In Nuqsana Inc. v. Tangmaarvik Inland Camp Services Inc. et. al., 2025 NUCJ 13, the Court granted a stay in favour of arbitration, finding the arbitration agreement provided for mandatory arbitration once either party elected to pursue a dispute by arbitration. The Court interpreted the arbitration clause and found that after mandatory “private amicable discussion and negotiation…”, the language “then any of the Parties may refer the Dispute to Arbitration” required arbitration if one party invoked the clause. The stay provision in Nunavet’s arbitration legislation is significantly different than others among common law provinces.
Background to dispute – The plaintiff, Nuqsana Inc. (“Nuqsana”), is an Inuit-controlled corporation which entered into a unanimous shareholders agreement (“USA”) to govern the business relationship between it and other shareholders of Tangmaarvik Inland Camp Services Inc. (“Tangmaarvik”), which provides camp services for mining projects across Canada. The defendants included Tangmaarvik and its other shareholders.
Nuqsana filed a statement of claim in the Nunavut Court of Justice alleging violations of the USA, including failing to appoint an Inuit delegate to the board of directors, failing to share audited financial information to shareholders, excluding Nuqsana from dividend issuances, and breaches of a rental agreement and construction agreement. The defendants then brought a motion for a stay of proceedings to allow the dispute to be resolved through arbitration in accordance with the USA.
The application for a stay – The USA includes a clause stating that, “[i]f any dispute … arises between the Parties with respect to this Agreement …, the Parties shall take reasonable steps to attempt to settle or resolve the Dispute through private amicable discussion and negotiation, and if such Dispute is not settled or resolved within 45 days from the time that Party first provides notice of the Dispute to the other Parties, then any of the Parties may refer the Dispute to Arbitration.” [emphasis added]
Under Nunavut’s Arbitration Act, RSNWT 1988 c. A-5 (“Arbitration Act”), a stay of proceedings may be granted under s. 10 (2) where the judge is:
“… satisfied (a) that there is no sufficient reason why the matter should not be referred in accordance with the submission; and (b) that the applicant was ready and willing to do all things necessary to the proper conduct of the arbitration at the time when the proceedings were commenced and still remains ready and willing to do so.”
Nuqsana took the position that the arbitration clause in the USA was permissive and that Nunavut’s Arbitration Act did not mandate arbitration. Nuqsana also asserted that only some of the issues pled in the statement of claim fell within the ambit of the USA’s arbitration clause and ordering arbitration of some of the issues would create multiple proceedings, complexity and delay. On the other hand, the defendants argued that the USA’s arbitration clause was broad enough to apply to all the issues, and that it required the parties to arbitrate.
The Court first addressed whether the arbitration clause is mandatory or permissive. The Court relied on Lebelle v Yellowknife Public Denominational District Education Authority, 2001 NWTSC 87 at paragraph 17 to find that “may” can have an imperative sense in contracts. In this case, the Court found that the arbitration clause required the parties to first attempt to resolve the matter through amicable discussion or negotiation. After that stage, the use of the word “may” permitted the parties to continue the agreement without resolving the dispute, but once a party referred the dispute to arbitration, arbitration would become mandatory. The Court set out this reasoning at paragraph 21:
“The intention of the parties, through the drafting and inclusion of 11.2 in the USA, is clear. If a dispute arose between the parties to the USA, it was contractually agreed that amicable discussion and private negotiation would be the first step towards resolution. Should such steps fail to resolve the matter, it was decided that any of the parties could or may refer the matter to arbitration. The imperative nature of the use of “may” in 11.2 is explicit. The clause enables any party to refer the matter to the jurisdiction of an arbitrator should amicable discussion and negotiation fail to lead to dispute resolution. “May” is used instead of “must” as there is no obligation on the parties to actually resolve the dispute. A party would be open to continuing the agreement in the face of a dispute should they choose. However, should the matter require dispute resolution, and should a party’s referral to arbitration be made pursuant to 11.2, jurisdiction would be imparted on the Arbitrator.”
