to order ACL to make further documentary disclosure. It says this occurred, at least in part, because the arbitrator failed to distinguish between the many documents ACL produced to support its own claim and those documents it should have produced in connection with the counterclaim. According to Arbutus, the expedited nature of the arbitration did not excuse ACL from its obligation to produce all relevant documents. Nevertheless, the arbitrator relied on time and cost factors when refusing its application for further and proper document production. In so doing, it says he acted in a manner that was procedurally unfair and committed a breach of the rules of natural justice. [130] I do not accept that the arbitrator erred by refusing to order ACL to produce further documents in connection with the counterclaim. He considered ACL's document production conducted to date, Arbutus' demands for further production, and the cost and efficiency implications of acceding to the application. Most importantly, the arbitrator considered the factual foundation presented by Arbutus in support of its application for further document production. He concluded that it did not raise the request "from a mere fishing expedition to a request for specifically identified information based on evidence that would show its relevancy": Award, para. 131. [131] The arbitrator was entitled to reach this conclusion. In so doing, he proceeded in a manner that was entirely procedurally fair. As is apparent from his analysis, he heard and considered the argument advanced by Arbutus and made his decision based on the information presented and proper legal principles. In these circumstances, there is no basis for concluding that he committed a breach of natural justice. CONCLUSION [132] The appeal is dismissed for the foregoing reasons. If necessary, counsel may speak to costs. "DICKSON J."