Spirit Bay Developments Limited Partnership v. Scala Developments Consultants Ltd.

2021 BCSC 1415 Spirit Bay Developments Limited Partnership v. Scala Developments Consultants Ltd. IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Spirit Bay Developments Limited Partnership v. Scala Developments Consultants Ltd., 2021 BCSC 1415 Date: 20210720 Docket: S211016 Registry: Vancouver Between: Spirit Bay Developments Limited Partnership and TSD General Partner Inc. Petitioners And Scala Developments Consultants Ltd. Respondent Before: The Honourable Mr. Justice Davies On appeal from: An order of an Arbitrator, dated February 18, 2020 (Scala Developments Consultants Ltd. v. Spirit Bay Developments Limited Partnership, BCIACAC File DCA-2084). Reasons for Judgment Counsel for the Petitioners: P. Senkpiel E.L. Hansen Counsel for the Respondent: S. Hern Q.C. N. Vaartnou Place and Date of Trial/Hearing: Vancouver, B.C. February 22 - 25 and April 15, 2021 Place and Date of Judgment: Vancouver, B.C. July 20, 2021 Table of Contents INTRODUCTION. 3 BACKGROUND TO THE ARBITRATED DISPUTES. 4 THE ARBITRATION PROCESS. 6 BACKGROUND TO THE SUBSTANTIVE ISSUES ON APPEAL. 7 The 2018 price increases. 7 The WIP Completion Contract 8 "Non-milestone work" and the "Handover Invoices" 9 STANDARD OF REVIEW ON APPEAL. 10 DISCUSSION AND ANALYSIS. 14 1) Did the Arbitrator err in law by resorting to subsequent conduct without first finding ambiguity in the contract? and. 14 2) Did the Arbitrator err in law by applying a commercial reasonableness test to interpretation of the contract?. 14 3) Did the Arbitrator err in law in his application of unjust enrichment?. 27 REMEDY. 33 INTRODUCTION [1] In an award (the "Award") dated February 11, 2020 and amended on March 9, 2020 an arbitrator (the "Arbitrator") appointed by the parties under the provisions of the Arbitration Act, R.S.B.C.1996, c. 55 [the Act] found that the Petitioners, Spirit Bay Developments General Partnership and TSN General Partner Inc. (collectively "Spirit Bay") are indebted to the Respondent, Scala Development Consultants Ltd. ("Scala") for damages in the amount of $1,769,787.16 for construction work done by Scala on a real estate development on Vancouver Island. [2] The Arbitrator also dismissed a counterclaim brought by Spirit Bay. [3] On October 15, 2020 Spirit Bay applied to this Court for orders setting aside the Award or, alternatively remitting the Award for reconsideration by another arbitrator. [4] In the further alternative Spirit Bay sought leave to appeal the Award under s. 31(1)(b) of the Act on the ground that in reaching the Award, the Arbitrator erred in law. In doing so Spirit Bay alleged 17 separate errors of law. [5] After three days of hearings, in reasons for judgment indexed under neutral citation 2020 BCSC 1839 (issued on November 26, 2020) Johnston J. dismissed most of the relief sought by Spirit Bay. He did, however, grant leave to appeal the Award in respect of "three points of law that might effect the result [of the arbitration]". [6] Those three points of law on which leave was granted are: 1) Did the Arbitrator err in law by resorting to subsequent conduct without first finding ambiguity in the contract? 2) Did the Arbitrator err in law by applying a commercial reasonableness test to interpretation of the contract? 3) Did the Arbitrator err in law in his application of unjust enrichment? [7] The answers to those three questions of law and the impact of those answers upon the Award are the subject of these reasons. BACKGROUND TO THE ARBITRATED DISPUTES [8] Spirit Bay is a limited partnership that operates a residential development on the reserve lands of the Beecher Bay (Sc'ianew) First Nation of which it holds several head leases. [9] Spirit Bay develops the lands over which it holds leases by the sale of sub-lease interests as fully serviced residential lots together with either pre-built homes or custom designed homes. [10] From February 2014 until sometime in 2015 Spirit Bay had engaged Cantech Consultants Ltd. ("Cantech") on a "cost-plus" contract for the construction of pre-built homes in the development. [11] When construction by Farmer Construction Ltd. ("Farmer") ended in 2015 Spirit Bay and Scala entered into a contract on November 20, 2015 (the "Housing Contract") for the construction of homes in the development. [12] The Housing Contract contains the following recitals and terms relevant to the issues raised in the arbitration and on this appeal: A. WHEREAS, SPIRIT BAY has leased a parcel of development land located within the boundaries of the Sc'ianew First Nation, locally known as Beecher Bay Reserve #1, (the "Development Parcel"); B. AND WHEREAS, SPIRIT BAY intends to develop the Development Parcel by the creation of lots and the construction thereon of single family dwellings for sale to the public (the "Development"); C. AND WHEREAS, SPIRIT BAY intends the Development to include lots sold to individuals who will build their dwellings ("Custom Lots") and lots upon which SPIRIT BAY will construct dwellings for sale with a lot as a package ("Village Homes"); D. AND WHEREAS, SPIRIT BAY has constituted; SCALA as the exclusive contractor for the Village Homes component of the single family dwelling units to be located on the Development Parcel; E. AND WHEREAS, SCALA has agreed to loan to SPIRIT BAY sufficient funds To allow SPIRIT BAY to repay Cantech Construction Ltd. for its having built the Visitor Centre at Spirit Bay; F. AND WHEREAS the parties have agreed to reduce their respective understandings in respect of these matters to writing as provided herein; NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual covenants hereinafter appearing, the parties agree as follows: 1. SCALA agrees to loan to SPIRIT BAY One Hundred and Forty Thousand Dollars ($140,000) interest free AND DUE sixty (60) days after termination of this Agreement, 2. The security for this loan is the Visitor Centre (building only) located at the Development. 3. SPIRIT BAY does by this Agreement constitute SCALA as the exclusive contractor for the Village Homes as described in recital C and recital D herein; this appointment is irrevocable .and is made in consideration of the loan made in recital E described in this Agreement; for clarity if is agreed that- SCALA does not have an exclusive entitlement to build dwellings for the Custom Lots component of the Development. 4. it is agreed by the parties that SPIRIT BAY or SCALA may terminate this Agreement, oh sixty (60) days notice, without penalty; if this relationship is terminated as provided in this section, SPIRIT BAY has the obligation on the termination date, as specified in the sixty (60) day notice, to repay SCALA, the One. Hundred and Forty Thousand Dollars ($140,000) loan without interest or penalty; all reference to days in this section refer to calendar days and not working days. 5. On any termination of this Agreement as provided in section 4, the. parties will cooperate to conclude their relationship, in a professional manner by payment of ail moneys owed and by the mutual provision of such information as may be necessary to ensure a smooth transition to the next contracting entity. 6. The time schedule for commencement of construction of individual single family dwellings within the Development will be as established by the parties, having regard to sales performance within the Development, and the reasonable capacity of SCALA to construct single family dwellings on the Development, from time to time. 7. A fixed price will be provided by SCALA for the construction of each individual single family dwelling for the Development SPIRIT BAY will authorize SCALA to proceed with each specified dwelling on, the basis of the fixed price, if agreed, and will pay for the construction on a "draw" basis, based on the fixed price, according to the following schedule: On commencement of construction 10% of fixed price On lock-up of the dwelling 40% of fixed price On completion of drywall 25% of fixed price On substantial completion of the dwelling 25% of fixed price 8. If there is no agreement on a fixed price contract, then tire parties agree to submit that or any other pricing dispute to the process agreed to in section 13. [13] Although those alleged errors of law upon which Johnston J. granted leave to appeal are stated in general terms, during the conduct of this appeal the focus was upon the effect, if any, of each of those alleged errors on three more narrow substantive disputes in which the Arbitrator found in favour of Scala. [14] Those disputes concern issues identified by the Arbitrator in the Award as: 1) "The 2018 price increase"; 2) "The Work in Progress (WIP) Completion Contact"; and 3) "Non-Milestone Work" and "Handover Invoices". [15] Before addressing those issues I will briefly address aspects of the arbitration process in order to give some context to the Award. THE ARBITRATION PROCESS [16] The arbitration required many pre-hearing applications and at least seven days of hearings that included both affidavit and viva voce evidence and hundreds of pages of documentary