Court File and Parties
COURT FILE NO.: 19-81424 DATE: 2021/03/16 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
JEAN MAISONNEUVE and 3721094 CANADA INC. Applicants – and – CHRISTOPHER CLARK and LANCITER CONSULTING INC. Respondents
Counsel: David Cutler for Applicants Bryce Dillon for Respondents
HEARD: February 16, 2021
JUSTICE SALLY GOMERY
[1] The applicants Jean Maisonneuve and 3721094 Canada Inc. seek an order referring the parties’ dispute to arbitration pursuant to an arbitration clause in a release signed in September 2016. The respondents Christopher Clark and Lanciter Consulting Inc. contend that the application is time-barred.
Background
[2] Clark and Maisonneuve are cousins. They were in business together for many years as shareholders in various companies, including Eastern Ontario R.E. Investors Inc. (“EOREI”), a company that acquired and managed real estate. Their relationship deteriorated and, in February 2016, Clark made a series of legal claims against Maisonneuve, which were referred to private arbitration.
[3] In September 2016, Clark and Maisonneuve reached an agreement on almost all of the issues in dispute. As part of their settlement, Maisonneuve agreed to transfer his shares in two companies, Centa Real Estate Limited (“Centa”) and Gro-Net Financial, Tax and Pension Planners Limited (“Gro-Net”) to Clark, and Clark agreed to transfer all of the EOREI shares in his control to Maisonneuve. Their lawyers drafted minutes of settlement (the “Minutes”), a mutual release and indemnity agreement (the “Release”), and an escrow agreement (the “Escrow Agreement”), which the parties signed on September 26 and 27, 2016.
[4] The one outstanding issue related to certain EOREI costs and expenses (the “Excluded Issue” or the “EOREI expenses”). Maisonneuve believed Clark should pay the EOREI expenses. Maisonneuve disagreed. As a result, the Release included the following clause:
The undersigned agree and understand that there is one issue that is not covered by this Mutual Release and it is as set out in this paragraph (the "Excluded Issue"). Maisonneuve takes the position that Clark is responsible for certain EOREI related costs and expenses incurred prior and subsequent to the Acceptance date. Conversely, Clark takes the position that he is not responsible for any EOREI related costs and expenses prior and subsequent to the Acceptance date and, if he is responsible for any EOREI related costs and expenses, then he disputes Maisonneuve's accounting thereof. If the parties are unable to resolve the Excluded Issue as between them, then the Excluded Issue shall be fully and finally referred to the Arbitrator for resolution. The Arbitrator's decision shall not be subject to any appeal, either of law, fact or mixed law and fact.
[5] Since both parties agree that this clause gives rise to an enforceable arbitration agreement governed by the Arbitration Act, 1991, S.O. 1991, c. 17 (the “Arbitration Act”), I will refer to it as the “Arbitration Clause”.
[6] In July 2017, Clark began an action to enforce the Minutes and obtain damages for Maisonneuve’s alleged breaches of his obligations pursuant to it (the “2017 Action”). In a statement of defence served in July 2017, Maisonneuve asserted that, although it was not specified in the minutes, the parties had contemplated that any arbitration pursuant to the Arbitration Clause would take place within 90 days.
[7] In January 2018, Maisonneuve’s lawyer, James Katz, sent a settlement proposal to Clark’s lawyer, Keith MacLaren. The proposal included a mechanism to resolve the Excluded Issue. In response, Mr. MacLaren phoned Mr. Katz and told him that he had no intention of engaging in any negotiations outside the context of the 2017 Action. When asked about this response in an out-of-court examination, Mr. MacLaren expressed the view that, if Maisonneuve wanted to raise the Excluded Issue, the parties would deal with it in arbitration.
[8] In 2019, Maisonneuve retained new counsel, and resiled from his position in the 2017 Action that the Minutes were null and void and that the parties intended, in signing them, that an arbitration take place within 90 days. Maisonneuve’s statement of defence was later amended to reflect this change of position. In the meantime, on June 11, 2019, his new lawyer sent an email to Mr. MacLaren requesting arbitration of the Excluded Issue. The request was refused on the basis that the arbitration was time-barred. According to Clark, any arbitration would have had to be completed in the 90 days following the parties’ signature of the settlement on September 26/27, 2016 or, alternatively, within two years of that date.
