In Roxboro Excavation Inc. v. Delsan-AIM Environmental Services Inc., 2024 QCCS 2331 the Court declined to hear a dispute between the Applicant, Roxboro Excavation Inc. (“Roxboro”), and the Defendant, Les Services environnementales Delsan-A.I.M. Inc. (“Delsan”), on the grounds that it lacked jurisdiction because the parties had agreed to submit the matter to arbitration. Even though the subject contract included an arbitration clause, the Court did not interpret the clause or otherwise consider whether that clause required the parties to arbitrate the disputes. The Court instead focussed its analysis and decision on a separate agreement the parties had negotiated to resolve their disputes by arbitration and not in court.
Background to the dispute – The parties’ dispute concerned disagreements arising from a subcontract agreement (the “Subcontract”), whereby Roxboro engaged Delsan to demolish parts of the bridge at a fixed price.
The Subcontract included a dispute resolution clause:
“8.2.5 Either party may, by written notice to the other party, no later than 10 business days after the negotiations with [the] mediator have been terminated… require that the dispute be finally settled by arbitration in accordance with the CCDC [Canadian Construction Documents Committee] Rules for Mediation of Disputes Relating to Construction Contracts 40…
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8.2.6 Upon expiry of the 10 business days, the parties shall no longer be bound by the arbitration agreement referred to in paragraph 8.2.5 and, if the written notice referred to therein is not given within the prescribed time, the parties may submit the unresolved dispute to the courts or to any other form of dispute resolution, including arbitration, to which they have agreed.
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For the purposes hereof, each Party elects domicile in the judicial district of Montreal and irrevocably submits any disputes arising from or relating to this Contract or relating thereto to the Quebec courts, judicial district of Montreal”.
Two disputes (the “Disputes”) arose between the parties.
1. Allegations that Roxboro had failed to pay funds it owed to Delsan pursuant to an Arbitration Award (the “First Dispute”); and
2. Disagreement over the scope of work contemplated by the Subcontract, whereby Delsan argued Roxboro forced Delsan carry out $3 million of work not encompassed in the fixed price set out in the Subcontract (the “Scope of Work Dispute”).
The nature of the First Dispute is not described in the decision and seems to relate to a dispute over accounts rendered by Roxboro for services performed by Delson. The background of the First Dispute is relevant to the present case only to determine whether the parties, by agreeing to arbitrate that dispute, agreed at that time to also submit the Scope of Work Dispute to arbitration. This is discussed further below.
The parties arbitrated the First Dispute and on October 20, 2022, the arbitrator rendered an Award in that proceeding.
On March 29, 2023, Delson served Roxboro with a Notice of Amended Arbitration in the Scope of Work Dispute.
The same day, however, Roxboro commenced an action, asserting the jurisdicition of the Court to hear the Scope of Work Dispute. The decision does not make it clear whether this Notice amended the Notice of Arbitration submitted with respect to the First Dispute, but the remainder of the facts suggest that this was the case.
In response to the action, Delsan filed a Request for Declinatory Exception and to Appoint an Arbitrator, asking the Court to stay Roxboro’s action. Delsan argued that the dispute resolution clause in the Subcontract required arbitration of the Scope of Work Dispute. Moreover, according to Delsan, the parties had separately agreed to arbitrate both the Disputes. Roxboro responded that the parties never agreed arbitrate the Disputes in two separate arbitrations. Roxboro also claimed that the dispute resolution clause did not mandate arbitration for the Scope of Work Dispute, and invoked the dispute resolution clause’s reference to the jurisdiction of the Superior Court of Quebec.
Issue: Did the parties agree to submit the Scope of Work Dispute to an arbitrator?
Delsan’s application for a declinatory exception was made pursuant to 167 of the Code of Civil Procedure, which provides in material part:
“167. A party may, if the application is brought before a court other than that which would have had jurisdiction to hear it, request that the application be referred to the competent court or, failing that, that it be dismissed.”
The Court acknowledged the trend in favour of private settlement of disputes by arbitration, citing para 38 of Desputeaux c. Éditions Chouette (1987) inc., 2003 SCC 17 . There the Supreme Court of Canada noted that given that trend, the court “accepts and even promotes the recourse to civil and commercial arbitration.”
The Court found that it did not need to determine whether the dispute resolution clause invoked by Delsaon was valid, because it found that the parties had reached a separate agreement to arbitrate the Scope of Work Dispute.
