3.68: Court options to deal with significant deficiencies

Case Summary

In May 2007, Lafarge Canada Inc. (“Lafarge”) contracted with the City of Edmonton (“Edmonton”) to provide cement pipe for a light rail transit project. Edmonton alleged that Lafarge did not comply with specific delivery times set out in the contract. In July 2007, Edmonton served Lafarge with notice that delay costs were being tracked and would be charged back to Lafarge under the contract. Lafarge disputed Edmonton’s contractual entitlement to withhold delay costs. The contract between the Parties provided that disputes would be submitted to Arbitration. In May 2009, the Parties entered into a Standstill Agreement, by which the Parties agreed not to assert a limitations defence in any proceedings commenced by either Party. The Standstill Agreement also provided that, upon termination, the Parties had three months to commence proceedings to preclude a limitation defence. Lafarge terminated the Standstill Agreement by written notice on February 2, 2011. On February 11, 2011, Lafarge commenced an Action by Statement of Claim to recover the balance of the contract price. The Statement of Claim was silent with respect to Arbitration. In its Statement of Defence, Edmonton pleaded, inter alia, that the Parties had agreed to submit any disputes under the contract to Arbitration. Lafarge served its Affidavit of Records in July 2011, at which time Edmonton asserted that Arbitration proceedings had not been commenced within three months of the termination of the Standstill Agreement, and therefore were not commenced in in time, pursuant to s. 51 of the Arbitration Act, RSA 2000, c A-43. In June 2012, Edmonton applied to strike the Statement of Claim pursuant to Rule 3.68 or, alternatively, to stay the Action pursuant to s. 7 of the Arbitration Act, and for a declaration that the Arbitration of the dispute was statute barred.

The Chambers Judge held that the Statement of Claim served as sufficient notice of, or as a commencing document with respect to, Lafarge’s intention to arbitrate the dispute under the contract. Alternatively, the Chambers Judge held that the Statement of Claim complied with the Standstill Agreement and prevented Edmonton from raising a limitations defence to the commencement of Arbitration proceedings. The Chambers Judge held that the Arbitration survived and remained outstanding, but did not decide whether the Statement of Claim should be stayed pursuant to s. 7 of the Arbitration Act. Edmonton appealed the dismissal of its Application to strike or stay proceedings, and the Chambers Judge’s refusal to issue a Declaration that Arbitration proceedings were statute barred.

The Court of Appeal allowed Edmonton’s Appeal. The Court held that the Statement of Claim did not serve as a commencing document for Arbitration, and further, that it was not sufficient notice of an intention to arbitrate. Further, given that Lafarge’s Statement of Claim did not refer to arbitration, and sought to recover monies owed under contract, the Statement of Claim could not be said to have expressed a clear and unequivocal intention to arbitrate or to commence arbitration proceedings. The Court further questioned the premise that a Statement of Claim could suffice to either commence an arbitration, or serve as notice of an intention to arbitrate, given that arbitration and litigation are distinct processes. In this context, the Court held that the Statement of Claim did not constitute a notice of Arbitration and therefore the Appeal must be allowed.

The Court held that the Chambers Judge did not err in concluding that, if Lafarge was entitled to pursue an Action for its claim, the Statement of Claim was filed in time. As such, the Court held that there could be some merit in Lafarge’s submission that the Statement of Claim was not defunct, and that there was an active proceeding in the Court of Queen’s Bench until the Court ruled otherwise. However, the Court further held that it should not address the issue of whether Edmonton, by its conduct, waived its rights to insist on arbitration, or attorned to the jurisdiction of the Court. The Chambers Judge did not decide these issues and, as such, the Court of Appeal held that the record before it was inadequate to resolve those questions. While the Court allowed the Appeal on the basis that the Statement of Claim did not constitute notice of arbitration, the issues of attornment and delay were returned to the Court of Queen’s Bench for consideration.

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