exhibits. The parties also filed lengthy written submissions supplemented by one day of oral submissions. [17] After the completion of the arbitral process in the Award comprising 82 pages the Arbitrator made findings of fact related to the many disputes between the parties not all of which are now before the Court on this appeal. [18] In doing so the Arbitrator not only dismissed Spirit Bay's counterclaims but also made significant determinations of credibility that were critical of Spirit Bay's evidence as well as its motivation in advancing some arguments. [19] The Arbitrator's findings of fact and determinations of credibility are not reviewable on this appeal. [20] I will accordingly only discuss findings of fact and/or credibility and the issues to which they are related if doing so is necessary to give context to the three alleged errors of law stated by Johnston J. to which Spirit Bay's appeal is limited. BACKGROUND TO THE SUBSTANTIVE ISSUES ON APPEAL [21] Spirit Bay has submitted that the three errors of law upon which leave to appeal was granted infected the Arbitrator's reasoning and the conclusions he reached in respect of the three substantive issues which I earlier identified. [22] I will briefly address the background to those issues in the chronological order in which they arose. The 2018 price increases [23] The Arbitrator was required to determine whether Spirit Bay was obligated to pay Scala's invoices for price increases on work done in its construction of houses under the Housing Contract in 2017 and 2018. [24] The 2018 price increase for which Scala sought payment related in part to work done under the Housing Contract and in part to work done under the Work In Progress (WIP) Completion Contact (the significance of which I will next discuss) after Spirit Bay terminated the Housing Contract. [25] The total amount claimed by Scala in its invoices for the two price increases in the two years was $331,697.17. [26] The Arbitrator found (at para. 221 of the Award) that Spirit Bay had agreed to a price increase for homes constructed by Scala in 2017. [27] In its written reply on this appeal Spirit Bay has acknowledged that the Arbitrator's findings as to the 2017 price increase are not reviewable. [28] After concluding that the 2017 price increases had been agreed to by Spirit Bay the Arbitrator then found (at para. 234 of the Award) that Spirit Bay had also agreed to the 2018 price increases and included those increases in his determination of Scala's entitlement to payment for those invoices delivered to Spirit Bay after Scala left the site. [29] Notwithstanding its concession that the Arbitrator's findings that the 2017 price increases are not reviewable, on this appeal Spirit Bay continues to assert that the Arbitrator erred in law in determining that Scala's invoices based upon the 2018 price increases are payable. The WIP Completion Contract [30] On August 27, 2018 Spirit Bay notified Scala that it was terminating the Housing Contract pursuant to section 4 of the Housing Contract and then, in September 2018, engaged Farmer on a "cost plus" contract to construct some Village Homes. [31] Notwithstanding Spirit Bay's termination of the Housing Contract and the commencement of work by Farmer, Scala continued to work on the site from September until December 6, 2018 on those houses it had under construction when Spirit Bay terminated the Housing Contract on August 27, 2018. [32] In the arbitration Scala claimed that its work after the Housing Contract was terminated was done under an oral contract that Scala and the Arbitrator called the Work In Progress (WIP) Completion Contract. [33] Spirit Bay denied the existence of the WIP Completion Contract arguing that Scala was supposed to finish what they had contracted to do pursuant to the Housing Contract. [34] The Arbitrator found (at para. 258 of the Award) that Scala had agreed to finish the houses it was working on when Spirit Bay terminated the Housing Contract "provided that Spirit Bay agreed to pay for the work on advances it received on account of work on a particular house" [Emphasis by Arbitrator]. [35] The Arbitrator then awarded Scala all of the monies invoiced for that work under the WIP Completion Contract. "Non-milestone work" and the "Handover Invoices" [36] Scala left the site on December 6, 2018 over disputes about payment for its work under the WIP Completion Contract. [37] When Scala left the site it delivered the "Handover Invoices" related to all work done by it up to December 6, 2018. As of that date, however, not all work had been completed on all of the houses that were being constructed by Scala under the WIP Completion Contract. Also, not all "milestones" which could trigger payment for work done had been completed by Scala. [38] The work to complete those houses was then done by Farmer pursuant to the cost plus contract it entered into with Spirit Bay when Spirit Bay terminated the Housing Contract. [39] In the arbitration Spirit Bay disputed any obligation to pay the Handover Invoices. It submitted that no payment was due to Scala for work on houses in respect of which construction had not reached a specific "milestone" requiring payment. [40] The Arbitrator was required to resolve many inter-related disputes concerning Spirit Bay's Handover Invoices including: 1) What milestones triggered the obligation to pay for work done under the WIP Completion Contract? 2) What stage of construction had actually been reached on each home that was the subject of a Handover invoice? and, 3) Was any payment due for work that was competed to a stage that was between milestones? [41] In resolving those disputes the Arbitrator accepted Scala's evidence as to the stage of construction reached on each house. Also, with the exception of $1,065 paid directly by Spirit Bay to a supplier the Arbitrator awarded Scala all amounts invoiced by it under the Handover Invoices whether or not a specific milestone had been reached by Scala because, when the arbitration was heard, all construction on all of the houses had been completed by Farmer. STANDARD OF REVIEW ON APPEAL [42] Before proceeding to my consideration of the three alleged errors of law that are the subject of this appeal and my further consideration of the three substantive issues relating to those errors upon which Spirit Bay relies in seeking to set aside the Award it is necessary to address the standard of review that applies on this appeal. [43] Prior to the recent decision of the Supreme Court of Canada in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 [Vavilov] it was settled law that the judicial standard of review for appeals on questions of law arising from arbitral decisions under s. 31 of the Act was "almost always" reasonableness unless the question of law was one that involved constitutional questions or questions of law of importance to the legal system as a whole outside of the arbitrator's expertise. See: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 [Sattva] at para. 106 and Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 [Teal Cedar] at para. 1. [44] In Vavilov, however, the Court took "the opportunity to re-examine its approach to judicial review of administrative decisions". [45] In doing so the Court addressed the standard of review to be applied when a court reviews the merits of an administrative decision and provided a revised framework for reviewing courts to follow when conducting a reasonableness review. [46] Of central importance to the determination of the standard of review to be applied to the Arbitrator's decision and the Award in this case is that in Vavilov the Court also departed from its recent jurisprudence when what is being reviewed is an administrative decision in respect of which the legislature provides for an appeal. [47] In Vavilov, at para. 37, the majority stated that, rather than the presumptive standard of reasonableness applicable to the judicial review of administrative decision makers: [37] It should therefore be recognized that, where the legislature has provided for an appeal from an administrative decision to a court, a court hearing such an appeal is to apply appellate standards of review to the decision. This means that the applicable standard is to be determined with reference to the nature of the question and to this Court's jurisprudence on appellate standards of review. Where, for example, a court is hearing an appeal from an administrative decision, it would, in considering questions of law, including questions of statutory interpretation and those concerning the scope of a decision maker's authority, apply the standard of correctness in accordance with Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 8. Where the scope of the statutory appeal includes questions of fact, the appellate standard of review for those questions is palpable and overriding error (as it is for questions of mixed fact and law where the legal principle is not readily extricable): see Housen, at paras. 