Failure to Comply with Clear Timelines in Dispute Resolution Clauses Precludes a Party from Compelling Arbitration

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Introduction

In Comren Contracting Inc. v Bouygues Building Canada Inc., 2020 NUCJ 2[1], the Nunavut Court of Justice considered whether strict adherence to timelines set out in an arbitration provision was a necessary condition to compel arbitration.

Bouygues Building Canada Inc. (“Bouygues”), and its subcontractor, Comren Contracting Inc. (“Comren”) were engaged in a dispute relating to work on an airport.[2] Comren applied to the Court for an order compelling Bouygues to submit to arbitration and for the Court to appoint an arbitrator. Bouygues argued that Comren was not compliant with the timelines set out in the dispute resolution provision of the subcontract and that the application should be dismissed.[3] The Court found that Comren failed to invoke the arbitration process in a manner that would contractually compel Bouygues to participate, and dismissed the application.[4]

Background

Comren and Bouygues entered into a subcontract in July 2015 relating to the construction of the new Iqaluit International Airport. The subcontract provided that in the event of a dispute, the subcontractor, Comren, could send a written notice of dispute (“Notices”) to Bouygues which would contain particulars relevant to the dispute and references to relevant provisions of the subcontract.[5] The relevant parts of the subcontract were:

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.[6]

During the course of the commercial relationship, Comren sent 23 notices to Bouygues with the last notice sent on November 26, 2016. Bouygues did not respond to any of the notices. On December 21, 2016, Comren’s counsel wrote to Bouygues indicating Comren’s intent to proceed to arbitration (ignoring the requirement to proceed with mediated negotiations). Bouygues responded to state that the notices failed to pertain to a contractor’s decision and failed to contain sufficient information as required by the subcontract.[7]

On January 23, 2017, Comren reiterated its intent to proceed to arbitration. On January 30, 2017, Bouygues stated that Comren had not proceeded according to the terms of the subcontract. After a series of exchanges, the parties agreed to mediation outside the parameters of the subcontract, but were unsuccessful in their dispute resolution.[8]

On July 27, 2019, Comren filed an application to the Court to compel Bouygues to arbitrate the disputes in accordance with their agreement. 

Bouygues responded by arguing that Comren failed to comply with the clear deadlines in paragraph 8.2 of the subcontract; Bouygues never waived such deadlines; there would be no harm or prejudice to Comren if the dispute were litigated; and the Court does not have jurisdiction to appoint an arbitrator.[9]

The Court’s Decision

The Court based its decision on the consideration of three issues:

  1. Did Comren comply with the timeline requirements of paragraph 8.2.5 such that Bouygues is contractually bound to engage in arbitration?
  2. If the answer to question 1 is no, is Bouygues estopped from refusing arbitration given its previous actions and stated prior willingness to engage in arbitration?
  3. If the answer to question 2 is yes, does the Court have jurisdiction to appoint the arbitrator?[10]

On the first issue, the Court identified two arbitration triggers which Comren claimed sustained its right to proceed with arbitration. On the first trigger, Comren was required to give notice within 10 working days of December 21, 2016 as per paragraph 8.2.5, and did not do so.[11] Additionally, Bouygues agreed to participate in mediation and arbitration, however, it was subject to objections which Bouygues had not waived. Therefore, Bouygues was not contractually bound to submit to arbitration.[12]

On the second trigger, the Court gave a plain and ordinary meaning to the subcontract and determined that Comren waited months of inconclusive discussions with Bouygues before it gave the required timely notice.[13] The Court stated that, “on the expiration of 10 working days following the unsuccessful mediation in June 2017 - with no arbitration notice from Comren to Bouygues - the arbitration provisions of the subcontract no longer bound the parties.”[14]

On the second issue, Comren relied on Lorneville Mechanical Contractors Ltd v Clyde Bergemann Canada Ltd (“Lorneville”), 2017 NSSC 119[15] to argue that “even where specific requirements have not been complied with, there is still an understood primacy and preference for arbitration over litigation”.[16] The Court distinguished Lorneville, as in that case, the parties expressly waived their arbitration timeline requirements.[17] Bouygues never waived the timelines in this matter, and cannot be compelled to arbitrate.

Importance of the Decision

This case is a reminder to parties with dispute resolution clauses to remain mindful of the timelines contained within. Failing to adhere to the strict timelines may prejudice a party’s right to compel the contractual counter-party to engage in the agreed upon dispute resolution provisions.

However, as dispute resolution provisions can be varied by mutual consent of the parties, any timelines or schedules within such an agreement can be varied by agreement. Though, absent any such agreement, the party seeking to engage the dispute resolution provision must abide by its requirements.

[1]Comren Contracting Inc. v Bouygues Building Canada Inc., 2020 NUCJ 2 (CanLII).

[2]Ibid at para 1.

[3]Ibid at para 2.

[4]Ibid at para 3.

[5]Ibid at para 4.

[6]Ibid at para 6.

[7]Ibid at para 8.

[8]Ibid at paras 9-10.

[9]Ibid at para 21.

[10]Ibid at para 22.

[11]Ibid at para 37.

[12]Ibid at para 38.

[13]Ibid at para 42.

[14]Ibid at para 43.

[15]Ibid at para 45.

[16]Ibid at para 46.

[17]Ibid at para 47.

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