Québec – fair administration of justice of complex construction dispute requires some litigants to arbitrate -#473

In four (4) court files involving five (5) litigants, Mr. Justice Bernard Synnott in Transport Richard Meloche Inc. v. Constructions Innovo Inc., 2021 QCCS 605 dismissed court litigation between two (2) of the litigants G and C and referred them to arbitration.  Three (3) court files had already been joined for proof and hearing by an earlier court decision and G had successfully applied to intervene in and file an action in warranty in one (1) file and filed a cross-claim in another.  Synnott J. resisted G’s arguments that enforcing its agreement to arbitrate would not favour the fair administration of justice. [informal translation] ‘If arbitration clauses had to be put aside each time several disputes arose from the performance of a construction contract, mandatary arbitration clauses would rapidly become obsolete and superfluous’.  Synnott J. dismissed argument raising the potential for contradictory decisions and held G to its bargain. [informal translation] ‘In any event, the Court is of the opinion that it would be contrary to the interests of justice and its fair administration to deprive the parties of a process for dispute resolution, namely by way of arbitration, which they themselves chose and to which they freely agreed to submit by way of contract’.

Coopérative de Solidarité du Bel-Âge de Pincourt (“Coopérative”) signed a $13,656,000.00 March 13, 2018 contract with Groupe Geyser Inc. (“Geyser”) for construction of an eighty (80) unit residential building.  Identified by Synnott J. at para. 20 as “CCDC2 (2008)”, Coopérative’s and Geyser’s contract (“CCDC2”) appeared to an iteration of a familiar industry precedent established by the Canadian Construction Documents Committee CCDC2.  (See the urbitral notes below for a sampling of prior Arbitration Matter notes regarding disputes involving either CCDC contracts or equivalent/similar versions).

Having signed with Coopérative, Geyser retained Les Constructions Innovo Inc. (“Innovo”) as well as 9301-2573 Québec Inc. dba Construction Tritan (“Tritan”) as subcontractors.  Innovo in turn retained Transport Richard Meloche Inc (“TRM”) as a specialist in the bulk transportation of earth, stone and sand. Intact Compagnie d’Assurance (“Intact”) undertook to insure certain of the parties to the various contracts.

Disputes arose leading to four (4) separate court litigation files which Synnott J. identified by the final three (3) numbers in the court docket numbers assigned to each by the court registry when first opened.

#191 – TRM instituted an action against Innovo and Intact with Coopérative as mise en cause (third party impleaded) to recover $85,895.89. Geyser applied successfully to intervene and, with Intact, instituted an action in warranty against Coopérative, something neither TRM nor Innovo could do as they lacked the legal connection to Coopérative to justify doing so;

#200 – Tristan instituted an action against Coopérative and Geyser;

#204 – Geyser instituted an action against Coopérative to recover $589,756.77 withheld by Coopérative and a further $4,139,152.90 for extras; and,

#208 – Tristan instituted an action against Geysery and Intact.

An earlier Superior Court decision joined files #200, #204 and #208 for proof and hearing.  #191 remained as a standalone file.

Coopérative applied to dismiss the litigation filed against it by Geyser, relying on the agreement to arbitrate contained in their CCDC2.  Geyser objected, arguing that (i) the agreement to arbitrate was not a complete one and (ii) the mandatory delays in which to engage in arbitration had not been respected, rendering the agreement to arbitrate optional.

Validity of agreement to arbitrate and scope of dispute – To introduce his analysis, Synnott J. referred first to article 2638 of Québec’s Civil Code of Québec, CQLR c CCQ-1991 (“C.C.Q.”).

Article 2638 C.C.Q. An arbitration agreement is a contract by which the parties undertake to submit a present or future dispute to the decision of one or more arbitrators, to the exclusion of the courts”.

Synnott J. next referred to Zodiak International v. Polish People’s Republic, 1983 CanLII 24 (SCC), [1983] 1 SCR 529 p. 533 which identified the components of a complete undertaking to arbitrate.

A complete undertaking to arbitrate, described variously as true, real or formal, is that by which the parties undertake in advance to submit to arbitration any disputes which may arise regarding their contract, and which specifies that the award made will be final and binding on the parties”.

Referring to Compagnie d’assurance Standard Life v. Boulianne, 1999 CanLII 13694 (QC CA), Synnott J. added that Québec’s Court of Appeal favoured a broad and liberal interpretation of valid agreements to arbitrate negotiated between the parties.  He agreed with Coopérative that the terms of the CCDC2 covered the dispute as framed by Geyser.  See Cegerco Constructeur Inc. v. Produits T.C.S. Inc., 2002 CanLII 63613 (QC CS) paras 29-30 and the more recent Construction Larivière ltée v. Pomerleau Inc., 2019 QCCS 5410 paras 36-40 relied on by Synnott J. to illustrate the application of that broad and liberal interpretation.

Having set out the applicable legislation and approach adopted by the courts, Synnott J. readily agreed that the agreement to arbitrate was a complete one and that it covered the dispute set out by Geyser in its claims against Coopérative.  Synnott J. also paused to closely track the give and take of Coopérative’s and Geyser’s exchanges regarding the notice of arbitration (“Notice”) and determined that, on the facts, Geyser failed to demonstrate that the notice had not issued within the delays. Not only were the terms of the agreement to arbitrate clear but Synnott J. also remarked that, had Geyser not wanted to submit to such terms, it should have negotiated their removal before signing.  See paras 47-48.

