In this decision, the Saskatchewan Court of Queen's Bench refused to appoint an arbitrator to resolve a dispute about overhead charges incurred in the operation of a joint venture.
Over a period of seven years De Beers Canada Inc. (De Beers Canada) was the operator of a joint venture with Shore Gold. Under the agreement, De Beers Canada charged the joint venture monthly for operational expenditures, and was reimbursed for those expenditures from a joint venture account. After De Beers Canada left the joint venture, Shore Gold formed the view that, contrary to the agreement, De Beers Canada profited from receiving 15% for overhead expenses to the tune of over $2.9 million.
Shore Gold subsequently delivered an arbitration notice pursuant to the dispute resolution provisions of the joint venture agreement. The provisions required the parties to agree upon a suitable arbitrator within 30 days, failing which an arbitrator would be named by the Court.When the parties failed to reach an agreement and Shore Gold applied to the Court for assistance, De Beers Canada applied to have the arbitration notice struck by arguing, among other things, that arbitration was not the appropriate procedure and that the issue of financial gain was not itself arbitrable because, even if De Beers Canada was found to have gained financially, there was no provision in the joint venture agreement for the repayment of that gain.
The Court found that De Beers Canada was estopped by its conduct (which included participating in a search for an arbitrator) from arguing that arbitration was not the appropriate procedure. However, the Court ultimately agreed that there was no arbitrable issue. The joint venture agreement allowed for forward-looking adjustments to the rate of overhead charges, but it did not require the operator to pay back any profit, or allow for the recovery of any loss, arising from the 15% overhead rate. As a matter of law, there was no dispute between the parties that could be resolved by an arbitrator.
The Court struck the arbitration notice and dismissed Shore Gold's application for the appointment of an arbitrator.
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