B.C. – grumblings insufficient to constitute notice to trigger arbitration – #158

In Campbell Construction Ltd. v. Abstract Construction Inc., 2019 BCSC 113, Madam Justice Jennifer M.I. Duncan held that ongoing dissatisfaction without particulars of a claim or the intention to start a claim are insufficient to qualify as notice to the other party. Notice is useless unless it gives enough information to the recipient to know what is in issue, the monetary effect and what the recipient can or has to do. Lack of notice deprives the recipient of the opportunity to consider its position and to negotiate under the contract or otherwise to resolve the problem.

Campbell Construction Ltd. (“Campbell”) provided materials, equipment and labour as a concrete subcontractor to three (3) projects for which Abstract Construction Inc. (“ACI”) was the general contractor. ACI and Abstract Ventures Inc. (“AVI”), a property owner/developer, are part of the Abstract Group.

The construction subcontract signed by ACI and Campbell contained a dispute resolution process including arbitration. Duncan J. appends the lengthy dispute resolution clause, “8.2 Negotiation, Mediation and Arbitration”, to her reasons as Appendix A.

The dispute resolution clause provided for escalating measures for resolving disagreements, including negotiation, mediation and then, eventually, binding arbitration. The process agreed to included the obligation to send written notices at each stage including one by which a party terminates mediation and one by which a party “may refer the dispute to be finally resolved by arbitration”. If the latter notice is not given within ten (10) working days after mediation terminates, the parties agreed that their undertaking to arbitrate no longer binds and either can access the courts:

8.2.6 On expiration of the 10 Working Days, the arbitration agreement under paragraph 8.2.5 is not binding on the parties and, if a Notice in Writing is not given under paragraph 8.2.5 within the required time, the parties may refer the unresolved dispute to the courts or to any other form of dispute resolution, including arbitration, which they have agreed to use.

The same subcontract also provided that the dispute resolution process does not limit a party from asserting a statutory right to a lien.

At paras 17-33 of her reasons, Duncan J. condenses the give and take of e-mails and correspondence exchanged between the parties from November 2017 and August 2018. In their exchanges, Campbell and ACI dispute performance issues and attempt to find a workable solution to complete the project. The disputes issues related to the feasibility for different, delayed slab pour dates, the cost of a concrete additive to allow for colder temperatures, the impact of the new pour dates on the completion of the project and attempts to recover time in the schedule to meet a revised completion date.

At the end of the process, Campbell and ACI disagreed as to whether ACI had properly given Campbell notice of ACI’s claim. Parallel to determining in which venue the parties had to appear – arbitration or the courts – Campbell and ACI also disagreed on whether another provision of their subcontract waived ACI’s claims. Duncan J. also appends that provision, section 12.2, to her reasons.

A certificate of substantial completion issued for April 16, 2018. Campbell filed two (2) builder’s liens, a May 31, 2018 one for $328,308.95 and a June 28, 2018 one for $45,396.55. AVI paid the sum of $373,705.50 into court on July 3, 2018 as lien security. Counsel for Campbell later asserted on July 30, 2018 that the holdback period for the project had expired and that Campbell was entitled to a full payout. ACI responded to advise that Campbell should engage the arbitration process to decide its entitlement to the lien security. ACI wrote on August 1, 2018 to assert that it had already provided notice of problems with the delays in completing the work but “out of an abundance of caution” and “not an admission that any further notice is required in respect to any and all claims”, thereby asserted claims against Campbell and stated that the claims had not been waived under section 12.2.

Campbell initiated an action in B.C. Supreme Court on August 28, 2018 against ACI and AVI in regard to its builders liens, coupled with allegations of breach of good faith contractual performance and unjust enrichment.

ACI applied for a stay under section 15 of Arbitration Act, RSBC 1996, c 55.

Campbell opposed ACI’s application. It submitted that ACI had failed to deliver a proper notice of dispute under the terms of the subcontract and did not state the nature of the dispute. As a result, Campbell maintained that the undertaking to arbitrate was void or inoperative and no stay should be ordered.