[9] Maisonneuve then brought this application seeking a referral to arbitration of the dispute about the Excluded Issue. He denies that the Minutes require arbitration of the Excluded Issue within 90 days. On the contrary, he contends that the Arbitration Clause requires the parties to make some attempt to resolve the Issue between them prior to the initiation of any arbitration. Until such an attempt was made, the applicable two-year limitation period in the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (the “Limitations Act”) did not begin to run. Maisonneuve says that, since Clark did not clearly communicate his refusal to negotiate a resolution of the issue until January 2018, at the earliest, the request to arbitrate is not time-barred.
The Issues
[10] There are three issues arising from Maisonneuve’s application and Clark’s motion to dismiss it:
(i) Do I have the jurisdiction to determine whether Maisonneuve’s arbitration request is time-barred? If so, should I? (ii) Was there a 90-day deadline to request or complete arbitration? (iii) If not, is the application nonetheless time-barred?
(i) Do I have the jurisdiction to determine whether Maisonneuve’s arbitration request is time-barred? If so, should I?
[11] This preliminary issue arises because, in his motion, Clark seeks the dismissal of the application as time-barred or, in the alternative, a referral to arbitration of any question relating to the arbitration, including the timeliness of Maisonneuve’s request for it. The principal relief requested presupposes that I have jurisdiction to determine the limitations issue, while the alternative relief suggests that I either do not have jurisdiction or should not exercise it.
[12] Clark’s counsel clarified his position at the hearing. He concedes that I have jurisdiction to determine if Maisonneuve’s request for arbitration is time-barred. If, however, I conclude that the evidence currently on record does not permit me to determine the limitations issue, he says that I should refer it to the arbitrator.
[13] Pursuant to s. 6 of the Arbitration Act, no court shall intervene in matters governed by the Act except for specified purposes. Those purposes include “to assist the conducting of arbitrations”. To that end, s. 10(1)(b) of the Act gives the court jurisdiction to appoint an arbitral tribunal where “a person with power to appoint the arbitral tribunal has not done so after a party has given the person seven days notice to do so”. That is the basis for Maisonneuve’s application in this case.
[14] Justice Ellies considered the Court’s jurisdiction to determine whether an application for referral to arbitration is time-barred in Foglia v. Coccimiglio, 2013 ONSC 114. He concluded that he could and should decide the issue. On the first question, he relied on s. 7 of the Arbitration Act, the relevant parts of which provide as follows:
- (1) If a party to an Arbitration Clause commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the Arbitration Clause, stay the proceeding.
(2) However, the court may refuse to stay the proceeding in any of the following cases:
- The matter is a proper one for default or summary judgment.
[15] In determining that he should exercise the jurisdiction conferred under s. 7(2), Ellies J. held that there were two reasons to do so. First, he found, at para. 27, that the record before him gave him sufficient insight with respect to the limitations issue:
[T]his is a case where the court can easily get a full appreciation of the issue and the evidence (see Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, 108 O.R. (3d) 1 (Ont. C.A.)). With one exception, the relevant facts are uncontested. The evidence consists almost entirely of documents, the authenticity of which is unchallenged. Although the court is now empowered under Rule 20 to make findings of credibility in summary judgment motions, it is not necessary to exercise that authority with respect to most of the evidence in this case.
[16] Second, at para. 32, Ellies J. found that no good purpose would be served by requiring the parties to litigate the issue before an arbitrator, when they had already presented their arguments to the Court:
Convenience is the other reason why I believe that this issue should be resolved by this court. I agree with counsel for the respondent that, although the matter could have been dealt with by the arbitrator, and probably should have been, it would be helpful to deal with the issue now, so as to avoid the duplication of effort involved in later bringing it before the arbitrator. I do not agree, however, with the submission that there is a risk of inconsistent verdicts, should this court decide the issue, because of the concurrent jurisdiction of the court and the arbitrator.