10, 19 and 26-37. Of course, should a legislature intend that a different standard of review apply in a statutory appeal, it is always free to make that intention known by prescribing the applicable standard through statute. [48] Accordingly, the fact that the review of the Arbitrator's decision is now before this Court under the provisions of s. 31 of the Act gives rise to the question of whether this appeal is subject to an appellate standard of review of correctness rather than the reasonableness standard enunciated in Sattva and Teal Cedar. [49] Although Spirit Bay submits that the Award should be set aside whether reviewed on either a reasonableness or a correctness standard it also submits that Vavilov has impliedly overruled Sattva and Teal Cedar so that as a statutory appeal the Arbitrator's decision is appropriately reviewable on the correctness standard. [50] Scala submits that because Vavilov was an appeal from an administrative tribunal rather than from a private arbitrator and because the Court did not consider its recent decisions in either Sattva or Teal Cedar the standard of review to be applied on this appeal remains that of reasonableness as established by those cases. [51] Since Vavilov was decided in 2019 the question of whether the standard of review of arbitral decisions in which there is a statutory appeal mechanism is reasonableness or correctness has been the subject of a number of conflicting decisions from Canadian courts. [52] In British Columbia in Nolin v. Ramirez, 2020 BCCA 274 (at para. 36) although Bennett J.A. adverted to the "issue percolating across the country as to whether Vavilov applies to commercial arbitration or arbitration generally" she decided (at para. 39) that because it made no difference whether a reasonableness or a correctness standard applied to the outcome of the appeal it was unnecessary to decide that "obviously complex question". [53] The issue has, however, very recently been the subject of discussion by the Supreme Court of Canada in its decision in Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7 [Wastech] . [54] In that decision, although Browne and Rowe JJ. agreed that Wastech's appeal should be dismissed they authored a minority decision in which they stated at paras. 120 and 121: [120] Factors that justify deference to the arbitrator, notably respect for the parties' decision in favour of alternative dispute resolution and selection of an appropriate decision‑maker, are not relevant to this interpretive exercise. What matters are the words chosen by the legislature, and giving effect to the intention incorporated within those words. Thus, where a statute provides for an "appeal" from an arbitration award, the standards in Housen apply. To this extent, Vavilov has displaced the reasoning in Sattva and Teal Cedar. Concluding otherwise would undermine the coherence of Vavilov and the principles expressed therein. [121] The appeal in this case was brought pursuant to s. 31 of the Arbitration Act, R.S.B.C. 1996, c. 55,[2] which provides that, either by consent of the parties or with leave of the Supreme Court of British Columbia, a party to an arbitration "may appeal to the court on any question of law arising out of the award". In light of Vavilov, it follows that the standard of review to be applied by this Court in this case is correctness (Housen, at para. 8). Our conclusion on this point is limited to the specific statutory provision at issue. In every case, the question is one of legislative intention, as reflected in the language of the statute. [55] The majority in Wastech disagreed with the minority on the issue of whether to then address the potential conflict between Vavilov and the Court's previous decisions in Sattva and Teal Cedar. [56] In doing so, Kaiserer J. writing for the majority stated at paras. 45 and 46: [45] This Court has indeed held that the standard of review applicable in appeals under s. 31 of the Arbitration Act is reasonableness, unless the question is one that would attract the correctness standard, such as constitutional questions or those questions of law that are of central importance to the legal system as a whole and outside the adjudicator's expertise (Sattva, at paras. 102‑6; Teal Cedar, at paras. 74‑76). I am mindful, however, that this Court's judgment in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, which was released shortly after this appeal was heard, set out a revised framework for determining the standard of review a court should apply when reviewing the merits of an administrative decision. I note that Vavilov does not advert either to Teal Cedar or Sattva, decisions which emphasize that deference serves the particular objectives of commercial arbitration (see Sattva, at para. 104; Teal Cedar, at paras. 81‑83). [46] In these circumstances, I would leave for another day consideration of the effect, if any, of Vavilov on the standard of review principles articulated in Sattva and Teal Cedar. We have not had the benefit of submissions on that question, nor do we have the assistance of reasons on point from the courts below. Moreover, the parties here agree, rightly in my view, that the outcome of this appeal does not depend on the identification of the proper standard of review. Thus, although this Court would ordinarily be called upon to determine whether the Court of Appeal identified the correct standard of review and applied it properly, in this case it is unnecessary to decide whether the standard is correctness or reasonableness (see Agraira v. Canada (Public Safety and Emergency Preparedness), 2013 SCC 36, [2013] 2 S.C.R. 559, at paras. 45‑47). On either standard, the arbitrator's award cannot stand. Respectfully stated, the fact that I do not pursue discussion of this particular point raised in the opinion of my colleagues should not be understood as my agreeing with their view (see, similarly, Newfoundland and Labrador (Attorney General) v. Uashaunnuat (Innu of Uashat and of Mani‑Utenam), 2020 SCC 4, at para. 15). [57] Although Spirit Bay acknowledges that the minority decision in Wastech is not binding upon this Court it asserts that the decision has persuasive value and should be applied in this case. [58] I have concluded that the majority decision of the Court in Wastech precludes the conclusion that either Sattva or Teal Cedar has been impliedly over-ruled by Vavilov. [59] Although by leaving open the question of the standard of review to be applied in reviewing arbitral decisions under s. 31 of Act the majority in Wastech has allowed some uncertainty in administrative law to continue, I am satisfied that stare decisis requires that the reasonableness standard enunciated in Sattva and Teal Cedar must still be applied in determining the issues raised on this appeal. DISCUSSION AND ANALYSIS [60] I will consider Spirit Bay's submissions and Scala's responses to those submissions in respect of each of the three errors of law alleged by reference to each of those alleged errors and the impact, if any, upon the three primary substantive disputes in issue. 1) Did the Arbitrator err in law by resorting to subsequent conduct without first finding ambiguity in the contract? and 2) Did the Arbitrator err in law by applying a commercial reasonableness test to interpretation of the contract? [61] I have determined that it is appropriate to address the first two alleged errors of law stated by Johnston J. collectively because of the extent to which they are inter-related. [62] Spirit Bay submits that the Arbitrator's contractual analysis was fundamentally flawed and that these interrelated errors of analysis and interpretation so permeated the Award that it must be set aside. [63] Determination of whether the Arbitrator erred in his application of principles of contract interpretation as alleged by Spirit Bay, and, if so to what extent and effect requires consideration of the principles involved in the context of an appeal under s. 31 of the Act. [64] In Sattva at paras. 42 to 55 Rothstein J. (for the Court) discussed the historical development of approaches to the determination of when contractual interpretation is a question of law and when it is a question of mixed law and fact. [65] That distinction is significant because as noted, s. 31 of the Act limits appeals to questions of law. [66] At paras. 46 to 50 in Sattva, Rothstein J. wrote: [46] The shift away from the historical approach in Canada appears to be based on two developments. The first is the adoption of an approach to contractual interpretation which directs courts to have regard for the surrounding circumstances of the contract -- often referred to as the factual matrix -- when interpreting a written contract (Hall, at pp. 13, 21-25 and 127; and J. D. McCamus, The Law of Contracts (2nd ed. 2012), at pp. 749-51). The second is the explanation of the difference between questions of law and questions of mixed fact and law provided in Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748, at para. 35, and Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 26 and 31-36. [47] Regarding the first development, the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine "the intent of the parties and the scope of their understanding" (Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744, at para. 27, per LeBel J.; see also Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, at paras. 