Québec – Determination of Admissibility Left to Arbitrator Where Facts Disputed – #802

Fondations Trevi Canada c. Édyfic inc., 2023 QCCS 4466 highlights the importance of clear communications between parties when those communications have implications as to whether contractually prescribed deadlines are met where there is a multi-tier arbitration clause. In this case, the Court appointed an arbitrator where admissibility with respect to the arbitration was disputed. It was not obvious from a summary review of the evidence and an interpretation of the dispute resolution clause whether certain prescribed periods under the relevant agreement had expired. The Court rejected the defendant’s argument that the matter was inadmissible and that an arbitrator should therefore not be appointed. With reference to case law about the competence-competence principle, the Court held that these matters should be referred to the arbitrator for determination. This case engages the often difficult issue of jurisdiction versus admissibility.  

Background to dispute – Fondations Trevi Canada (“Trevi”) was a subcontractor to Édyfic inc. (“Édyfic”) in connection with a construction project for several high-rise buildings in Westmount, Montréal, which were completed in the summer of 2020. Following the completion of the project, there was a dispute between the parties as to whether Trevi as subcontractor was entitled to recovery of increased costs for the project, as a result of interruptions caused by discrepancies between the ground conditions that existed and those set out in the agreement. 

In March through July 2020, Trevi and Édyfic corresponded on this issue but did not reach an agreement on the increased costs entitlement and the scope of the release the parties had signed when the project was completed. Specifically, on May 26, 2020, Trevi wrote to Édyfic proposing a meeting to attempt to resolve the outstanding issues. On June 18, 2020, Édyfic responded with questions and with its position with respect to the scope of the release. In July 2020, Trevi responded that it did not agree with Édyfic’s position and the parties were deadlocked.

The dispute resolution clause provisions – Under section 6.6.3 of the contract, Trevi was permitted to submit a price increase. It did so on January 27, 2021, when it sent a formal demand for payment of the requested price increase. Section 6.6.5 of the contract provided further that the party responding to the request: “must do so by written notice within ten working days of the date of receipt of the request, or within a period agreed upon by the parties.” Édyfic did not do respond. Under s. 6.6.6. of the agreement, if the response to the price change request was not acceptable to the party making the application, the dispute resolution mechanisms in Part 8 of the contract applied.

Under s. 8.2.1, Trevi had seven (7) business days from the date it received a decision from Trevi to its request for price increases to send a Notice of Dispute. Édyfic then had ten (10) business days in which to respond to the Notice of Dispute. 

Under s. 8.2.3, ten (10) business days after receipt of the response to the Notice of Dispute, the parties were to request the project mediator to assist them in resolving any outstanding disputes. Under s. 8.2.5, no later than ten (10) business days after the mediated negotiations have been terminated one party may require that the dispute be arbitrated. 

Trevi issued a Notice of Dispute on February 18, 2021 under s. 8.2.1 – i.e. within 7 business days from the end of the period of time available to Édyfic to respond to Trevi’s January 27, 2021, letter requesting the price increase (which was 10 days).

Edyfic’s response to every step taken by Tevi was that it was out of time.

Édyfic responded to the Notice of Dispute on March 4, 2021 (10 business days after February 18), alleging that Trevi’s claims were inadmissible as its formal request for the price increase was out of time (with reference to the end of construction) and that its Notice of Dispute was out of time (with reference to the decision of the contractor on the price increase request). With respect to the latter, Édyfic argued that the 10- day prescribed period began on June 18, 2020, when Édyfic responded to Trevi’s request for a meeting. Accordingly, in its submission, the “decision by the Contractor” (being Édyfic) as set out in s. 8.2.1 had been accepted by Trevi as it did not start a dispute 7 business days thereafter, being June 30, 2020.

On March 10, 2021, Trevi followed up with a request for documents and advised of its intention to request the assistance of a mediator under the agreement. Trevi repeated this request again on March 18 and 23, including to ask for further details about the mediator’s contact information and availability, as required by s. 8.2.3, which required collaboration in connection with the mediation process.