ACI argued that the e-mails between the parties concerning delays and the concrete additives were sufficient notice to trigger the dispute resolution process and that sufficiency of notice should be deferred to the arbitrator. ACI relied on Bondfield Construction Company Limited v. London Police Services Board et al., 2013 ONSC 4719 which involved a similar three-step dispute resolution process and which applied the four (4) principles identified in EDF (Services) Limited v. Appleton & Associates, 2007 CanLII 36078 (ON SC) to stay the action:

1. On an application for a stay of proceedings, “it is not for the court…to reach any final determination as to the scope of the arbitration agreement”.
2. “Where it is arguable that the dispute falls within the terms of the arbitration agreement…the stay should be granted and those matters left to be determined by the arbitral tribunal”.
3. “[A] challenge to the arbitrator’s jurisdiction must be resolved first by the arbitrator unless the issue is based solely on a question of law” […]
4. Arbitration clauses are to be given a large, liberal and remedial interpretation to effectuate the dispute resolution goals of the parties […]”.

Campbell countered, arguing that the arbitration clause in the subcontract was either void or inoperative and that section 15(2) authorized the court not to stay the action. Campbell argued that ACI failed to provide a “specific notice in writing of an unequivocal intention to commence a claim under the dispute resolution provisions of the subcontract, with sufficient particulars of the claim to be disputed”. For sufficiency of notice, Campbell relied on Northland Kaska Corp. v. R., 2001 BCSC 929 and its analysis of earlier cases including Corpex (1977) Inc. v. The Queen in right of Canada, [1982] 2 SCR 643, 1982 CanLII 213 and Doyle Construction Co. v. Carling O’Keefe Breweries Of Canada Ltd., 1988 CanLII 2844 (BC CA) and which held that reasonable notice required sufficient particulars.

In excerpting Northland Kaska Corp. v R., Duncan J. cited paras 70-71 of Doyle Construction Co. v. Clarling O’Keefe Breweries of Can. Ltd. regarding how the courts approach giving notice if doing so is a condition precedent to recovery. (See more generally paras 64-73 of Doyle Construction Co. v. Clarling O’Keefe Breweries of Can. Ltd.)

The passage includes helpful reasons supporting giving the other party meaningful information about what is in issue and, in doing so, the opportunity to respond appropriately and in time.

The provision for notice is useless unless it gives some particulars to the owner as to what the complaint is. It must surely also be given in enough time so that he may take the guarding measures pointed out in Corpex if he so desires. An early notice also leaves the owner free to negotiate either under this provision or under any other provision of the contract which may assist in the resolution of the problem. From the standpoint of the contractor, he may not, of course, know precisely what monetary effect of accumulation of delays might bring about, but an early notification of his concern will also enable him to get himself into a negotiating position as to the method of solution of the problem, and to raise his concerns under the contract.

The grumblings of this contractor, recorded though they may be in site minutes, display no intention to claim until December 1983. Even then, no claim was actually advanced, but intent was indicated. But no details were given: an owner would be hard put to know exactly what it is to meet, and hence what it is to do. The purpose of the notice is to give the owner an opportunity of considering his position and perhaps taking corrective measures, and he is prejudiced by not being able to do it.

Campbell also characterized ACI’s e-mails as “grumblings” which were insufficient to qualify as notice under the subcontract. Given that arbitration had not been commenced and that ACI had waived the dispute resolution mechanism in the subcontract, Campbell argued that it was free to initiate court litigation.

Duncan J. observed that the “arguable case” standard applied to stay applications, relying on Gulf Canada Resources Ltd. v. Arochem International Ltd., 1992 CanLII 4033 (BC CA) and Sum Trade Corp. v. Agricom International Inc., 2018 BCCA 379. Duncan J. noted that the latter case involved the International Commercial Arbitration Act, RSBC 1996, c 233 which had the same provision concerning a stay as does the Arbitration Act.

Duncan J. held that, on a superficial consideration of subcontract and exchanges between Campbell and ACI, there was not an arguable case that the two were bound to arbitrate and “it serves no purpose deferring the question of jurisdiction to an arbitrator”.

The e-mails from ACI “amounted only to mere “grumbles” and work proceeded on an agreed schedule”. Duncan J. identified the gap in ACI’s evidence at the stay application stage.

[52] Nowhere in the materials does ACI point to any evidence of a statement as to the nature of the claim and the grounds upon which the claim is based or a statement of the estimated quantum of the claim, let alone a clear and unequivocal statement of the intention to claim, as required under 12.2.6.

Duncan J. wrote : “To put it another way, I do not find an arguable case that ACI triggered the arbitration clause in the applicable timeframe.

Because ACI failed to convince Duncan J. that, on an arguable standard, Campbell’s litigation should be stayed, Duncan J. refused the stay.