The Court then turned to the remaining issue under section 10(2) of the Arbitration Act: whether there were any reasons why the matter should not be referred to arbitration. The Court referred to the principles in Central Investments and Development Corp. v Miller, 1982 CanLII 3029 (PEI SCTD) at paragraph 16 to determine what constituted sufficient reasons. Relying in particular on the principle that, “if the agreement for arbitration covers the claim as set out in the pleadings, it is the prima facie duty of the Court to allow the issue to be settled in the agreed upon forum, and to grant the stay of proceedings,” the Court found that the USA’s arbitration clause was broad enough to cover all of the claims in plaintiff’s pleadings, and thus it was the prima facie duty of the Court to allow the dispute to proceed before an arbitrator.
The Court ruled out other reasons why the matter should not be referred to arbitration. First, the arbitration clause was still operative: the dispute existed between the parties; the parties took reasonable steps to settle the dispute as required by the USA’s arbitration clause; and the dispute had not been resolved in 45 days. Second, the plaintiff had properly triggered the arbitration clause. Third, the issues in dispute were not questions of law and did not relate to the construction of the agreement. Finally, the plaintiff and all defendants were parties to the USA.
In the result, the Court ordered the stay of proceedings.
Contributor’s Notes:
First, the Court’s understanding of “may” as mandatory in this case is interesting. The Court did not expressly rely on any decisions holding that “may” in an arbitration clause required mandatory arbitration, although it is consistent with other case law holding that, once one party elects to arbitrate, such a clause may become mandatory (see e.g. Canadian National Railway Company v. Lovat Tunnel Equipment Inc., 1999 CanLII 3751 (ON CA)). The Court here did not point to any specific evidence of the factual matrix that led to the conclusion that the meaning of “may” in the USA’s arbitration clause was “clear”.
Second, this case also highlights some key differences between provincial domestic arbitration acts. Section 10 of Nunavut’s Arbitration Act provides that a Court “may” stay proceedings if “there is no sufficient reason why the matter should not be referred in accordance with the submission.” The only other domestic acts with similar wording are those of Nova Scotia and Newfoundland. This language allows the Court more discretion than in other provinces; for example, under Alberta’s domestic act, a Court “shall” stay a proceeding and can only refuse the stay in specific circumstances.
The distinct stay test under Nunavut’s Arbitration Act may help explain why the Court’s approach to determining the stay application relied on Central Investments and Development Corp. v Miller (“Central Investments”), a 1982 case from the Prince Edward Island Supreme Court (which, at the time, interpreted a stay provision similar to Nunavut’s current legislation). The approach in that case is arguably contrary to the competence-competence principle. Central Investments places the onus entirely on the Court to determine whether the issues between the parties fall within the arbitration clause or not. It does not consider whether an arbitral tribunal should have the jurisdiction to determine that question. There have been many cases addressing the importance of the competence-competence principle since 1982, however, the Court did not address this apparent tension with the competence-competence principle.
The Court’s approach in this case may not apply in other provinces. As we noted in a previous Arbitration Matters case note, Case Note #755 – Stay test may vary – no Canadian standard arbitration stay provision, the test to stay proceedings in favour of arbitration varies significantly across provinces, so parties should take care to understand the stay requirements of their seat when considering such an application.
Finally, this case reinforces the importance of complying with the timelines in a stepped arbitration clause. These clauses may cause issues for parties that do not strictly comply with the stipulated timelines. In this case, there could have been an issue about what was meant by “private amicable discussion and negotiation”, whether the parties met that obligation, and if they had not, whether that constituted an issue of jurisdiction or admissibility. See for example Comren Contracting Inc. v Bouygues Building Canada Inc., 2020 NUCJ 2, in which the Nunavut Court held that the parties could not be compelled to arbitrate because the parties did not comply with the deadlines in their stepped arbitration clause. Arbitration Matters addressed this in Case Note #267 – Non-compliance with clear deadlines in contract eliminates ability to arbitrate. In this case, however, the Court did not address this potential issue in any detail, as it appears that the respondent did not raise any issues with the parties’ compliance with the stepped arbitration clause.