To analyse this issue, the Court considered “all relevant evidence.” This involved reviewing emails between Delsan, Roxboro, and the arbitrator pertaining to arbitration coordination to determine whether they showed that the parties had reached an agreement.
The Court found that the parties had agreed to arbitrate the Scope of Work Dispute because, among other things, the evidence showed that the parties intended that both disputes were to be arbitrated, in two stages. The Court pointed to the following evidence in support of this conclusion:
1. Roxboro’s counsel had written to Delsan’s counsel agreeing to “submit their disputes to arbitration.” He also wrote a prospective arbitrator that the Subcontract provided for an arbitration process and that the parties had mutually agreed to submit their disputes to arbitration. Namely, the parties agreed that both Disputes were to be arbitrated.
2. An arbitrator the parties had engaged to decide the First Dispute had written to the parties referencing two phases of arbitration, being both the First Dispute and the Scope of Work Dispute. That letter had invited the parties to advise of any corrections. Roxboro offered no corrections.
3. The arbitrator rendered an award in the First Dispute arbitration, which referenced the parties’ agreement to proceeding with a second stage (i.e. the Scope of Work Dispute)of the arbitration.
Therefore the Court rejected Roxboro’s position that it had never consented to a two-stage arbitration, the Court found that the evidence above “squarely contradicted” this position.
The Court concluded:
“[41] In the [Court’s] view, the balance of probabilities demonstrates the existence of a written agreement by which the parties: agreed to submit the Disputes to arbitration under the Subcontract; and agreed that this arbitration would take place in two phases. It was not until January 11, 2023 – approximately eight months after confirming to a prospective arbitrator that they would submit the Disputes to arbitration – that Roxboro changed its mind and invoked its contractual arguments for the first time.”
The Court distinguished the case from Poinsot c. Abaziou, 1991 CanLII 3929 (QCCA) (“Poinsot”), where one-sided correspondence was unsuccessful to show that an arbitration agreement existed. Citing the Quebec Court of Appeal, the Court explained that “a unilateral proposition contained in ‘the appellant’s letter […] is not enough, in and of itself, to constitute an arbitration agreement between the parties’”. In contrast to Poinsot, the Court in this case found that “Delsan’s position is not based on a single one-sided sentence, but on a set of exchanges and documents which crystallizes and corroborates it.”
The Court also distinguished the case from Constructions 3P inc. c. Construction Demathieu & Bard (CDB) inc., 2019 QCCS 2070. In that case, the parties were merely exploring the possibility of arbitrating their disputes. The hypothetical nature of their discussions suggested a lack of common intention necessary for an agreement. In contrast, in the present case, there was “nothing hypothetical or uncertain about the common intention of the parties.”
Having found the parties had agreed to arbitrate the Scope of Work Dispute, the Court determined it must suspend or stay Roxboro’s action. The Court, moreover, emphasized its respect for arbitration agreements, stating:
“[47] …by not suspending the civil claim and by not referring it to arbitration, the Tribunal would come to not only to thwart the will of the parties, but also to undermine the regime a method of settlement codified by the legislator and promoted by the jurisprudence”.
The Court held that it did not need to determine if the Subcontract’s dispute resolution clause required that the Scope of Work Dispute be arbitrated.
Contributor’s Notes:
In this case, the Court decided the case based on whether the parties, through their written correspondence and conduct, had agreed to arbitrate the Scope of Work Dispute. The Court found that the evidence showed that the parties intended to arbitrate both Disputes, separately. The Court, therefore, it did not consider whether the Subcontract’s dispute resolution clause mandated arbitration or Roxboro’s argument that the dispute resolution clause preserved the Court’s jurisdiction to hear disputes.
Had the Court considered the issue, there were good arguments in favour of the clause mandating arbitration. In Bondfield Construction Company Limited v. London Police Services Board et al., 2013 ONSC 4719 (“Bondfield”), the Ontario Superior Court considered a nearly identical clause. Like the present case, that clause was a Canadian Construction Documents Committee, or CCDC, arbitration clause. Both clauses, moreover, appear discretionary. Each stipulates that a party may refer a dispute to be finally resolved by arbitration within 10 days after a mediation is terminated. The subject clause in Bondfield provides:
“By giving a notice in writing to the other party not later than 10 working days after the date of termination of the mediated negotiations under para. 8.2.5, either party may refer the dispute to be finally resolved by arbitration under the latest edition of the Rules of Arbitration of CCDC 2 Construction Disputes.”
The Court in Bondfield held that this clause provided for mandatory arbitration, so long as the parties followed the timelines in the dispute resolution process and stayed an action.