64-65, per Cromwell J.). To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning: No contracts are made in a vacuum: there is always a setting in which they have to be placed. . . . In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating. (Reardon Smith Line, at p. 574, per Lord Wilberforce) [48] The meaning of words is often derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement (see Moore Realty Inc. v. Manitoba Motor League, 2003 MBCA 71, 173 Man. R. (2d) 300, at para. 15, per Hamilton J.A.; see also Hall, at p. 22; and McCamus, at pp. 749-50). As stated by Lord Hoffmann in Investors Compensation Scheme Ltd. v. West Bromwich Building Society, [1998] 1 All E.R. 98 (H.L.): The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. [p. 115] [49] As to the second development, the historical approach to contractual interpretation does not fit well with the definition of a pure question of law identified in Housen and Southam. Questions of law "are questions about what the correct legal test is" (Southam, at para. 35). Yet in contractual interpretation, the goal of the exercise is to ascertain the objective intent of the parties -- a fact-specific goal -- through the application of legal principles of interpretation. This appears closer to a question of mixed fact and law, defined in Housen as "applying a legal standard to a set of facts" (para. 26; see also Southam, at para. 35). However, some courts have questioned whether this definition, which was developed in the context of a negligence action, can be readily applied to questions of contractual interpretation, and suggest that contractual interpretation is primarily a legal affair (see for example Bell Canada, at para. 25). [50] With respect for the contrary view, I am of the opinion that the historical approach should be abandoned. Contractual interpretation 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. [67] As to the "extraction of a question of law from one of mixed law and fact", at para. 53, Rothstein J. observed: [53] 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 (Housen, at paras. 31 and 34-35). 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" (King, at para. 21). Moreover, there is no question that many other issues in contract law do engage substantive rules of law: the requirements for the formation of the contract, the capacity of the parties, the requirement that certain contracts be evidenced in writing, and so on. [68] He said further at para. 55: [55] Although that caution was expressed in the context of a negligence case, it applies, in my opinion, to contractual interpretation as well. As mentioned above, the goal of contractual interpretation, to ascertain the objective intentions of the parties, is inherently fact specific. The close relationship between the selection and application of principles of contractual interpretation and the construction ultimately given to the instrument means that the circumstances in which a question of law can be extricated from the interpretation process will be rare. In the absence of a legal error of the type described above, no appeal lies under the AA from an arbitrator's interpretation of a contract. [69] I have concluded that Spirit Bay has established that the Arbitrator did, in fact, err in law in his application of principles of contract interpretation in the two ways alleged. [70] I say that because, in Sattva (at paras. 57 and 58) Rothstein J. stated: [57] While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement (Hayes Forest Services, at para. 14; and Hall, at p. 30). The goal of examining such evidence is to deepen a decision-maker's understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract (Hall, at pp. 15 and 30-32). While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement (Glaswegian Enterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), 101 B.C.A.C. 62). [58] The nature of the evidence that can be relied upon under the rubric of "surrounding circumstances" will necessarily vary from case to case. It does, however, have its limits. It should consist only of objective evidence of the background facts at the time of the execution of the contract (King, at paras. 66 and 70), that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting. Subject to these requirements and the parol evidence rule discussed below, this includes, in the words of Lord Hoffmann, "absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man" (Investors Compensation Scheme, at p. 114). Whether something was or reasonably ought to have been within the common knowledge of the parties at the time of execution of the contract is a question of fact. [My emphasis.] [71] Unfortunately the Arbitrator did not limit his interpretation of the Housing Contract analysis of the parties' knowledge at the time of its formation. [72] To the contrary, at paras. 167 to 170 of the Award the Arbitrator wrote: [167] The parties have no dispute about the law that should be applied to interpretation of the contract. These principles were referred to in Scala's argument. [168] At the heart of this is that a contract must be interpreted objectively, in a commercially reasonable manner, with a consideration of the factual matrix: Toronto (City) v. W.H. Hotel Ltd, [1956] S.C.R. 434, 56 D.L.R. (2d) 539 (SCC) at page 548. [169] What is commercially reasonable depends on the context of the contract, and how the words would be understood by a reasonable business person: Sativa Capital Corp v. Creston Moly Corp, 2014 SCC 53, at paragraphs 47 to 48.These considerations can include matters which ought to reasonably have been within the knowledge of both parties at or before the date of contracting. [170] The surrounding circumstances are relevant in contract interpretation: British Columbia (Minister of Technology Innovation and Citizen's Services) v. Columbus Real Estate Inc, 2016 BCCA 283 at paragraphs 41-43 and 0930032 B.C. Ltd v. 3 Oaks Dairy Farms Ltd., 2015 BCCA 332 at paragraphs 3-5. [73] The Arbitrator's statement at para. 168 relying upon the Supreme Court of Canada's decision in Toronto (City) v. W. H. Hotels Ltd. [W.H. Hotels] both overstates and mis-states the principle of contractual interpretation discussed in the case that refers not to "commercial reality" but rather avoiding interpretation which "would result in commercial absurdity". [74] The Arbitrator also did not reconcile the principle that he incorrectly extracted from the Court's 1956 decision in W.H. Hotels with the more modern principles of interpretation enunciated in Sattva. [75] In that regard, although at para. 169 of the Award the Arbitrator did refer to paras. 47 to 48 of Sattva (which I have quoted above) he erroneously added or substituted the concept of "commercial reasonableness" to (or in place of) legitimate considerations of the "commercial purpose" of the transaction. [76] The Arbitrator then further erred by stating (at para. 171 of the Award): [171] Subsequent conduct of the parties may be considered in helping to interpret a contract, regardless of whether there is ambiguity in the contract: Wade v. Duck, 2018 BCCA 176, at paragraph 28 and 29. [My emphasis.] [77] Contrary to that assertion, in Wade after considering para. 57 of Sattva, Kirkpatrick J.A. (for the Court) reached the opposite conclusion. In doing so, she stated (at para. 28): [28] evidence of subsequent conduct should only be admitted if the contract is found to be ambiguous after one has considered its text and the factual matrix surrounding the creation of the contract: Re Canadian National Railways and Canadian Pacific Ltd. (1978), 95 D.L.R. (3d) 252, aff'd [1979] 2 S.C.R. 668 [Canadian National Railways] [My emphasis.] [78] Further, contrary to the principles of interpretation stated by the Arbitrator in the Award at 171 Kirkpatrick J.A. went on to say in Wade (at para. 29): [29] For clarity, I note that the Supreme Court's decision in Sattva has not changed this rule, notwithstanding its instruction that "the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix" (at para. 50). As the Ontario Court of Appeal has recently made clear, the "factual matrix" or "surrounding circumstances" capable of informing contractual interpretation do not include subsequent conduct: Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912 at paras. 