In Vancouver Pile Driving Ltd. v. JGC Constructors BC Ltd., 2024 BCSC 344, the Court granted two applications to stay litigation arising out of a large multi-party construction dispute in favour of arbitration. The first Applicant was a contractor which had a subcontract with the Plaintiff that provided for mandatory arbitration, unless the dispute involved the owner or other project participants. The second Applicant was the owner, a non-party to the subcontract, which argued that if the litigation was stayed against the contractor, it should be stayed against the owner as well. The Court applied section 8 of the International Commercial Arbitration Act, R.S.B.C. 1996, c. 233 (“ICAA”) to stay the proceedings against the first Applicant. The Court also stayed the action against the second Applicant owner pursuant to section 10 of the Law and Equity Act, R.S.B.C. 1996, c. 253 to prevent a multiplicity of proceedings.
Background to the Dispute – This case arose out of a project for the construction of a marine terminal berth at Kitimat, B.C. The terminal berth was being constructed by LNG Canada Development Inc. (“LNGC”), which was the owner. The prime contractor was JGC Fluor BC LNG Joint Venture (“JGC-Fluor”). Plaintiff, Besix-Vanpile Joint Venture (“Plaintiff”), was a subcontractor to JGC-Fluor. The Plaintiff’s work on the project included dredging and the building of a quay wall. The Plaintiff alleged that it encountered issues during construction, such as difficulties with debris in the water, sinkholes, and dredging incidents for which the defendant owner and contractor were responsible.
The Arbitration Clause – The subcontract between JGC-Fluor and the Plaintiff contained a mandatory arbitration clause. It provided:
“All disputes, controversies or differences which may arise between the parties, out of or in connection to the [Subcontract] that do not involve [LNGC] or Participants, or any breach, validity or cancellation thereof, shall finally be settled by arbitration in London, United Kingdom in accordance with the latest Rules of Arbitration of the International Chamber of Commerce.”[Emphasis added.]
The critical language for the purposes of the application was whether the disputes “do not involve” LNGC.
The Plaintiff filed a Notice of Civil Claim in March 2023 against JGC-Fluor and LNGC.
Applications to Stay – Defendant JGC-Fluor applied to stay the Plaintiff’s claim against it due to the mandatory arbitration clause in the parties’ subcontract. Defendant/Owner LNGC did not take a position on JGC-Fluor’s application, but it argued that if the action against JGC-Fluor was stayed, the action against it should be stayed pending the outcome of the arbitration between JGC-Fluor and the Plaintiff.
Section 8 of ICAA sets out the applicable statutory framework. It provides:
“8(1) If a party to an arbitration agreement commences legal proceedings in a court against another party to the agreement in respect of a matter agreed to be submitted to arbitration, a party to the legal proceedings may, before submitting the party’s first statement on the substance of the dispute, apply to that court to stay the proceedings.”
(a) Competence-Competence – In addressing JGC-Fluor’s application for a stay, the Court set out the competence-competence principle; as a general rule, courts should give the arbitrator the first opportunity to determine its own jurisdiction. If there is an “arguable case” that the dispute falls within the scope of the arbitration agreement, a stay of litigation should be granted. Two limited exceptions are if the challenge to the arbitrator’s jurisdiction is limited to a pure question of law, or if the challenge turns on a question of mixed fact and law that can be determined on a superficial consideration of the record.
The standard of proof that applies at this stage is the arguable case standard. If the party seeking a stay can establish that it is arguable that the matter raised in the litigation is a matter that was agreed to be submitted to arbitration, the court should grant a stay to give the arbitrator the first opportunity to decide it.
With respect to the concern about inefficiencies of multiple proceedings that might arise due to the exercise of the arbitration clause, the Court identified authorities which indicate that this is not a basis to deny a stay. The Court cited Prince George (City) v. McElhanney Engineering Services Ltd. (1995), 9 B.C.L.R. (3d) 368, which stated at para. 37 that, “as a general principle, the mere fact that there are multiple parties and multiple issues which are inter-related and some, but not all, defendants are bound by an arbitration clause is not a bar to the right of the defendants who are parties to the arbitration agreement to invoke the clause.”
(b) Interpretation of the arbitration clause – In this case, the central issue was whether there was an arguable case that the arbitration clause applied to the dispute. The arbitration clause provided that all disputes that arose between the parties out of or in connection to the subcontract that “do not involve” LNGC or the other project participants were to be finally settled by arbitration under the ICC rules. The key issue of interpretation was whether the dispute did “not involve” LNGC.
The Defendant JGC-Fluor argued that the arbitration clause applied and that arbitration was mandatory. It submitted that the wording of the arbitration clause must be interpreted within the factual matrix of a large construction project, and that “involve” must mean direct involvement only. It submitted that each of the Plaintiff’s claims must be assessed separately and that the Court must stay all claims against JGC-Fluor that could be resolved without LNGC’s participation as a party, as these were to be settled by mandatory arbitration.
The Plaintiff argued that the plain meaning of the words “do not involve” is broader. It submitted that “involve” includes both direct and indirect involvement. The Plaintiff took the position that LNGC, as the owner of the project and due to its active involvement, was involved in the issues that arose. It pointed to the numerous references to LNGC in the pleadings and argued that this indicated that LNGC was involved. Therefore, it submitted that the involvement of LNGC in the project took these disputes outside of the arbitration clause, and consequently litigation proceedings against JGC-Fluor were proper.