[17] I agree with and adopt this reasoning in this case. I find that I have jurisdiction to determine the limitations issue and that I can determine it fairly on the record before me, based on the documentary record and uncontroverted evidence. I do not need to make findings of credibility. I do have to make some inferences, but they are based on uncontested facts, such as the contents of correspondence exchanged between the parties’ lawyers.
[18] In keeping with r. 4.01 of the Rules of Civil Procedure, a ruling by this court will secure the “just, most expeditious and least expensive determination” of the issue. Counsel for Clark conceded that, if I am able to determine the issue on the record before me, I should do so.
[19] I therefore conclude that I can and should resolve the limitations issue.
(ii) Was there a 90-day deadline to request or complete arbitration?
[20] Clark contends that the parties intended to resolve the Excluded Issue within 90 days of signature of the minutes of settlement. At para. 16 of his October 3, 2019 affidavit, he states that:
At the time of the Minutes, Maisonneuve and I contemplated that the arbitration would take place within 90 days of September 26, 2016. We also contemplated that EOREI would be a party to the arbitration, and that Lalonde and Labreche would be involved, as it related to alleged corporate expenses.
[21] On this motion, Clark argues that the parties’ intention is reflected in correspondence between their lawyers when the terms of the settlement were being negotiated, in the language in the escrow agreement, and in the position taken by Maisonneuve in subsequent litigation between the parties.
[22] On September 20, 2016, Maisonneuve’s lawyer sent an email to Clark’s lawyer seeking confirmation of the deal that he understood their clients had reached. He described the terms of the settlement as follows:
- Clark to transfer shares of EOREI to Maisonneuve;
- Maisonneuve to transfer share of Centa [and] Gro-Net to Clark (to be held in escrow pending a binding arbitration on the sole issue of whether the parties have rights to adjustments as between them and if so, the applicable timeframe and quantum);
- Subject to the availability of the parties, their counsel and the arbitrator, the parties shall agree upon a date for arbitration within 15-days from the date of this email; and
- The parties to exchange Mutual Full and Final Releases on terms.
[23] Clark’s lawyer responded by saying that the terms were acceptable “provided our firm is acting as the escrow agents for the shares and we close by Thursday”. He added that: “To be clear we can speak with the arbitrator about dates within 15 days and set a schedule”.
[24] On September 26, 2016 (the “Effective Date”), the parties signed an escrow agreement with respect to Maisonneuve’s transfer of shares to Clark. Under this agreement, Clark was to deliver certain share documents to his solicitors. Further to clause 4, the documents would remain in escrow and released back to Clark on the earlier of one of three events:
(a) the failure of the parties to submit the matters in dispute as between them to arbitration within 90 days of the Effective Date; or (b) the completion of arbitration proceedings as between Clark and Maisonneuve, subject to the provisions of any order of the arbiter in such proceedings; or (c) as may be otherwise directed to the Escrow Agent by Clark and Maisonneuve pursuant to a written notice executed by each of Clark and Maisonneuve and delivered to the Escrow Agent.
[25] Clause 4.1 provided that, if Clark failed to respond to the arbitration, he would forfeit a percentage of the escrowed shares equivalent to the value of Maisonneuve’s claim.
[26] According to Clark, the September 20 exchange shows that the parties contemplated the completion of an arbitration of the Excluded Issue prior to the release of the documents in escrow to Clark. Clause 4 of the escrow agreement established a maximum escrow period of 90 days, failing which Clark’s shares would be released back to him. At para. 19 of his supplementary December 17, 2019 affidavit, Clark states that he “asked for [clause 4] to be added because of Maisonneuve's procrastination. Therefore, if he failed to commence the arbitration within 90 days, the shares would be released.”