39-50 [Shewchuk] [My emphasis.] [79] I find that by relying upon the subsequent conduct of the parties without any finding of ambiguity and by importing concepts of "commercial reasonableness" in interpreting the Housing Contract the Arbitrator committed fundamental errors of law. [80] The question that then arises is whether those errors of interpretation either individually or collectively require that the Award must be set aside in whole or in part. [81] In answering that question I start with the fact that the Arbitrator's erroneous consideration of the parties' subsequent conduct without first determining whether any contractual ambiguity existed only directly arises with respect to his determination that the 2017 and 2018 price increases invoiced by Scala were allowed by the Housing Contract. [82] Although the Arbitrator's consideration of subsequent conduct without a finding of ambiguity is also indirectly engaged in relation to his interpretation of the oral WIP Completion Contract his doing so arises only to the extent that he found that the 2018 price increase continued to apply on work done by Scala on houses under the WIP Completion Contract. [83] In determining that the terms of the Housing Contract provided for price increases the Arbitrator stated at paras. 172 to 175 of the Award: [172] The Housing Contract did not contain a schedule of the prices of homes to be constructed by Scala. It is my view, in construing the contract as a whole, a purchaser was entitled to have a house constructed on a fixed price basis, as opposed to, for example, a house constructed on a cost plus basis. [173] There is no support, however, for the proposition that at the time the parties entered into the Housing Contract Scala agreed to construct houses based on a price schedule that was fixed in November 2015. Indeed there was no price schedule in existence at that time. [174] Both parties expected that numerous houses would be constructed over a period of years and at least until the Housing Contract was terminated by one of the parties. The lack of inclusion of a price schedule in the contract offers some support for the notion that the parties did not intend the prices to be fixed in time. [175] It was within the reasonable contemplation of both parties that construction costs, and therefore the price of houses constructed by Scala, would rise overtime. [84] Although the Arbitrator did not find an ambiguity in the Housing Contract with respect to whether it provided for price increases I am satisfied that he did not rely upon the subsequent conduct of the parties to conclude that it was within the reasonable contemplation of both parties that construction costs and therefore the price of houses constructed by Scala would rise over time. [85] That conclusion then became the foundation for his subsequent findings that the amounts invoiced by Scala for work done by it in 2017 under the Housing Contract and also in 2018 under the Housing Contract before it was terminated by Spirit Bay on August 27, 2018 as well as under the WIP Completion Contract, all of which included price increases, were payable by Spirit Bay. [86] In his conclusions related to the parties' disagreements over price increases claimed by Scala the Arbitrator wrote at paras. 205 to 212 of the Award: [205] Spirit Bay has argued that there is no ability under the contract to adjust prices as time goes on. Spirit Bay argued that despite this, the parties did agree to adjust prices on a "go forward basis". [206] Spirit Bay now denies any obligation to pay $331,687.17 of amounts invoiced by Scala as reflected in its Exhibit 14 - Column - Reject Invoices Over Contract Price, on the basis that it did not agree to Scala's unilateral and retroactive price increases. [207] Scala's position is that Spirit Bay agreed to both the price increases - one effective January 2017 and one effective January of 2018. The second price increase was to be implemented, but subject to a further review and adjustment at a post-completion reconciliation meeting. [208] The reconciliation meeting never took place; but Scala has justified its cost increases based on the evidence tendered at this arbitration. [209] In my view, the notion of a price increase based on an increase of Scala's costs is not inconsistent with a fixed price construction contract. According to this contract, the price had to be agreed before construction commenced. In effect, given the degree of customization of any particular house, the price was not in effect fixed until the customization was agreed to and Spirit Bay authorized the construction to commence. While Spirit Bay was concerned with sales, Scala is concerned with construction. It is clear that the effective price for the house was determined after Scala met with Spirit Bay's customer. [210] The prices were not published in the Housing Contract, but the parties had a dispute mechanism if agreement could not be reached about a price. [211] The problems arise when there is a substantial delay in the start of construction, in relation to the fixing of the price between Spirit Bay and its customer. [212] I find that there were two price increases which were agreed to by the parties. [My emphasis.] [87] Specifically concerning the 2017 price increases, after considering the background to that issue and the evidence of Scala's witnesses in detail the Arbitrator wrote at paras. 220 to 221 of the Award: [220] In January of 2017, Scala prepared its price schedule. By April of 2017, Spirit Bay implemented the price schedule. In its closing argument, Scala made no submissions about the January 2017 price increase. It did not address the price increases in its witness statements. [221] I find that there was an agreement by the parties about the 2017 price increase, as this increase was incorporated into Spirit Bay's prices for model homes which Spirit Bay apparently delivered to real estate agents selling the lots. The average price increase from 2015 - 2016 to January 2017 was 7 % [My emphasis.] [Exhibit references omitted.] [88] As I have previously noted, in its Reply Submissions on this appeal Spirit Bay acknowledged that the Arbitrator's conclusions with respect to the 2017 price increase are not reviewable. [89] Spirit Bay does, however, continue to assert that the Arbitrator erred at law in concluding that the 2018 price increases were authorized by the Housing Contract either before or after its termination by Spirit Bay. [90] Specifically concerning those price increases the Arbitrator wrote at para. 222 to 234 of the Award: [222] In November of 2017, Mr. Cota approached Mr. Obrigewitsch to revise the Housing contract, including the milestone schedule and increases in prices. [223] Mr. Mackaroff testified that Scala held off on its invoicing for increases, until it had a meeting with Spirit Bay. He testified that this was consistent with what occurred for the 2017 price increases. [224] The parties met in February of 2018, and Mr. Cota informed Mr. Obrigewitsch of the need to increase prices to reflect construction costs. [225] According to Mr. Mackaroff, Spirit Bay agreed to pay the invoices with the increased prices, but the parties agreed to have an open book reconciliation meeting to determine whether the price increases were supported by increases in Spirit Bay's direct and indirect costs. He maintained this position during cross-examination. [226] At a meeting on April 26, 2018, Spirit Bay agreed to implement an amended pricing schedule which applied to nine houses then under construction, and Spirit Bay issued an amended price list . [227] The houses to which the price increases applied were: 208 Marina Way, 2132 Ridgeline Road, 2109 Ridgeline Road, 1101 Spirit Bay Road, 1150 Marina Drive, Lot P 825 Sunset Point, 1104 Spirit Bay Road, 1112 Spirit Bay Road and 1120 Spirit Bay Road. [228] Mr. Obrigewitsch's witness statement confirms that Spirit Bay agreed to the increase in prices. It appears that there was reluctance on Spirit Bay's part. [229] However, at this point Spirit Bay had no choice as Scala was prepared to terminate the Housing Contract, as it had a right to do, with notice. Although Spirit Bay has raised the issue of duress, this has not been pleaded. I accept Scala's argument that Spirit Bay has not proven that there was coercion of the will so as to vitiate consent.": Kriegman v. Dill, 2018 BCCA 86 at page 68-70. [230] Unbeknownst to Scala, by April of 2018, Spirit Bay decided that it was going to look for a contractor to replace Scala. [231] Spirit Bay states that the 2018 price increase agreement was for "all new sales." This is not what was sought by Scala, whose focus was on building houses, not on selling houses. Further, in the context of the issue raised by Scala, Spirit Bay's position makes little commercial sense. In his email of February 16, 2018, Mr. Cota stated: "Any house sold from November last year should be consider a price list update. Or I can stop now." [232] I accept the evidence of Mr. Cota that there were often substantial delays as to when construction commenced and that these delays were ones that were largely outside of Scala's control. [233] Under the Housing Contract it was open to Spirit Bay to have the price increase arbitrated under clause 13 of the Housing Contract, if it did not agree to the price increases proposed by Scala. It never advised Scala that it rejected the price increases. Further, Spirit Bay incorporated the prices onto its price sheets distributed to customers. It is obvious that Scala did not choose to arbitrate this issue as there was no need; they thought they had Spirit Bay's agreement to implement the price increase. [234] I find that Spirit Bay agreed to the 2018 price increase. [My emphasis.] [91] Spirit Bay submits that the Arbitrator's statement in para. 231 that " in the context of the issue raised by Scala Spirit Bay's position makes little commercial sense" illustrates that the Arbitrator's erroneous approach to contract interpretation infected his decision concerning the 2018 price increase to such an extent that the Award must be set aside or varied to remove any obligation upon Spirit Bay to pay any part of the award based upon the 2018 price increase. [92] After considering the Award in its entirety and the submissions of counsel I am satisfied that although, as I have discussed above, the Arbitrator erred in his legal analysis with respect to the correct approach to contract interpretation at paras. 