Nova Scotia – “battle of the forms” doctrine fails to resolve whose agreement binds parties to arbitrate – #166

Faced with competing claims regarding whose documents constituted the parties’ agreement, Madam Justice M. Heather Robertson in LED Roadway Lighting Ltd. v. Alltrade Industrial Contractors Inc., 2019 NSSC 62 found no clear intention to incorporate either party’s arbitration clause. Instead, Robertson J. decided to favour Defendant’s suggestion and stayed the litigation pending the outcome of arbitration between the parties. Though she found no agreement to arbitrate, she also determined that there was no objection to arbitration either.

Alltrade Industrial Contractors Inc. (“Alltrade”) responded to a request for proposals issued by the city of Sault Ste. Marie to replace the city’s street light luminaries with new LED luminaries. Alltrade subcontracted with LED Roadway Lighting Ltd. (“LRL”) for the design, engineer, manufacture and supply of the luminaries.

Only Alltrade signed the prime contract, Contract No. 15 05 001 (“Prime Contract”), directly with the city’s public utility (“PUC”). The Prime Contract included conditions stipulated by Ontario provincial guidelines. One of those conditions, General Condition 3.14, provided for mandatory and binding arbitration under Ontario’s Arbitration Act, 1991, SO 1991, c 17.

Alltrade and LRL disagreed as to which documents exchanged between the parties constituted the operative contract. Alltrade argued that the contract involved the purchase orders (“PO’s”) it issued to LRL while LRL claimed that the parties were bound by the quotations it issued. Alltrade’s PO’s contained the following mentions which it argued incorporated the Prime contract’s arbitration agreement by reference:

As per Alltrade Industrial Terms and Conditions and PUC Services Contract No. 15 05 001
Precedent of documents
1) Alltrade Purchaser Order
2) PUC Services Contract Number 15 05 001

LRL’s quotations also included a choice of law and a jurisdiction clause except that they stipulated the laws of Nova Scotia and provided that the Supreme Court in Halifax would have exclusive jurisdiction provided that the dispute did not qualify for arbitration under another provision of the quote. The clause in LRL’s quotations, excerpted at para. 13 of the reasons, provided for arbitration before a panel of either one (1) or three (3) arbitrators depending on the amount in issue, all subject to Nova Scotia’s Commercial Arbitration Act, SNS 1999, c 5.

As a result, both parties claimed they had agreed to arbitration except that neither party accepted that it was bound by the other party’s agreement to arbitrate.

On October 16, 2018, LRL instituted litigation against Alltrade in the Supreme Court of Nova Scotia claiming breach of contract. Alltrade applied for an order dismissing the action for want of jurisdiction or, in the alternative, staying the action pending arbitration.

[15] Alltrade submits the motion to stay or dismiss the action should be granted for three reasons. The action should be stayed pursuant to s. 9 of the Commercial Arbitration Act SNS 1999, c.5., s. 9 as the parties have agreed to resolve their disputes by way of arbitration. The action should be dismissed as the court lacks territorial competence pursuant to s. 4 of the Court Jurisdiction and Proceedings Transfer Act (“CJPTA”). And in the alternative, the court should decline territorial competence pursuant to s. 12 of the CJPTA as Ontario is a more appropriate forum in which to hear the proceeding.

[16] LRL replies that evidence fails to disclose an arbitration agreement. They say the certainty of the contractual terms necessary to do so are far from clear as evidenced by the numerous exchanges of quotations and purchaser orders upon which each of the parties rely. Further, they say an arbitration clause contained in a prime contract cannot be incorporated by reference into a subcontract unless that is the clear intention of the parties.

LRL relied on Rule 5.14 of the Civil Procedure Rules and section 41(e) of the Judicature Act, RSNS 1989, c 240.

At paras 17-32, Robertson J. summarizes the evidence provided to her describing the parties’ knowledge and use of the documents in question. If anything, the record demonstrated little common ground. “There is not much the parties do agree about with respect to their contractual arrangements.

