Canada – Motion to “Compel” Participation in Arbitration Dismissed, Despite Arbitration Clause

This article was first published on the Arbitration Matters blog, here.

In Black & McDonald v. Eiffage Innovative Canada Inc., 2022 ONSC 1855, Justice Dow was faced with two motions: (1) the defendants’ motion to stay the Ontario action on the basis of forum non-conveniens; and (2) the plaintiff’s motion to “compel” the defendants to participate in an arbitration as a result of an arbitration clause contained in the relevant contract. Justice Dow granted the stay on the ground that British Columbia was the proper forum, but declined to “compel” the defendants to participate in the arbitration. He found that whether the arbitrator had jurisdiction over the dispute was to be determined by the arbitrator at first instance and that any failure on the part of the defendants to participate in arbitration would have consequences for them in that proceeding.

The plaintiff was a sub-contractor on a project that involved renovating the Alex Fraser Bridge, which crossed the Fraser River outside Vancouver, British Columbia. Defendant Eiffage Innovative Canada Inc. was the contractor on the project pursuant to a Prime Contract with British Columbia; the individual defendants were its Director and CEO, construction manager, and subcontracting administrator. The Statement of Claim alleged breach of trust against them.

The work on the bridge was to be completed by June 28, 2019 but there was provision in the Prime Contract for payment reductions if the bridge was completed late. The work was not completed on time and the plaintiff started an action in Ontario in July, 2020, for payment. The plaintiff claimed that it was owed almost $3.5 million, which included requests for payment for change orders. The defendants claimed that the work was not done properly or in a timely manner.

The Subcontract contained a provision that the terms in the Prime Contract were binding upon the parties insofar as they were applicable. Those terms included an arbitration clause. The relevant terms of the main contract were as follows (para. 7):

“a) GC 80.01 that the contract “shall be governed by and interpreted in accordance with the laws of British Columbia”;

b) GC 80.02 that Eiffage “attorns itself to the exclusive jurisdiction of the courts of the Province of British Columbia”;

c) GC 8.09 that “every Sub-Contractor observes the terms of the Contract so far as they apply to that portion of the Work to be performed by that Sub-Contractor”; and

d) GC9.01(c) that “all disputes” .. “shall be referred to and finally resolved by a single arbitrator following the rules of the British Columbia International Commercial Arbitration Centre [now Vancouver International Arbitration Centre] for the conduct of domestic commercial arbitration”.

There were two jurisdiction motions before Justice Dow.

The defendants brought a motion for an order dismissing or staying the action on the basis that it was not commenced in the proper forum. The plaintiff brought a cross-motion to compel the defendants to participate in arbitration on the basis of the arbitration clause in the Subcontract.

The defendants’ forum motion – The court was guided by the principles in Young v. Tyco International of Canada Ltd., 2008 ONCA 709 (paragraphs 23 to 34). The defendants conceded jurisdiction simpliciter. Eiffage was an Ontario corporation with offices in Burlington. The other defendants resided in Ontario. Also, there were numerous dealings between the parties in Ontario. Justice Dow weighed the various factors that are relevant to the forum non conveniens analysis and found that the terms of the contract weighed heavily in favour of British Columbia as the proper forum:

“[24] As a result, although the standard to displace the plaintiff’s choice of jurisdiction is high, it must cede to the principle of efficiency and justice. The allegations of conduct by the individual defendants arose as a result of the contractual terms of the Prime Contract, the Subcontract and the Bond agreement. The terms contained in the Subcontract which incorporated the terms of the Prime Contract clearly anticipated and, I find, that the plaintiff knew or ought to have known its relationship was to be “governed by and interpreted” in accordance with the laws of British Columbia (GC80.01). Further, the parties accepted “the exclusive jurisdiction of the courts of the Province of British Columbia” (GC80.02).”

He therefore granted a stay of the Ontario action.

The plaintiff’s motion “to compel arbitration” – Justice’s Dow’s reasons for decision on this motion are short:

[28] The cross-motion by the plaintiff to compel the Eiffage defendants to participate in an arbitration raised concerns that the Eiffage defendants had refused to respond or proceed with what was provided for in the Prime Contract and Subcontract. I agree with counsel for the Eiffage defendants that should Eiffage not respond, it risks default proceedings as against it in accordance with the rules of the arbitral tribunal in question. I further agree that termination (sic) of whether the arbitrator has jurisdiction over the dispute is a matter for the arbitrator at first instances (sic). The cross-motion is thus dismissed.

Finally, Justice Dow found that the stay of the Ontario action may be revisited if the defendants were to fail to abide by terms of contract or “raised issues arising from the passage of time in pursuing the jurisdiction issue in Ontario” and he remained seized of any such motion to vary his order.

Editor’s Notes:

First, the brief facts in Justice Dow’s decision suggest that the plaintiff had commenced an arbitration pursuant to the arbitration clause in the Subcontract, but later started the Ontario action after some or all of the defendants failed to respond to the arbitration. Justice Dow noted that counsel for Eiffage agreed thatit would suffer the consequences of any failure to participate in the arbitration itself, suggesting that this was not an issue to be decided by the court. Indeed Justice Dow determined that any dispute about whether the arbitrator had jurisdiction over the dispute was for the arbitrator to decide. He therefore declined the plaintiff’s request to “compel” the defendants to participate in the arbitration.

Second, the stay issue was argued solely on the basis of forum non conveniens. The decision makes no reference to the stay provisions of the governing arbitration law, in this case the British Columbia Arbitration Act, S.B.C 2020, c. 2, s. 7.

Third, interestingly, the decision does not address the fact that both the action and the arbitration appear to have been brought against both the party to the Subcontract containing the arbitration clause, Eiffage (apparently for breach of contract or negligence, or both), and also its employees who were not parties to the Subcontract (for breach of trust). Justice Dow found that because all defendants were being represented by the same counsel, he would not give them separate consideration. It is not clear whether the parties or Justice Dow considered the possibility that the claims against Eiffage would be pursued by arbitration and those against the individuals would proceed in the British Columbia courts. Or it is possible that all defendants agreed to participate in the arbitration.

author

Lisa C. Munro

Lisa Munro is a partner at Lerners LLP, whose practice is limited to work as an arbitrator in domestic and international commercial arbitrations (both ad hoc and under institutional rules). She brings to this role more than 25 years of experience as counsel in commercial/business litigation and both international and…

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