168 and 171 of the Award, I do not agree the Award must be either set aside or varied because of the two alleged contractual interpretation errors of law stated by Johnston J. [93] In summary, I reach that conclusion because: 1) Although the Arbitrator did not first determine that the Housing Contract was ambiguous with respect to whether increases in construction prices after 2015 were permitted he did not rely upon the subsequent actions of the parties in determining that the parties intended at the time of contracting that the 2015 prices would not remain in effect over a period of years until the Housing Contract was terminated by one of the parties or all the construction of all houses contemplated by the Housing Contract was completed. 2) Rather, the Arbitrator relied upon the expectations of the parties and what was within their reasonable contemplation at the time they entered into a long-term contract with dispute mechanism provisions. 3) In those circumstances I am satisfied that, notwithstanding his erroneous statements about the applicable principles of contract interpretation, in reaching the conclusions he reached concerning the 2017 and 2018 prince increases the Arbitrator in substance and in fact applied principles of contract interpretation recently enunciated in Sattva at paras. 57 and 58. 4) Spirit Bay has properly acknowledged that the Arbitrator's findings concerning the 2017 price increases are not reviewable on this appeal because they were based upon his consideration of the documentary evidence and the credibility of the witnesses. 5) The Arbitrator's conclusions about the 2018 price increases (as recorded at para. 234 of the Award) were also based upon his consideration of the documentary evidence and the credibility of the witnesses. As such his conclusions are not reviewable on this appeal either as findings of fact or as findings of mixed law and fact. 6) To the extent that the Arbitrator referred to commercial reality in reaching his conclusions with respect to the 2018 price increases, he did so in rejecting positions advanced by Spirit Bay. He did not do so by application of erroneous principles of contract interpretation but rather by findings concerning the evidence adduced by the respective parties. [94] In reaching those conclusions I have not yet addressed issues of contractual interpretation that may be said to have arisen concerning the "milestones" that were to trigger payment obligations as under clauses 7 and 8 of the Housing Contract. [95] In addressing disputes with respect to payment for invoiced work under the heading "Milestones" the Arbitrator wrote at paras. 180 to 191 of the Award: [180] In house construction it is imperative the builder be paid on a timely basis. Most construction contracts have milestones, where a certain percentage of the construction costs must be paid to the builder. [181] The usual method of protecting against a slow paying or non-paying owner - the filing of a builders' lien - was not available to Scala as the development was on Indigenous lands and the Builders Lien Act does not apply. [182] There is a dispute between these parties about the appropriate milestones. Spirit Bay submits that it is the milestones in the customer's financing that is determinative. I reject that because customer financing milestones play no part of the contract between Scala and Spirit Bay. [183] Instead of paying in accordance with the draw schedule set out in the Housing Contract, Spirit Bay decided to make payments in accordance with the bank milestones. [184] This was not a payment approach that was agreed to by Scala. [185] Scala was not a party to the contracts Spirit Bay had with its customers, nor was it a party to any lending agreement between Spirit Bay's customers and their lending institution. [186] Spirit Bay was in breach of the Housing Contract when it paid Scala in a different manner than set out in the Housing Contract. [187] From the outset of its work Scala invoiced according to a six step method which was not part of the Housing Contract. The milestones used by Scala in preparing its invoices, in comparison with the typical bank milestones and the Housing Contract method: Typical Bank Milestones Housing Contract method Scala's Invoicing Condition Removal 10% 10% Footings 10% Framing 20% Lock-up 15% 40% 20% Drywall 30% 25% 25% Cabinets 15% Completion 45% 25% 10% [188] Spirit Bay says it did not accept or reject the six milestone schedule, but it did pay invoices. For example, Spirit Bay did not ever reject an invoice, before termination of the Housing Contract, on the basis that Scala had prematurely billed before reaching a milestone. In my view, this post contract evidence is strong evidence of acceptance by conduct, particularly since this method was implemented after Scala raised the issue at the start of its invoicing: Wade. [189] The importance of the milestones cannot be minimized. While the builder is paid the same by the completion of the project, there are many costs which must be incurred l before completion. Under Scala's invoicing system and by the Housing Contract by lockup Scala would receive 50% of the contract price and by completion of drywall it should receive 75% of the contract price. Under a bank draw system Scala would receive 10 % as soon as the contract is signed, but only 25 % by lockup and 50 % by drywall. This in effect requires the builder to carry or finance the costs of constructing a house. [190] In this arbitration Spirit Bay now purports to reject a large number of invoices on the basis that Scala had not achieved a bank milestone. The total amount claimed as a reduction by Spirit Bay is $621,514.07. [191] In my view the bank milestone is simply a ruse or fiction now used by Spirit Bay to deny payment. It is without a foundation in the Housing Contract. It is actually a method used by Spirit Bay to avoid drawing on its own Bank of Montreal line of credit to finance to the difference between bank milestones and the draw method in the Housing Contract, or the six draw schedule Scala required. [My emphasis.] [96] The Arbitrator's findings and the conclusions he drew from them satisfy me that although he cited Wade in para. 188 he did so in the context of his assessment of the parties' respective approaches to the administration of the Housing Contract. [97] I am satisfied that although his reliance upon Wade for the proposition he stated was erroneous the Arbitrator did not then apply that mis-stated proposition to interpret the Housing Contract so that the Award must be set aside. [98] I say that because the Arbitrator did not find that the invoicing approach taken by Scala was available to it under the Housing Contract. He also found that Spirit Bay had breached its contractual obligations by refusing to adhere to the milestone payment provisions of the Housing Contract. [99] Although the milestone issue continued as a matter of dispute after the termination of the Housing Contract it was then an issue of contract formation with respect to the terms of the WIP Completion Contract, not the formation or interpretation of the Housing Contract. 3) Did the Arbitrator err in law in his application of unjust enrichment? [100] The third error of law alleged by Spirit Bay as a basis for setting aside the Award requires consideration of whether, and if so to what extent in making the Award the Arbitrator erroneously applied equitable principles of unjust enrichment when to do so was precluded from doing so. [101] In Garland v. Consumer's Gas Co., 2004 SCC 25 [Consumer's Gas] at para. 30 Iacobucci J. (for the Court) wrote: As a general matter, the test for unjust enrichment is well established in Canada. The cause of action has three elements: (1) an enrichment of the defendant; (2) a corresponding deprivation of the plaintiff; and (3) an absence of juristic reason for the enrichment. [102] Germane to the issues in this case is that in Consumer's Gas (at para. 44) Iacobucci J. observed that one of the established categories that constitutes a juristic reason is the existence of a contract. [103] Where there is a valid and enforceable contract in effect between the parties their relations on matters covered by the contract a court has no power to substitute another form of obligation. See: Peter Kiewit Sons' Co v. Eakins Construction Ltd., [1960] S.C.R. 361 at 69; Noh v. Plaza 88 Developments Ltd., 2011 BCCA 461 at para. 68. [104] The significance of those principles to the resolution of alleged errors of law of the Arbitrator in his application of unjust enrichment is highlighted by the observations of Newbury J.A. (for the Court) in Kosaka v. Chan, 2009 BCCA 467 wherein she stated at paras. 