Robertson J. identified three (3) issues which LRL’s application presented to her, only the first of which relates to arbitration:

1) Did the parties agree to resolve the dispute by way of arbitration pursuant section 9 of the Ontario Arbitration Act;
2) Does this court have territorial competence in this proceeding pursuant to section 4 of the CJPTA; and,
3) If so, should this court refuse to exercise its territorial jurisdiction pursuant to section 12 of the CJPTA because the Province of Ontario is the more appropriate forum in which to hear the proceeding?

In addition to those issues, Robertson J. recorded Alltrade’s “fourth option”:

[33] Alltrade has, through the course of argument of this motion, also suggested a fourth option for this court – to decline jurisdiction and order that the parties proceed to arbitration, allowing the parties to determine which arbitrator they can agree on, whether it be pursuant to the arbitration legislation of Nova Scotia or Ontario.

Robertson J. addressed the first issue at paras 34-44 of her reasons.

Alltrade sought to stay the litigation pursuant to section 9 of Nova Scotia’s Commercial Arbitration Act and relied on Butler Machine Tool Co. Ltd. v. Ex-Cell-o Corp. (England) Ltd., [1979] 1 All E.R. 965. That case approved the “battle of the forms” or “last shot” doctrines. Subject to the facts of each case, those doctrines accept that the contract is the last form received without objection. Alltrade therefore argued that, on the facts, its PO’s constituted the contract and pointed to Litchfield Bulldozing & Demolition Ltd. v. PCL Construction Ltd., 1085 CarswellBC 765 as an illustration of incorporation by reference.

Robertson J. observed that, in practice, this decisiveness is challenged by the actual facts.

The challenge is to look at the documents passing back and forth between the parties to understand whether they have reached an agreement on all material points, even though there may be a difference in the forms and conditions printed on them.

LRL countered, relying on basic principles of contract formation, arguing that there must be evidence of a clear intention to incorporate the agreement. LRL relived on Dynatec Mining Ltd. v. PCL Civil Constructors (Canada) Inc., [1996] O.J. No 29, paras 10-11 and Sunny Corner Enterprises Inc. v. Dustex Corporation, 2011 NSSC 172 paras 21, 25-27.

Based on her review of the facts provided, Robertson J. concluded that she could not find the requisite intention of the parties to incorporate Alltrade’s arbitration agreement into their contract. The one area of agreement was that they agreed to arbitration.

[32] Despite Alltrade and LRL failing to agree on the prevailing document (purchase order or quotation) and jurisdiction (Ontario or Nova Scotia), the single thing both parties did agree upon was their desire to arbitrate any dispute that arose between them.

She moved on to consider if the Nova Scotia Supreme Court had territorial competence. That analysis lead Robertson J. to conclude that LRL had failed to establish her court’s jurisdiction or a “real and substantial connection” to Nova Scotia. She did conclude that analysis by combining her findings on the Alltrade’s agreement to arbitrate and the role of the Prime Contract.

[56] Although I could not find clear intention to incorporate the Ontario arbitration clause into their agreement, there is no doubt that their contractual arrangements were intended to meet the terms of the prime contract.

In her analysis of the third issue, she held that Ontario was the most appropriate form, summarizing her findings at para. 61.

In a brief closing paragraph, she accepted to follow Alltrade’s fourth option and stayed the action pending arbitration. Though she found neither Alltrade’s PO’s nor LRL’s quotations constituted a binding contract on arbitration but both agreed to some form of arbitration.

[62] I will grant an order in favour of the applicant Alltrade staying the action pending the outcome of arbitration between the parties, with costs to the applicant.

Neither party could demonstrate acceptance of its contract but both agreed to the principle of arbitrating their claims.  Each had included the arbitration agreement as part of the terms and conditions of a contract the other resisted.  Despite the lack of a contract containing their agreement to arbitrate, their declared willingness to arbitrate was accepted as sufficient to stay the litigation.  The result is that, even without an agreement to arbitrate, a willingness in principle may justify the court declining jurisdiction.