3.68: Court options to deal with significant deficiencies

Case Summary

Technip Stone & Webster Process Technology, Inc. and Technip USA, Inc. (the “Appellant”) appealed from an Application Judge’s Decision that Husky Oil Operations Limited (the “Respondent”) was not bound by an arbitration clause in a contract because they were not a signatory to the contract. The Appellant argued that if the Respondent wanted to enforce a warranty provided in the contract (the "Contractual Warranty Right"), it necessarily meant that the matter would proceed to arbitration if a dispute arose. The Respondent argued that they were not bound by any associated conditions or limitations imposed by the contract, including the requirement to arbitrate disputes.

After considering the contract in issue, Lema J. held that that the Applications Judge erred. Justice Lema concluded that because the Respondent decided to enforce the Contractual Warranty Right, it was agreeing to resolve the warranty dispute via arbitration. In other words, the Respondent became a party to the arbitration mechanism when it sought to enforce the Contractual Warranty Right.

The Appellant argued that since the Respondent failed to commence arbitration proceedings in accordance with section 3(1) of the Limitations Act, RSA 2000, c L-12 (the “Limitations Act”), the Action must be dismissed pursuant to Rule 3.68. Justice Lema noted that section 3(1) of the Limitations Act sets deadlines for seeking a “remedial order” and that “at first glance”, requesting arbitration would fall outside seeking a “remedial order”. However, section 5(1) of the Arbitration Act, RSA 2000, c A-43 (the “Arbitration Act”), provides that “[t]he law with respect to limitation periods applies to an arbitration as if the arbitration were an action and a matter in dispute in the arbitration were a cause of action”. The Court found that section 5(1) of the Arbitration Act created a link between arbitration proceedings and the Limitations Act, and that commencing arbitration was subject to the time limits stipulated in section 3(1) of the Limitations Act. Accordingly, since the Respondent filed its Statement of Claim in 2017, the applicable limitation period for the Respondent to commence arbitration had necessarily expired. The Respondent’s arbitrable claims were struck from it’s Action against the Appellant pursuant to Rule 3.68. However, with respect to the Respondent’s negligence claim against the Appellant, Lema J. held that it was not struck as it arose under the law of negligence, was not arbitrable pursuant to the contract, and was not affected by the expiration of the arbitration deadline. 

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