17 and 18: [17] Counsel was not aware of any authority in which unjust enrichment had been found where a valid and enforceable contract provided the reason for the conferring of the benefit on the defendant and the deprivation of the plaintiff. If a court were to allow recovery in these circumstances, the negotiation of contracts between arm's-length parties would be an undertaking fraught with risk and the security of concluded agreements would be threatened. As Maddaugh and McCamus write in the Law of Restitution): Where the enrichment results from the performance of a valid contractual obligation, the general policy favouring the security of transactions weighs against the intervention of restitutionary claims. Only if the transactions can be found to be unenforceable for a reason recognized either at law or in equity can the possibility of a restitutionary claim for the value of benefits conferred be entertained. [At 3-27] [emphasis added.] [18] In summary, there was a juristic reason in this case for Mr. Kosaka's continued services, and on the state of the law as it now exists, that fact is fatal to the claim that the defendants were unjustly enriched by Mr. Kosaka's continuing services. I would dismiss the appeal. [105] After consideration of those principles I am satisfied that the Arbitrator erred in law in his application of the law of unjust enrichment to the disputes before him and that, with the exception of those findings of fact made by the Arbitrator concerning: 1) the applicability of the 2018 price increases to the work done by Scala pursuant to the WIP Completion Contract; and 2) the status of the work done by Scala on each house in issue when it left the site on December 6, 2018, the Award with respect to the Handover Invoices must be set aside. [106] My reasons for those conclusions follow. [107] At paras. 249 to 261 of the Award the Arbitrator discussed and made findings of fact concerning Spirit Bay's termination of the Housing Contract; the existence of the oral WIP Completion Contract and some of its terms; and, Spirit Bay's breach of the WIP Completion Contract. [108] In doing so the Arbitrator wrote: [249] Part of the factual matrix in this case is the ending of the relationship. It is clear that Spirit Bay elected to terminate the Housing Contract in August 2018. It did so by way of an immediate termination rather than giving 60 days' notice as required by clause 4 of the Housing Contract. [250] The Housing Contract provides in clause 5 that on termination Scala is to be paid the amounts owed under the contract. [251] The Housing Contract does not address the completion of incomplete houses when a party elects to terminate the Housing Contract. It does however provide that in clause 5 5. On the termination of his Agreement as provided in Section 4, the parties will cooperate to conclude their relationship in a professional manner by payment of all amounts owed and by the provision of such information as may be necessary to ensure a smooth transition to the next contracting entity. [252] At this point there was a substantial deficit in the balance of payments in Scala's favour. Spirit Bay had brought Farmer on the Site without giving Scala notice of the termination of the Housing Contract. Spirit Bay had received and continued to receive payments from individual customers as milestones were achieved. Scala had demanded full payment of its accounts. [253] It is clear that the parties discussed the completion of incomplete houses. Scala has referred to the completion arrangement as a work in progress completion contract. I use this term for convenience as well, although it is clear that there was no written contract with this title. [254] Spirit Bay denies the existence of a work in progress completion contract. Spirit Bay has argued that Scala was supposed to finish what they had contracted to do. The difficulty with that argument is that Spirit Bay had terminated the Housing Contract. Generally, termination of a contract by one party excuses the opposing party from its obligations to continue to perform. [255] It is difficult to understand then how Spirit Bay characterizes the ongoing work from the date it terminated the contract until the date Scala downed tools. [256] Mr. Mackaroff testified that Scala agreed to complete the incomplete houses on the basis that Spirit Bay would immediately pay to Scala the funds it received from the homeowner or bank, once the milestone was completed. [257] I find it improbable that Scala would have continued to finish the incomplete houses, without a clear expectation that Spirit Bay would pay fully its outstanding accounts and pay its invoices for completing the houses. It is improbable that Scala would simply work in return for Spirit Bay advancing funds from time to time to Scala's subcontractors. [258] I find that Scala agreed to finish the houses it was working on, provided that Spirit Bay agreed to pay for the work from advances it received on account of work on a particular house. [259] I further note that at this time, Spirit Bay had raised no issues of deficient work by Scala; nor had it disputed the invoices previously rendered by Scala. These disputes did not arise until after Scala terminated the work in progress completion contract. [260] Spirit Bay failed to remit payments to Scala, and Scala ceased work. I find that the post completion contract came to an end because of a breach by Spirit Bay when it appropriated money which should have been paid to Scala, to reduce Spirit Bay's debt to Scala. [261] This was not a case of Scala abandoning the project, but rather a case of Spirit Bay breaching the completion arrangement. [My emphasis.] [109] The underlined portions of that excerpt establish that the Arbitrator found as a fact that after Spirit Bay terminated the Housing Contract the relationship between the parties was governed by the oral WIP Completion Contract. [110] Unfortunately, however, the Arbitrator did not then proceed to make clear findings as to what were the terms of the WIP Completion Contract with respect to the milestones, if any, that governed Spirit Bay's payment obligations. [111] Instead, notwithstanding the conclusion (at para. 260 of the Award) that Spirit Bay had breached the WIP Completion Contract by appropriating money that should have been paid to reduce Spirit Bay's debt due to Scala, the Arbitrator said (at para. 199 of the Award) that: [199] I agree with Scala's position that when I am assessing Scala's claim for damages, I am obliged to assess the amount due and owing according to clause 5 of the Housing Contract which reads: 5. On the termination of his Agreement as provided in Section 4, the parties will cooperate to conclude their relationship in a professional manner by payment of all amounts owed and by the provision of such information as may be necessary to ensure a smooth transition to the next contracting entity [112] Having said that, however, the Arbitrator then immediately thereafter (at paras. 200 and 201 of the Award) concluded that: [200] All amounts owed, at least includes the invoices rendered by Scala. Spirit Bay did not object in a timely way these invoices. Further, it includes all materials and labour expended on the property since the last milestone. Payments are not due until a milestone is complete, but at least the next milestone for all houses in dispute have been attained, so in my view there is an amount owing to Scala. [201] If Scala is not paid for this work, then Spirit Bay retains the benefit of the payments of the owner, as well as the benefit of materials and labour bestowed by Scala on the houses. I find that Spirit Bay would be unjustly enriched, if this situation was permitted to exist. [My emphasis.] [113] Those conclusions are inconsistent with the provisions of clause 5 of the Housing Contract because "payment of all amounts owed" under that termination provision could only refer to monies owed under the fixed price milestone provisions of clause 7 of the Housing Contract. [114] Without clear findings that Spirit Bay had repudiated the WIP Completion Contract by appropriating money which should have been paid to Scala and that Scala accepted that repudiation by terminating the WIP Completion Contract and by doing so brought the payment provisions of the Housing Contract to an end, the Arbitrator erred in his application of unjust enrichment principles to award Scala monies that would not be payable to it if (as he found at para. 199) Clause 5 of the Housing Contract governed Scala's post termination payment obligations. [115] The Arbitrator's application of unjust enrichment principles to conclude that Scala was entitled to payment for the non-milestone work claimed by it in the