Nunavut – non-compliance with clear deadlines in contract eliminates ability to arbitrate – #267

In Comren Contracting Inc. v Bouygues Building Canada Inc., 2020 NUCJ 2, Mr. Justice Paul Bychok held that non-compliance with clear and unambiguous deadlines in a stepped dispute resolution clause extinguished claimant’s right to pursue arbitration.  Respondent’s eventual agreement to engage in mediation and arbitration, subject to its rights to raise that non-compliance as “technical or procedural defences”, did not waive its right to litigate or estop it from refusing arbitration.

Bouygues Building Canada Inc. (“Bouygues”) and Comren Contracting Inc. (“Comren”) signed a July 2015 subcontract relating to construction of the new Iqaluit International Airport (“Subcontract”). The Subcontract contained a dispute resolution clause which stipulating, in part, the following process:

8.2.4 If the dispute has not been resolved within 10 Working Days after the Project Manager was requested … the Project Manager shall terminate the mediated negotiations by giving Notice in writing to both parties.

8.2.5 By giving Notice in Writing to the other party, not later than 10 Working Days after the termination of the mediated negotiations under paragraph 8.2.4, either party may refer the dispute to be finally resolved by arbitration under the Rules of Arbitration of Construction Disputes as provided in CCDC[2]  …

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.

Soon after the parties began to perform the Subcontract, Comren sent the first of 23 notices of dispute (“Notices”), the last of which issued November 26, 2016.  Bouygues replied to none of the Notices.  Bychok J.’s reasons set out a series of exchanges between Comren and Bouygues, either directly or through counsel, regarding their respective positions as to whether (i) the notices raised valid issues subject to the dispute resolution (ii) mediation had been attempted or completed and, if so, when; and, (iii) Comren’s Notices had validly initiated arbitration and, if so, within the periods agreed to by the parties.

Bouygues did eventually engage with Comren but did so without prejudice to Bouygues’ rights to “raise technical or procedural defences in the arbitration process, including defences relating to timeliness of Comren’s claims and to whether or not Comren properly complied with the subcontract with relation to asserting and maintaining the claims that it will bring forward in arbitration”.

Comren applied to the Nunavut Court of Justice for an order to appoint an arbitrator for an arbitration to held in Vancouver.  It argued that Bouygues had failed to facilitate mediation and that Comren had been entitled to proceed with mediation as though mediation had taken place but failed. Comren also argued that Bychok J. should give the Subcontract a “broad”, “liberal” and “pragmatic” interpretation. 

Comren relied on Lorneville Mechanical Contractors Ltd. v. Clyde Bergemann Canada Ltd., 2017 NSSC 119 aff’d Clyde Bergemann Canada Ltd. v. Lorneville Mechanical Contractors Ltd., 2018 NSCA 14 which held that non-compliance with the parties’ dispute resolution provisions and their agreements to extend the delays were not obstacles to issuing a stay in favour of arbitration.  In that case, the plaintiff applied to stay its own litigation. Madam Justice Ann E. Smith of the Supreme Court of Nova Scotia determined that a plaintiff could not rely on the Commercial Arbitration Act, SNS 1999, c 5 to stay its own lien action but exercised her discretion under section 41(e) of Nova Scotia’s Judicature Act, RSNS 1989, c 240 to refer the parties’ disputes to arbitration. 

See the earlier, paired Arbitration Matters notes on both cases: “Nova Scotia court exercises discretion to grant plaintiff’s request to stay its own action” and “Nova Scotia Court of Appeal skeptical that litigants suffer irreparable harm if obliged to litigate instead of arbitrate”.

Bouygues resisted Comren’s application, arguing that Comren had failed to comply with deadlines in the Subcontract and Bouygues had never waived the timing deadlines.

Bychok J. prefaced his analysis by positioning the court’s role in interpreting Comren’s and Bouygues’ Subcontract in order to give effect to their intention when they entered it.

The role of the interpreting justice is to give to the words used their plain and natural meaning within the factual context of the parties’ relationship. It is not the justice’s role to “rewrite the parties’ contract” or to “relieve one of them from the consequences of an improvident contract” or their careless actions.