[27] I note first that, despite Clark’s assertion in his October 3, 2019 affidavit that the parties contemplated the completion of their arbitration within 90 days of settlement, this is not reflected in clause 4. Subsection (a) provides that Clark’s shares may be released from escrow as early as 90 days from the Effective Date, if by that time the parties have not submitted their dispute to arbitration. This leaves open the possibility that one of the parties would request arbitration and the other would agree within 90 days. In that case, the shares would have remained in escrow until the arbitration proceedings had been completed (subsection (b)) or the parties directed the Escrow Agent to release them (subsection (c)). There was no deadline set for the completion of an arbitration submitted within 90 days.
[28] Clark argues, however, that the parties’ intention to complete arbitration within 90 days is evidenced by the position taken by Maisonneuve in the 2017 Action. In response, Maisonneuve says that the original defence to the 2017 action was “incorrectly pleaded”. He now denies that the parties ever agreed that the arbitration over the Excluded Issue would take place within 90 days of the settlement. On the contrary, the Arbitration Clause recognizes that the parties were required to try to resolve the issue amicably before any arbitration could be initiated.
[29] Having considered the language in the Arbitration Clause and taking into account the circumstances in which it was signed, I find that the parties did not agree to a 90-day deadline either to request arbitration or to complete it.
[30] The Arbitration Clause does not explicitly set a 90-day deadline, or any deadline, for the arbitration of the Excluded Issue; nor does the release in which it is found, nor do the minutes of settlement to which it is attached. Clauses 4 and 4.1 of the escrow agreement signed the same day show that the parties anticipated that they would attempt to resolve the Issue, either by arbitration or otherwise, within 90 days. There is nothing that suggests, however, that Maisonneuve agreed to relinquish his claims with respect to the EOREI expenses if he failed to seek arbitration within this period. The escrow agreement in fact provides for another penalty for Maisonneuve’s failure to assert his claim promptly: Clark’s shares would be released from escrow.
[31] In interpreting a contract, a judge must seek to determine the intent of the parties and the scope of their understanding. In order to do so, “a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”; Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, at paras. 47, and authorities cited therein. Relevant contextual factors can include the purpose of the agreement and the nature of the relationship created by the agreement; Sattva, at para. 48.
[32] Evidence of terms that the parties may have contemplated, however, does not allow the judge to ignore the terms of the contract ultimately reduced to writing and signed. As the Supreme Court held at para. 57 of Sattva:
While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement… . The goal of examining such evidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract… . While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement … . [Authorities omitted and emphasis added.]
[33] As stated by the B.C. Court of Appeal in Glaswegian Enterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), 101 B.C.A.C. 62, cited by the Court in Sattva, at para. 20: “The factual matrix is the background which may deepen an understanding of what the parties meant by the language they used, but the Court cannot make a new agreement. Our search is always for the meaning intended by the parties as expressed in the agreement” [emphasis added].
[34] The agreements signed by the parties on September 26 and 27, 2016 do not set a deadline for the arbitration of the Excluded Issue, failing which Maisonneuve would lose his entitlement to claim for EOREI expenses. Nor do I find a deadline imposed as an implied term. Further to the Supreme Court’s decision in M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619, 10 C.C.E.L. (4th) 75, at para. 47, terms may be implied in a contract only if they are:
(1) Based on custom or usage; (2) As the legal incidents of a particular class or kind of contract; or (3) Based on the presumed intention of the parties where the implied term must be necessary “to give business efficacy to a contract or as otherwise meeting the ‘officious bystander’ test as a term which the parties would say, if questioned, that they had obviously assumed”.
[35] Under the third branch of the MJB test, a party seeking to imply a term based on business efficacy must show that the parties necessarily intended to include such a term in their agreement. Clark’s evidence, on its face, does not establish this. In his October 3, 2019 affidavit, he says that the parties “contemplated” that the arbitration would take place within 90 days. In his December 17, 2019 affidavit, he says that he asked for clause 4.1 to be inserted in the escrow agreement so that Maisonneuve would be penalized if he failed to commence an arbitration within that period. The penalty was the release of Clark’s shares from escrow. There is no evidence that the parties ever intended or agreed that an additional penalty would be that Maisonneuve would relinquish his claim for the EOREI expenses altogether.