Handover Invoices because all possible milestones had by the time of the arbitration been completed by Farmer (rather than Scala) amounted to the re-writing of the fixed price and termination provisions of the Housing Contract in circumstances where he had found (at para. 200 of the Award) that "payments are not due until a milestone is compete". [116] Even if the Arbitrator did conclude without specifically so stating that the WIP Completion Contract had been repudiated and/or fundamentally breached by Spirit Bay in respect of its payment obligations which entitled Scala to accept repudiation and cease all work on the site, having regard to his statement at para. 199 that he was obligated to apply clause 5 of the Housing Contract in assessing the amounts owed to Scala for its work, it was necessary for the Arbitrator to address why the termination provisions of the Housing Contract did not apply. He did not do so. [117] Instead, applying principles of unjust enrichment the Arbitrator purported to interpret the termination provisions of the Housing Contract to avoid what he considered would be an unfair result. [118] His reasons for so doing are readily discernible from his observations at para. 166 of the Award in which he wrote: [166] In my view, this [not paying for non-milestone work] would result in an unjust enrichment of Spirit Bay, if it gets to pocket the payments from the customer without paying Scala for the costs of construction. At this point one must also recall that Scala terminated the work -in - progress completion contract because Spirit Bay pocketed monies which should have been paid to Scala, and that Spirit Bay was substantially in arrears to Scala. There would be a corresponding deprivation to Scala if Spirit Bay takes the advantage of Scala's work without paying the price represented in the hand over invoices. There is no juristic reason why Spirit Bay should be entitled to the benefit of Scala's work product. [My emphasis.] [119] Those reasons are also discernible from his confirmatory statement at para. 194 that: [194] In this arbitration Spirit Bay now rejects the Scala hand over invoices because it says that Scala had not yet achieved the next bank milestone. If this were the case, Spirit Bay simply gets to "pocket" the amount of labour and materials bestowed by Scala since the last achieved milestone. In my view this is an unreasonable position that would result in the unjust enrichment of Spirit Bay. [My emphasis.] [120] I find that the Arbitrator erred to such an extent in his application of unjust enrichment principles on issues related to the Handover Invoices that those aspects of the Award are unreasonable and must be set aside because his conclusions do not fall within a range of possible, acceptable outcomes that are defensible having regard to his findings of fact and the law. [121] The result would be the same if this review had proceeded on a correctness standard of review. REMEDY [122] Scala submitted that if I found that the Arbitrator had erred in law in making the award I should amend the Award to address any such error. [123] I am satisfied that although this Court has the power to confirm, amend or set aside the Award under the provisions of s. 31(4)(a) of the Act, I am also satisfied that the legal and factual complexities of the Award as it related to the Handover Invoices compounded by the Arbitrator's failure to make necessary findings of fact concerning the terms of the WIP Completion Contract and the extent, if any, to which the WIP Completion Contract or its termination may have modified or supplanted the Housing Contract are such that a re-hearing with such evidence as may be necessary to address those issues and others arising from the Arbitrator's erroneous application of unjust enrichment principles is necessary. [124] As I have previously noted, however, a re-hearing is only necessary with respect to those aspects of the Award directly related to or arising from (for example the quantum of but not Scala's entitlement to loss of profits and interest) the Handover Invoices. [125] More specifically, for reasons I have previously addressed the Arbitrator's findings concerning the applicability of the 2018 price increases to the work done by Scala pursuant to both the Housing Contract before its termination and the WIP Completion Contract are not reviewable and thus need not be reheard. [126] The Arbitrator's findings of fact concerning the status of the work done by Scala on each house in issue when it left the site on December 6, 2018 are also binding upon the parties. [127] That leaves for consideration the issue of whether the necessary re-hearing in this matter in respect of the Award in Spirit Bay's obligations to pay for work invoiced by Scala in the Handover Invoices should be conducted by the Arbitrator or by another Arbitrator appointed pursuant to the Act. [128] Scala urged that if I determined that any re-hearing of the issues on Appeal was necessary and that I could not amend the Award to address any error or errors of law I should remit those issues to the same Arbitrator together with my opinions on any error of law. In making that submission Scala observed that a new arbitration before a different or the same arbitrator would be both time consuming and prohibitively expensive. [129] Spirit Bay submitted that any re-hearing of the matters raised on this Appeal should be before a different arbitrator. [130] In making those submission Spirit Bay relied upon Mayer v. Mayer, 2012 BCCA 77 at paras. 134-136 in which the Court wrote: [134] Mhinder requests a direction that the remittal be to a different judge. He relies on the remarks of Hall J. (as he then was) in British Columbia Nurses' Union v. British Columbia (Labour Relations Board) (1995), 14 B.C.L.R. (3d) 363 at para. 20, [1996] 3 W.W.R. 113 (S.C.), aff'd 33 B.C.L.R. (3d), [1997] 6 W.W.R. 81 (C.A.). In this case, Mr. Justice Hall concluded the Labour Relations Board had erred in ordering that a grievance be remitted to the original arbitrator where the award involved findings on credibility. In his reasons, he said, [20] ... In my judgment, when a decision turns, as the case at bar does, on a disputed issue of credibility, it is approaching the impossible to ask the tribunal of first instance to revisit the matter with a view to possibly reversing those findings and making new findings. To my mind, it is making a demand upon the original hearing tribunal that verges on the superhuman. Where decisions on credibility have been reached after due consideration and reflection, I should think it could scarcely ever be appropriate that the matter be remitted. [135] In affirming Hall J.'s judgment, Lambert J.A. said, for the Court, [14] ... It is, in my opinion, completely unrealistic to expect a decision maker to free his or her mind from a previous conclusion that someone is in essence, lying, and to reach a new and entirely balanced conclusion completely free from that previous settled decision on the basis of new evidence which may do nothing more than add another piece to the total puzzle of credibility and fact finding. [136] The wisdom of these remarks is undeniable. Nevertheless, I would not presume to direct the Chief Justice of the Supreme Court in the exercise of his responsibilities for the administration of the judges of his Court. Accordingly, I would decline to give the direction sought. [131] In this case the Arbitrator not only made findings of credibility adverse to Spirit Bay's representatives but also harshly characterized Spirit Bay's conduct in relation not only to the disputes in issue but also within the arbitration. [132] In that regard I note the following: 1) At para. 98 of the Award the Arbitrator wrote: [98] In my view, during the course of the relationship, after the decease of Mr. Butterfield, Spirit Bay used a number of accounting tactics or tricks to deal with its financial problems, resulting in a slowing of cash flow to Scala. 2) At paras. 104 and 105 of the Award he wrote: [104] Spirit Bay did not reject or question any of Scala's invoices, based on its non-acceptance of price increases or its milestone theory until it terminated the Housing Contract; and the majority of these issues appear to have been first raised in December of 2018, after Scala notified Spirit Bay that it was downing tools. [105] In my view these tricks by Spirit Bay continued into the hearing of this matter with a substantial shifting of its position about the amount of money owing to Scala - from no money and an overpayment owing to Spirit Bay, to a concession at the hearing that $403,863.35 was owed. 3) As I have previously noted, at para. 191 of the Award the Arbitrator characterized Spirit Bay's position in respect of bank milestones as a "ruse or a fiction" to deny timely payment to Scala for work done. [133] I am satisfied that in those circumstances and notwithstanding the relatively narrow ambit of the re-hearing in this case that is necessary to address Scala's Handover invoice claims that a re-hearing must be conducted by a different arbitrator. "Davies, J."