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Monday Morning Case Bites for March 11, 2019

Last Week’s Court Rulings from the Alberta Court of Queen’s Bench, Court of Appeal and SCC.

Edited by Amanda Kostek & Christie Dewar

Fath v Quadrant Construction Ltd, 2019 ABQB 151
Mandatory Arbitration Clause | Limitation Period | Continuing Litigation l Waiver

In this case, the Court declined to strike the action and directed the parties ready the claim for summary disposition. The issue was whether the action could continue in the face of a mandatory arbitration clause between the parties. The Defendant participated in the litigation notwithstanding the mandatory arbitration clause until the limitation for arbitrating expired. The Defendant then brought an application. The Court was critical of this strategy:

[15] This application was not taken until April 25, 2016, just after that limitation expired. While this delay might be a tactic that would be endorsed by Sun Tzu (The Art of War), it is not supported in a cooperative civil litigation context. Equity is not kind to those who sleep upon their rights; especially when it can involve prejudice the other side. This is not one of those defences that can wait until the end. If you truly believe it you should do it, not say it; and right away, not two years later. Otherwise, the other side might fairly presume that you have no interest in it. But the decided cases do not make things so easy.

The Court noted that the application was less about the venue than ending the action. If the arbitration clause trumped, then the action would come to an end, since the limitation for arbitrating had expired. The Court directed that the application was brought with undue delay, so if the Court was permitted to consider the grounds for refusing to stay an action in the Arbitration Act, the action should not be stayed or struck.

The Court commented that a party can waive a mandatory arbitration clause:

[42] A party is free to waive a contractual term, including a mandatory arbitration clause regardless of anything in the Arbitration Act. This is a matter of contract law, or equity. A party can attorn, or accede, or submit to the jurisdiction of the Court to deal with a dispute in the same way, even if there is another remedy or another forum, thus giving up their rights to the alternate remedy.

The Court dismissed the application on the following basis:

[49] In this case the Defendant did not object to the lawsuit in a timely way. It took steps in the lawsuit, including raising defences on the merits. I acknowledge that the arbitration provision was in the defence but was it only acted upon with great delay and with knowledge of the right. In my view, the Defendant, by its conduct, led the Plaintiff to believe that the Defendants’ strict rights under the contract would not be insisted upon. It only objected when the default was certainly too late to cure.

[50] If I am incorrect about the Courts ability to consider s. 7(2) of the Act at this late stage, I find that the Applicant has submitted to the jurisdiction of this Court for the resolution of this dispute, or has otherwise waived its right to rely on the arbitration clause. The Applicant proceeded with the lawsuit, and slept upon its rights after it had identified this right in its defence. A party with this type of defence should move promptly. It is not something to be left to the end of the day. And all the more so if the right could have been given effect with little prejudice to either side.

[51] The law in this area is in a very unsettled state. One of the many issues with not being able to consider the s. 7(2) exceptions, post-limitation is that is it resurrects a type of problem that had plagued limitations law; the problem of the late-suing Plaintiff.

[53] If I am wrong about all of this, it is my view that the uncertainty about the limitation period, the unsettled state of the law and the parties approach to this lawsuit all weigh in favour of the default position being that the lawsuit should proceed.