[36] In his September 20, 2016 email to Clark’s counsel, Maisonneuve’s counsel stated that Maisonneuve would transfer shares of Centa and Gro-Net to Clark “to be held in escrow pending a binding arbitration on the sole issue of whether the parties have rights to adjustments”. He also said that the parties would agree on a date for arbitration within 15 days. The settlement documents signed a few days later did not contain either of these terms. This demonstrates that the precise terms of the parties’ settlement evolved from the date of that email to the parties’ agreement.
[37] The parties’ failure to include various terms previously discussed must be assumed to be the product of a conscious decision. The minutes of settlement include a “whole agreement” clause at para. 8:
These Minutes of Settlement and attached Schedules constitute the entire agreement between the Parties with respect to the subject matter hereof. The Parties mutually acknowledge and agree that there are no representations, warranties, conditions, undertaking or collateral agreements, whether express or implied, between the Parties, other than those expressly set forth in these Minutes of Settlement and attached Schedules with respect to the subject matter hereof.
[38] Finally, with respect to Clark’s argument that Maisonneuve’s defence to the 2017 Action proves the parties’ intentions: “Evidence of subsequent conduct is sometimes admissible to construe an ambiguous agreement, but such evidence is approached with caution and is only helpful, at a minimum, if the conduct reveals an unequivocal mutual understanding”; Lotimer v Johnston, 2019 BCSC 2098, at para. 14, citing Canadian National Railways v. Canadian Pacific Ltd. (1978), 95 D.L.R. (3d) 242 (B.C.C.A.) at 262, aff’d [1979] 2 S.C.R. 688.
[39] The Arbitration Clause is not ambiguous. It does not set any deadline for arbitration of the Excluded Issue. The escrow agreement says that, if the arbitration is not concluded within 90 days, Maisonneuve will lose some leverage, in that Clark’s share documents will be released from escrow. It does not say or suggest that Maisonneuve would lose any right to claim the disputed EOREI expenses. The parties agree, through the whole agreement clause at para. 8 of the minutes of settlement, that they are not bound by any collateral conditions or agreements. In these circumstances, I do not place any weight on the position initially taken by Maisonneuve in the 2017 Action, a position which he has since repudiated.
[40] If I were inclined to put any weight on subsequent conduct, I would also be required to take into account the evidence of Clark’s lawyer, Mr. MacLaren, with respect to his understanding of the situation on January 31, 2018. When asked why he did not ask Mr. Katz any questions about the reference to the Excluded Issue in Maisonneuve’s settlement proposal, he testified that:
Why should I ask him about it when I told him there was no negotiating? I didn’t care. I didn’t care to hear about it. Bring your arbitration, serve your documentation, send me whatever documents you’ve got to approve (sic) that, and we will deal with it in an arbitration. [Emphasis added.]
[41] Mr. MacLaren later clarified that these statements reflect what he thought at the time, not what he actually conveyed to Mr. Katz during their call. Be that as it may, Mr. MacLaren’s allusion to a potential arbitration shows that, in his mind, it was still a possibility. Since Mr. MacLaren has represented Clark throughout, I impute his understanding of the situation to his client. Accordingly, if I were considering subsequent conduct, I would find that Mr. MacLaren’s evidence undermines Clark’s contention that both parties unequivocally understood that arbitration had to be completed within 90 days of the September 26/27, 2016 settlement.
[42] I conclude that there was no requirement for an arbitration to be requested or completed within 90 days of the parties’ settlement on September 26-27, 2016.
(iii) Is the application nonetheless time-barred?
[43] The applicable limitation period for arbitration in this case is two years from when the claim was “discovered”. Section 5 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (the “Limitations Act”) provides that a claim is discovered on the earliest day that the person with the claim knew, or reasonably ought to have known that:
(i) the injury, loss or damage had occurred, (ii) the injury, loss or damage was caused by or contributed to by an act or omission, (iii) the act or omission was that of the person against whom the claim is made, and (iv) having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.
