Why this decision matters
In Harder v. InCor Holdings Limited, 2024 BCSC 1789, the court addressed what steps taken by a party in a proceeding before the court will prevent that party from subsequently seeking a stay in favour of arbitration under the International Commercial Arbitration Act, R.S.B.C. 1996, c. 233. The decision highlights what steps a party can and cannot take in response to an interim measures application brought in court before forfeiting the right to arbitrate.
Underlying Facts
The plaintiffs commenced an action in British Columbia. The parties had an arbitration agreement. Some of the defendants applied for a stay in favour of arbitration in London, UK under s. 8 of the International Commercial Arbitration Act. The provision requires that a party apply for a stay "before submitting the party's first statement on the substance of the dispute".
The issue was whether the applicants had submitted a statement on the substance of the dispute—and forfeited the right to a stay—by filing (i) two affidavits in response to the plaintiffs' Mareva injunction application or (ii) a response to civil claim (equivalent to a statement of defence).
The Court's Decision
The court held that the affidavits were not statements on the substance of the dispute; filing them did not preclude the applicants from seeking a stay. While the affidavits touched on the underlying merits of the dispute, they did so because the merits were relevant to the test for a Mareva injunction. The primary purposes of the affidavits were to seek an adjournment of the application and address the test for a Mareva injunction.
As a Mareva injunction is an interim measure that parties to an arbitration agreement may pursue in court without losing the right to arbitrate, the responding affidavits were not "statements on the substance of the dispute".
In contrast, filing the response to a civil claim was fatal to the applicants' stay application. A response to civil claim constitutes a statement on the substance of the dispute unless it merely addresses jurisdictional issues like the arbitrability of the dispute and the applicability of a stay. Here, the defendants filed a substantive response that denied material facts, set out the defendants' version of the facts, asserted legal positions, and asked for the action to be dismissed on its merits. Their response did not seek a stay or refer to the arbitration agreement.
While the applicants argued that the response was part of their response to the Mareva injunction application, the court found there was no evidence of that and the defendants could have deferred filing the response.
Final Thoughts
This case highlights the importance of deciding whether to seek a stay in favour of arbitration before responding to anything filed with the court. To preserve the right to arbitrate, any filings should be limited to interim measures or jurisdictional issues.
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