On March 30, 2021, Édyfic responded that Trevi no longer had the right to mediate because Trevi exceeded the above-mentioned deadline under the contract. Pursuant to s. 8.2.5, Trevi served a Notice of Arbitration the next day, March 31, 2021, in order to initiate the arbitration process with respect to the dispute over the price increase request, asking Édyfic to collaborate in selecting an arbitrator. 

Édyfic’s position was that this notice was also out of time since a Notice of Arbitration needed to follow within 10 days of there being no mediator named, which Édyfic said took place on March 4, 2021, the day it responded to the Notice of Dispute. Since they Notice of Arbitration was received on March 31, 2021, Édyfic argued that the deadline had already passed.

Given Édyfic’s refusal to cooperate to appoint an arbitrator, Trevi commenced this proceeding for the appointment of an arbitrator.

Question for the Court – The Court was asked to appoint an arbitrator to hear the dispute between Trevi and Édyfic, and to declare that the latter’s refusal to cooperate in appointing an arbitrator was abusive.

In order to determine whether an arbitrator should be appointed, the Court considered whether the claims were admissible for arbitration. The issue was whether Trevi had complied with the applicable deadlines for serving its Notice of Dispute and Notice of Arbitration. This required an analysis of the multi-tier arbitration clause in question – as well as whether this issue should first be decided by the arbitrator. 

Édyfic argued that the starting point was an email exchange on June 18, 2020. However, the Court found that this email could not be considered the “contractor’s decision” from which Trevi had 7 days to serve a Notice of Dispute, as the exchange was really about whether the parties would meet to discuss. Édyfic also argued that its March 4, 2021, letter triggered the time period in which Trevi was required to serve the Notice of Arbitration. 

The Court rejected Édyfic’s arguments. It held first that it was not clear that the time period for the Notice of Dispute ran from the exchange of emails in May and June, 2020, when the parties were discussing a meeting. It also did not accept Édyfic’s position on that the March 4, 2021, email started the clock on the period within which Trevi was required to serve the Notice of Arbitration, given the various follow up inquiries that Trevi had made throughout March 2021 in an effort to appoint a mediator.

Finally, the Court held that this was a matter for the arbitrator to decide. The Court relied on both Gifran inc. v. 9225-2071 Québec inc, 2023 QCCA 311 and Nakisa inc. v. Kumar, 2023 QCCA 1404 for the proposition that an arbitrator should determine his or her own jurisdiction unless the questions of fact to be decided in order to determine the arbitrator’s jurisdiction involve only a superficial review of the evidence. (For a review of the Gifran case, see Arbitration Matters case note Québec – Interpretation of two shareholder agreements requires more than a superficial analysis – #725 – Arbitration Matters.) 

In this case, the Court held that there were several questions that required more than a superficial examination and therefore granted Trevi’s request to appoint an arbitrator.

The Court rejected Trevi’s request that the Court find Édyfic’s conduct to be abusive. The Court observed that the significant delay between the start of the discussions (in mid-2020) and the sending of the notice in early 2021 could explain Trevi’s attitude. 

Contributor’s Notes:

This case is of interest because it begs the question as to whether the principle that the arbitrator should decide his or her jurisdiction at first instance also applies to questions of admissibility. The Court did not address whether this was truly a matter of jurisdiction or one of admissibility – i.e. because the time periods set out in the agreement had elapsed – and whether the same test applies for determinations of admissibility. That issue was to be determined by the arbitrator under the competence-competence principle: “An objection to jurisdiction refers to the authority of a tribunal to hear a case, whereas an objection to admissibility refers to the characteristic of a claim and whether it is fit to be heard by the tribunal”, as set out in para. 44 of The United Mexican States v. Burr, 2020 ONSC 2376.

A further takeaway is that if parties are looking to trigger the start the clock for the running of any dispute resolution deadlines in a commercial agreement, they should ensure that the language they use is clear and does not give leave ambiguous whether the clock had started to run. 

The author thanks Emilie-Anne Leroux, an articling student at Dentons Canada LLP, for her assistance with this case note.