[44] Although the first three conditions were met in September 2016, Maisonneuve contends that a proceeding — in this case, an arbitration— was not appropriate until the parties first attempted to resolve their dispute informally. He says that this did not occur until, at the earliest, January 31, 2018. On that day, in response to Maisonneuve’s settlement proposal, Mr. MacLaren advised that his client had no intention of engaging in any negotiation outside of the 2017 Action, which did not contain any claims for relief with respect to the EOREI expenses. Since Maisonneuve served his notice of arbitration within two years of this date, he contends that his claim is not time-barred.
[45] Clark argues that the Arbitration Clause did not require the parties to attempt an informal resolution of the Excluded Issue. In the alternative, he argues that, since Maisonneuve was aware that he had no intention of negotiating a resolution of the Excluded Issue in September 2016, the two-year limitation period began to run the date that the release was signed. Allowing Maisonneuve’s claim to proceed in these circumstances, he says, would create a dangerous precedent.
(i) From a limitations perspective, what is the impact of a requirement to negotiate or mediate prior to arbitration?
[46] In at least two cases, Ontario courts have held that, where the parties have agreed to exchange information, negotiate or mediate prior to arbitration, the limitations clock does not begin to run until they have done so.
[47] In L-3 Communication SPAR Aerospace Limited v. CAE Inc., 2010 ONSC 7133, Kershman J. considered the limitations applicable to a notice of arbitration by CAE issued pursuant to a contract with L-3 that specified that the “price and other adjustments that are not agreed between the parties may be referred to arbitration … by either party”. He held that CAE’s request to arbitrate would have been premature if attempts to negotiate a price adjustment had not yet taken place. As a result, until the failure of negotiations, an arbitration would not be an appropriate proceeding and limitations did not begin to run. Since the notice to arbitrate was served within two years of L-3’s refusal to engage in further negotiations, the arbitration was not time-barred.
[48] In PQ Licensing S.A. v. LPQ Central Canada Inc., 2018 ONCA 331, the Court of Appeal dismissed an appeal of an arbitrator’s ruling rejecting a limitations defence. The parties entered into a franchise agreement whereby they had to engage in mediation of any dispute before initiating arbitration. The arbitrator concluded that arbitration was not appropriate within the meaning of s. 5(1) of the Limitations Act until after the parties had mediated or one of the parties had refused to do so. Although the franchisee served a notice to arbitrate almost four years after the parties’ contract was rescinded, it was within two years from the franchisor’s refusal to respond to a notice to mediate. The Court of Appeal upheld the arbitrator’s decision that, in the circumstances, the arbitration proceeding was not time-barred.
[49] Applying these decisions to this case, if I find that Arbitration Clause required the parties to attempt to resolve the Excluded Issue prior to requesting arbitration, then arbitration did not become appropriate until this occurred. As a result, the two-year limitation period would not have begun to run until Maisonneuve realized, or ought to have realized, that Clark refused to engage in any discussions on the issue.
(ii) Did the Arbitration Clause require the parties to attempt to resolve the Excluded Issue before initiating arbitration?
[50] Maisonneuve contends that the Arbitration Clause required the parties to attempt to resolve the Excluded Issue amicably before requesting arbitration. He relies on the words underlined and bolded below:
The undersigned agree and understand that there is one issue that is not covered by this Mutual Release and it is as set out in this paragraph (the "Excluded Issue"). Maisonneuve takes the position that Clark is responsible for certain EOREI related costs and expenses incurred prior and subsequent to the Acceptance date. Conversely, Clark takes the position that he is not responsible for any EOREI related costs and expenses prior and subsequent to the Acceptance date and, if he is responsible for any EOREI related costs and expenses, then he disputes Maisonneuve's accounting thereof. If the parties are unable to resolve the Excluded Issue as between them, then the Excluded Issue shall be fully and finally referred to the Arbitrator for resolution. The Arbitrator's decision shall not be subject to any appeal, either of law, fact or mixed law and fact.