The Court interpreted the meaning of the word “involve” in the context of the arbitration clause at para. 23, as follows: “The range of the word’s possible meanings in common usage suggests that it takes much of its meaning from contexts in which it is used. Defining “involved” in the abstract is of little assistance in understanding what it means in the Arbitration Agreement.”
The Court was alive to the factual matrix of the large project, which involved multiple parties and contractual chains which linked to LNGC. The Court concluded that it was clear that the parties were aware that LNGC was part of the contractual chain, but still contemplated that there could be disputes that did not “involve” LNGC under the arbitration clause.
While the Court did not have to conclusively decide this issue of interpretation for the purposes of the stay application, it held that it was arguable that the words “do not involve” had the narrow meaning that JGC-Fluor submitted, which meant that it was arguable that some of the claims were to be stayed in favour of arbitration.
Court’s Decision to Stay – The Court stayed the action against both JGC-Fluor and LNGC.
The Plaintiff had made two categories of claim against JGC-Fluor.
The first category consisted of 10 contractual claims which arose out of the subcontract and were made only against JGC-Fluor. The Court held at para. 31 that “[t]here is no question that they arise out of the Subcontract and they are advanced only against JGC-Fluor.” These contractual claims were stayed in favour of arbitration.
The second category consisted of claims of negligent misrepresentation that the Plaintiff made against both LNGC and JGC-Fluor. The misrepresentation claims alleged that there were misrepresentations about the site investigation, suitability of plans, and full disclosure of information about the site. The Plaintiff alleged that its negligent misrepresentation claims against both defendants were intertwined. However, to highlight the differences between the claims, JGC-Fluor submitted that “[t]he claims [the Plaintiff] has made against LNG Canada in this action involve representations that were made at a different time, to a different audience, for a difference [sic] purpose, in breach of a different duty, and with a vastly different element of reliance” (at para. 33).
The Court concluded at para. 34: “Assessment of the accuracy of these statements would require careful consideration of the evidentiary record, well beyond a superficial review. It follows that the exception does not apply and issues should be left for an arbitrator to determine, on a full evidentiary record”. Consequently, the misrepresentation claims against JGC-Fluor were stayed.
With respect to LNGC’s application for a stay, the Court pointed out at para. 36 that “[s]ection 8(1) of the ICAA permits a party to a legal proceeding to seek a stay even if it is not a party to the arbitration agreement”. The Court also cited section 10 of the Law and Equity Act, R.S.B.C. 1996, c. 253 and concluded that, taken together, these permit the Court to grant a stay to avoid a multiplicity of proceedings. It stayed the action against LNGC on this basis.
Contributor’s Notes:
First, this case illustrates the application of the competence-competence principle in the context of a large complex multi-party dispute. The Court endorsed this principle and the proposition that the mere fact that there are multiple parties, multiple issues, and multiple contracts, some of which do not contain arbitration clauses is not an automatic bar to the right of parties to the arbitration agreement to invoke the arbitration clause.
While a stay to enforce an arbitration clause might cause a multiplicity of proceedings, this is not a ground to prevent the right to arbitrate from being invoked. As the Court explained at para. 19:
“Importantly, in cases such as this, involving multiple parties and multiple interrelated issues, where only some of the parties are subject to an arbitration clause, the inefficiencies entailed by some claims going to arbitration while others remain in court is not a basis for denying a stay: Ontario v. Imperial Tobacco Canada Limited, 2011 ONCA 525 at paras. 69, 78; see also Brian Casey, Arbitration Law of Canada: Practice and Procedure, 4th ed (Huntington, New York: Juris Publishing, 2022) at 338.”
Instead, the risk of a multiplicity of proceedings can be dealt with using other tools. As the Court explained at para. 43:
“While the principle of deference to the parties’ choice of dispute resolution forum creates the possibility of multiple proceedings, s. 10 of the Law and Equity Act permits the court to prevent them. On that basis, I stay the action against LNGC pending completion of the arbitration.”
This approach highlights the importance of arbitration clauses and sets out a predictable order of priority for addressing concerns of a multiplicity of proceedings which may arise in large complex disputes. Interestingly, this is an example of a case in which a non-signatory to an arbitration agreement successfully obtained a stay of litigation against it, to prevent a multiplicity of proceedings, while the arbitration continued between the signatories to the arbitration agreement.
Second, this case highlights issues of contractual interpretation and the importance of clarity in contract drafting. The Court had to interpret the meaning of the word “involve”. The arbitration clause applied to disputes that do not involve LNGC or the other participants. The Court considered the factual matrix of the large project to give meaning to the wording (see decision at para 26).
Third, this case shows the standard which is to be applied when a party is seeking a stay of litigation in favour of arbitration. While this case raised complex issues of contractual interpretation, the Court was aware of the standard and granted the stay to permit the arbitrator to determine the issues with respect to JGC-Fluor. It highlights a general attitude of the courts as to the importance of arbitration and the need to uphold the integrity of the arbitral process.