He added that (i) the Subcontract had been entered into by sophisticated parties based on legal advice and (ii) the “arbitration timing provisions” were “not unique” but are “a standard feature” of such contracts, referring to J. Brian Casey’s “Arbitration Law of Canada: Practice and Procedure”, 2nd ed. (JurisNet, 2011), p. 122. Bychok J. concluded that “[t]hus, the only rational inference I can draw is that the officers of each corporate party were completely aware of the content and ramifications of the subcontract’s timing deadlines”.

Bychok J. identified two (2) “arbitration triggers” which Comren claimed sustained its right to proceed with arbitration.  For the first “arbitration trigger”, Bychok J. held that Comren had waited too long.

[37] I stated earlier that I do not need to decide whether Comren’s interpretation of the mediation part of the subcontract was correct. Even if I assume Comren was correct that it could deem mediation failed and declare the 10-day arbitration referral period to have begun, by its own calculations, Comren was required to give paragraph 8.2.5 notice within 10 working days of December 21, 2016; in other words, by January 5, 2017. Comren did not do so.

Bychok J. held that Bouygues had agreed to participate in mediation and arbitration but subject to its objections which Bouygues had not waived. “In my view, Bouygues’ agreement to mediate did not cure Comren’s failure to give timely notice to arbitrate by even its own calculated date (January 5, 2017). Therefore, Bouygues is not contractually bound to submit itself to arbitration”.

In similar fashion, for the second “arbitration trigger”, Bychok J. held that Comren had, again by its own choice, waited too long.

[40] As events were to unfold, mediation failed on June 7-8, 2017. Given my finding pertaining to the first trigger, I do not have to decide whether it was open to Comren after the failed mediation, to compel Bouygues to participate in arbitration. Comren was, in any case, out of time. However, If I am wrong on this point, Comren’s actions after the June 2017 mediation also did not conform with the arbitration trigger timelines set out in the subcontract. Those timelines required that Comren refer the dispute to arbitration by June 22nd, 2017. It did not do so.

[41]   Instead, Comren says it re-triggered arbitration under the subcontract with its notice to Bouygues dated October 4, 2017.[16] I note here that Bouygues maintains that it never received a copy of that notice until June 2018. Comren’s counsel was unable to explain how or when the October 4, 2017 notice was communicated to Bouygues at that time.

Comren argued that Bouygues had waived its objection and was estopped from refusing to arbitrate given that Bouygues had participated in the mediation and shown a willingness to pursue arbitration.  Comren referred to Lorneville Mechanical Contractors Ltd. v. Clyde Bergemann Canada Ltd. as an earlier precedent.  Bychok J. disagreed, distinguishing the facts in that case from those before him. 

In Lorneville, the parties expressly waived the arbitration timeline requirements during their negotiations. The record here shows that Bouygues, unlike Lorneville, did not agree to hold in abeyance the paragraph 8.2.5 timelines during its protracted discussions with Comren over arbitration. In fact, Bouygues expressly stated that its agreement to enter mediation was “entirely without prejudice to whatever rights that Bouygues might have to raise technical or procedural defences in the arbitration process, including defences relating to timeliness of Comren’s claims”. Therefore, Bouygues’ actions – meaning its lengthy discussions with Comren in 2017 and 2018 about possible arbitration – do not prevent it from asserting its right to litigate the dispute with Comren.

urbitral note – Bouygues conditioned its involvement in the dispute resolution process on an express reserve to later raise Comren’s non-compliance with timing in the Subcontract.  Bouygues’ express reserves were made prior to engaging in the process required by Comren and preserved Bouygues’ ability to successfully contest Comren’s application to order compliance with the arbitral process.  Bouygues’ and Comren’s exchanges were sufficiently different from those in Lorneville Mechanical Contractors Ltd. v. Clyde Bergemann Canada Ltd. to justify not applying the latter case to extend any timelines and thereby preserve the initial obligation to pursue arbitration.