[51] Clark argues that this clause did not require that the parties try to resolve their dispute prior to requesting arbitration. He relies in particular on Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218, a case where the Court of Appeal considered the limitations regime applicable to loss transfer claims made by one insurer against another. Section 275(4) of the Insurance Act, R.S.O. 1990, c. I.8, states that: “If the insurers are unable to agree with respect to indemnification under this section, the dispute shall be resolved through arbitration under the Arbitrations Act.” At para. 30 of Markel, the Court of Appeal that this provision establishes that insurers are required to arbitrate, as opposed to litigate, loss transfer disputes; it does not require insurers make any attempt to agree prior to initiating arbitration.
[52] Notwithstanding the able submissions of Clark’s counsel on this point, I conclude that the Court of Appeal’s interpretation of the words in s. 275(4) of the Insurance Act do not dictate my interpretation of the parties’ contract, and that the Arbitration Clause in this case required the parties to attempt to resolve the Excluded Issue prior to requesting arbitration.
[53] I begin by observing that the exercise of interpreting a contract is different than the exercise of interpreting a statutory provision. The interpretation of a statute is a question of law. Pursuant to s. 64 of the provincial Legislation Act, 2006, S.O. 2006, c. 21, Sch. F, “An Act shall be interpreted as being remedial and shall be given such fair, large and liberal interpretation as best ensures the attainment of its objects”. Section 63 of that same Act further provides that: “The law is always speaking”. This echoes s. 10 of the federal Interpretation Act, R.S., c. I-23, s. 10, which expands on the purpose of this rule:
The law shall be considered as always speaking, and where a matter or thing is expressed in the present tense, it shall be applied to the circumstances as they arise, so that effect may be given to the enactment according to its true spirit, intent and meaning.
[54] These interpretive principles require courts to discern the mischief that the legislator intended to address in enacting legislation, and to interpret the statutory language to further the legislator’s purpose, sometimes to address problems that were not even contemplated when the law was passed.
[55] A judge’s goal in interpreting a contract is different. A contract is not made to address a societal issue or need. It is made to order the relationship between the parties or to resolve a specific problem they have at a particular time. As the Supreme Court reminded us in Sattva, the court’s unique focus is the discernment of the parties’ intent at the time they reached their agreement. That is why, unless a contract is a standard form agreement described in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 SCR 23, the interpretation of a contract is a mixed question of fact and law.
[56] As a result, when I interpret the phrase “If the parties are unable to resolve the Excluded Issue as between them, then the Excluded Issue shall be fully and finally referred to the Arbitrator for resolution.” in the Arbitration Clause, I am engaged in a different exercise than the Court of Appeal did in Markel when faced with similar (although not identical) language in a statute.
[57] Furthermore, having engaged in the appropriate interpretive exercise, I conclude that, when Clark and Maisonneuve signed the release, they intended that an attempt would be made to resolve the Excluded Issue amicably before engaging in arbitration. I reach this conclusion based on the specific phrasing chosen by the parties in the Arbitration Clause, the context in which this phrasing is found, and the evidence with respect to the parties’ dealings leading up to the signature of the settlement documents on September 26/27, 2016.
[58] With respect to the precise language used, the parties, with the assistance of their lawyers, agreed that “If the parties are unable to resolve the Excluded Issue as between them, then the Excluded Issue shall be fully and finally referred to the Arbitrator for resolution”. This formulation distinguishes the language in the Arbitration Clause from the language under consideration in Markel. The “if-then” language, on its face, presupposes that the parties will attempt to resolve their dispute, and only seek arbitration if and when this proves unsuccessful. The language chosen is both prospective and conditional.
[59] The prospective and conditional cast of this language is reinforced by the context in which it appears. The sentence is preceded by a summary of the parties’ respective positions with respect to it. This is consistent with the contemplation of future discussion of the Excluded Issue. It is difficult to see, otherwise, why the parties would have gone to the trouble of stating their respective positions within the Arbitration Clause.
[60] Finally, the plain meaning of the “if-then” construction is consistent with the evidence regarding the parties’ course of conduct in the weeks leading up to September 26, 2016.
