Canada: Understanding The Dispute Resolution Provisions Of Your Construction Contract: Will You Be Required To Submit Your Construction Claim To Arbitration?

When a claim arises on a construction project, the parties involved will often automatically choose litigation through the court system over the process contemplated by the dispute resolution provisions of their contract. However, a recent decision of the Ontario Superior Court of Justice serves as a reminder (in a somewhat atypical context) that courts will work hard to hold parties to their written agreement – particularly when arbitration provisions are involved.

Contractor Brings Court Motion to Enforce the Arbitration Provision of its CCDC-2 Contract

In Bondfield Construction Company Limited v. London Police Services Board, Bondfield was retained in August of 2007 as the general contractor for the renovation and expansion of the Police Board's headquarters in London, Ontario. The construction contract entered into by the parties was an amended "CCDC-2 1994" (which has since been superseded by the CCDC-2 2008). This form is a fixed-price general contract and is likely the most widely used of the popular standard contracts put out by the Canadian Construction Documents Committee.

Both the old and new versions of the CCDC-2 include a detailed dispute resolution protocol under Part 8. In this instance, the parties initially sought to follow the required dispute resolution steps of their contract or to otherwise have their dispute resolved without litigation. Bondfield provided notice of its delay claim to the project's designated Consultant on May 30, 2008. After receiving the Consultant's findings on January 31, 2009, Bondfield subsequently wrote to the Board on June 10, 2010, suggesting that the parties try to resolve their dispute through an independent third party.

The Board replied by advising that it preferred to stick with the contract's dispute resolution process and submitted its own claim to the Consultant for alleged deficient work. Upon receiving the Consultant's findings on the Board's claim, Bondfield delivered its dispute of those findings and requested that a Project Mediator be appointed, all as contemplated by the contract.

Several months later, Bondfield delivered its detailed delay claim to the Board, which the Board referred to the Consultant. Bondfield then commenced a court action on July 29, 2011 and after receiving the Board's statement of defence, proposed returning to the dispute resolution process contemplated by the contract. When the Board did not respond, Bondfield initiated a court motion to have the contract's arbitration provision enforced and its own court action stayed (i.e. suspended pending the resolution of the arbitration proceeding)..

Court Requires Parties to Abide by the CCDC-2's Arbitration Provision

The paragraph at issue was the contract's General Condition (GC) 8.2.6:

Bondfield also relied in part on section 106 of the Courts of Justice Act, which allows a court to stay a proceeding upon such terms as the court considers just.

The Board opposed Bondfield's motion. In particular, the Board argued that there was "undue delay" and a general failure to comply with the time limits prescribed by the CCDC-2. The Board's argument was an interesting one given that GC 8.2.6 appears to set out a very strict notice requirement where either party wishes to refer a dispute to arbitration.

Ultimately, the Court allowed Bondfield's motion to succeed and ordered a stay of the action. In so doing, the Court noted, in reliance upon case law (Brock University v. Stucor Construction Limited), that this precise provision had previously been considered by the courts and was found to be an arbitration agreement for the purpose of the Arbitration Act, 1991.

The Court also relied cited a series of cases that stand for the general propositions that:

1. where parties have entered into an arbitration agreement, arbitration proceedings will take priority over judicial proceedings and the courts will liberally interpret arbitration provisions so as to implement the dispute resolution goals of the parties (Cityscape Richmond Corp. v. Vanbots Construction Corp); and
2. the arbitrator, rather than the court, is well-equipped to address the arbitrator's own jurisdiction, the scope of the arbitration agreement, questions of fact and most questions of mixed fact and law (EDF (Services) Ltd. v. Appleton and Associates et al)

Accordingly, the Court found that the Board's objections to Bondfield's motion based upon delay and a failure to abide by the time limits prescribed by the dispute resolution provisions of the contract could be addressed by the arbitrator. The Court granted Bondfield the order staying the action and found that the parties ought to be held to what was interpreted to be an agreement to arbitrate.

What Does the Decision Mean for Parties to Construction Disputes?

Although the Court's findings in the Bondfield decision do not necessarily represent new law, they do provide important reminders for members of the construction industry.

Firstly, although the CCDC contracts may be considered "standard", they are still treated as negotiated agreements, whether amended or not, and ought to be carefully reviewed and understood by the parties who rely upon them. Standard or not, courts will try to hold parties to their negotiated bargain.

Even more significantly, a construction contract's dispute resolutions should be given the attention they deserve at the time the contract is negotiated, rather than being viewed as an afterthought. It is clear from the Bondfield decision that the courts will do their best to uphold such provisions. It is therefore crucial to ensure from the outset that the dispute resolution protocol is one that is appropriate for the project and acceptable to the parties.

Cases Cited

Bondfield Construction Company Limited v. London Police Services Board 2013 ONSC 4719 (S.C.J.).

Brock University v. Stucor Construction Limited 33 C.L.R. (3d) 182 (S.C.J.)

Cityscape Richmond Corp. v. Vanbots Construction Corp., [2001] O.J. No. 638 (S.C.J.)

EDF (Services) Ltd. v. Appleton and Associates et al. [2007] O.J. No. 3281 (S.C.J.)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.