Contestation of the notice of arbitration – Synnott J. further dismissed argument that the parties were bound by delays which they could not and did not alter.  On the record, Synnott J. determined that the parties had done just that.  Reading the exchanges in their context, Synnott J. considered that Geyser had taken one position earlier in the exchanges and another later in the exchanges regarding mediation and, on the record, that the parties had mutually agreed to additional delays.

Fair administration of justice – Geyser argued that the fair administration of justice urged that a single judge hear all the disputes and that the agreement to arbitrate did not favour that fair administration.

Synnott J. readily dismissed Geyer’s arguments.  First, the issues raised in the various claims were not of the same nature. Second, there were no links between the subcontractors and Coopérative which only dealt with Geyser.  Synnott J. promptly conceded the availability of different statutory recourses for subcontractors such as construction hypothecs (liens) but remarked that such recourses do not create a contractual right of recourse.

Synnott J. underlined that the dispute between two (2) parties stemmed from their contract and resisted undermining the contractual arrangements just because other disputes arose.

[informal translation] ‘If arbitration clauses had to be put aside each time several disputes arose from the performance of a construction contract, mandatary arbitration clauses would rapidly become obsolete and superfluous’.

Synnott J. dismissed any concern for contradictory judgments, reiterating that the disputes raised different issues between different parties.

Adding that arbitration is a process which is generally fast and effective, Synnott J. anticipated that it might also favour settlement of other court files thanks to the arbitration.  By quickly learning their own rights and obligations, Geyser and Coopérative could likely resolve the sums owing between them.

[informal translation] ‘In any event, the Court is of the opinion that it would be contrary to the interests of justice and its fair administration to deprive the parties of a process for dispute resolution, namely by way of arbitration, which they themselves chose and to which they freely agreed to submit by way of contract’.

urbitral notes – First, for similar complexity and related issues in construction matters, see the earlier Arbitration Matters notes:

Ontario – trial judge and appeal court rely on litigants’ agreement to repurpose arbitral award findings of fact – #402” regarding Sky Clean Energy Ltd. (Sky Solar (Canada) Ltd.) v. Economical Mutual Insurance Company, 2020 ONCA 558. In dismissing appellant’s claims that the trial judge erred in interpreting a common form of insurance contract used in the construction industry, the Court of Appeal noted that the litigants had agreed that findings of fact made in an arbitration award would bind the trial judge.  Though plaintiff had unsuccessfully challenged that same award and defendant had not been a party to the arbitration, both accepted not to relitigate the findings of fact when litigating their own dispute regarding those facts.

Alberta – unambiguous wording on arbitration costs in standard contract does not merit court intervention – #377” regarding K-Rite Construction Ltd v. Enigma Ventures Inc, 2020 ABQB 566. Madam Justice Donna L. Shelley dismissed challenges to a costs award, holding that awarding costs is discretionary and generally will be a question of mixed fact and law.  Shelley J. held that, absent some form of improper consideration, arbitrators have full discretion as to costs, may not be bound by traditional rules regarding the award of costs and using their discretion does not amount to an error of law.  Shelley J. also dismissed Applicants’ challenges to the arbitration agreement’s costs provisions contained in an industry-specific contract.  Despite the potential importance that standard forms may arguably have in an industry, unambiguous wording does not merit the court’s intervention.

Alberta & Manitoba – courts take different paths to different outcomes following same S.C.C. case – #276” regarding Cove Contracting Ltd v. Condominium Corporation No 012 5598 (Ravine Park), 2020 ABQB 106 in which Mr. Justice Grant S. Dunlop considered the role of a Canadian Construction Documents Committee construction contract (“CCDC2”) to rebuild a condominium complex destroyed by fire. 

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

Alberta – heavily-customized industry standard form contract ineligible for precedential value – #253” regarding Prairie Roadbuilders Limited v. Flatiron-Dragados-Aecon-Lafarge, A Joint Venture, 2019 ABQB 934. Mr. Justice James T. Eamon held that interpretation of an industry standard form contract promised no precedential value due to extensive negotiated changes which had resulted in an “awkward hybrid” and that resolution of the parties’ dispute depended on key portions drafted by the parties.  Eamon J. comments also on the role of “boilerplate” and further held that the issues submitted to the arbitrator qualified as discrete questions of law and, having already been referred to and determined in arbitration, could not be re-submitted on appeal to the court under section 44(3) of Alberta’s Arbitration Act, RSA 2000, c A-43.

Québec – word inserted only in French version of standard form construction contract makes arbitration mandatory – #249” regarding Construction Larivière Ltée v. Pomerleau Inc., 2019 QCCS 5410. Madam Justice Dominique Goulet held that the word French word “peut” (“may” in English), when read in context with the word “exiger” (“require” in English), justified qualifying the agreement to arbitrate as mandatory rather than a possibility.  The French word “exiger” does not appear in the English equivalent of the same standard form contract.  Goulet J. also held that the ten (10) day delay in which to initiate arbitration was a strict one.  Though the undertaking was mandatory, the arbitral party willing to proceed was too late in doing so and she denied the application to refer the parties to arbitration.

Ontario – claimant unable to arbitrate its dispute unless consolidated with non-existent arbitration – #164” regarding Federal Electric (1976) Limited v. McDonald Brothers Construction, 2019 ONSC 496.  Madam Justice Michelle O’Bonsawin refused to refer A and B to arbitration because their agreement provided that any of their disputes also relating to a dispute between B and C shall be arbitrated “at the same time in the same proceedings and by the same Arbitration Board as is appointed to resolve the dispute between” B and C. The contract between B and C had no agreement to arbitrate. O’Bonsawin J. also lists and applies the principles applicable to determining whether “best efforts” were made by B to advance its claim against C.