[61] On September 13, 2016, Mr. MacLaren sent a letter to Maisonneuve’s counsel flatly denying that Clark had any obligation to pay the EOREI expenses and advising that his instructions were to engage in no further discussions on this issue. Clark argues that this shows that Maisonneuve necessarily understood, when he signed the release two weeks later, that further discussions were fruitless.
[62] The uncontested evidence with respect to events in the two weeks after this correspondence, however, indicates that Clark’s position changed. In response to the September 20 email from Maisonneuve’s counsel, Mr. MacLaren confirmed that the parties had reached a settlement in principle, which included the contemplation of a binding arbitration “on the sole issue of whether the parties have rights to adjustments as between them”, that is, whether Maisonneuve had a claim for the EOREI expenses. In other words, although Clark had insisted only a week earlier that there would be no discussion of this issue, he now conceded that there should be a mechanism to resolve it. A week later, Clark entered into Minutes that not only acknowledged Maisonneuve’s claim for the expenses but contemplated that the parties could resolve the issue as between them prior to resorting to arbitration.
[63] Given the evolution of Clark’s position after September 13, there is no basis to second-guess the plain meaning of the words used in the Arbitration Clause.
[64] I therefore find that the Arbitration Clause required the parties to attempt to resolve the EOREI expense issue prior to initiating arbitration. The reasoning in L-3 Communications and PQ Licensing applies. Maisonneuve and Clark agreed that, prior to engaging in arbitration, they would attempt to resolve the Excluded Issue. Until it was clear that no informal resolution was possible, arbitration was not an appropriate proceeding, and the two-year limitation period did not begin to run.
(iii) When did Maisonneuve realize, or when should he have reasonably realized, that no resolution of the Excluded Issue was possible “as between” the parties?
[65] Clark argues that, even if the Clause theoretically required the parties to attempt an informal resolution of the Excluded Issue, Maisonneuve should have realized when he signed the release that this was impossible. As a result, the two-year limitation period began to run from September 27, 2016.
[66] A benign view of this argument is that Clark seeks to introduce an implied term — that he would not make any attempt to resolve the Excluded Issue outside of an arbitral process — to contradict the explicit terms of the parties’ agreement, which required an attempt to “resolve the Excluded Issue as between them”. An implied contractual term cannot, however, contradict an express term in the contract; G.H.L. Fridman, The Law of Contract in Canada, 3rd ed. (Scarborough: Carswell, 1994), at p. 476; and MJB, at para. 29.
[67] A less benign construction of Clark’s argument is that he signed the Release without ever intending to comply with its terms, and now seeks to take advantage of that. I am unwilling to accept that a party’s bad faith intention not to comply with contractual obligations he has undertaken can better his position in legal proceedings to enforce the agreement.
[68] This leaves the question of when Maisonneuve knew, or should have known, that an amicable resolution would be impossible. He says that he did not realize this until March 2019, when Mr. MacLaren indicated, in response to correspondence from another stakeholder, that Clark’s claim for EOREI expenses was time-barred. I find that a person in Maisonneuve’s position would have reasonably realized this on January 31, 2018. This was the day that Mr. MacLaren advised Mr. Katz that there was no point in engaging in any negotiations outside of settlement discussions with respect to the 2017 Action. Since the 2017 Action did not address the Excluded Issue, this implied that Clark had no intention of trying to resolve it unless required to do so through legal proceedings.
[69] Based on this finding, the request to arbitrate was not time barred, as it was served within two years of January 31, 2018.
[70] Clark contends that this conclusion creates a dangerous precedent. He relies on cases where courts have held that a claimant is required to investigate possible claims with reasonable due diligence, such as Fennel v. Deol, 2016 ONCA 249, at paras. 20 to 23, to argue that the court should not allow Maisonneuve to extend the limitation period when he took no concrete steps to pursue his claim for the EOREI expenses for almost three years.
[71] The facts in Fennel v. Deol are readily distinguishable from the facts in this case. A much more apposite case is PQ Licensing, in which the franchisor, like Clark, raised similar objections to overall fairness. At para. 43 of her decision, van Rensburg J.A. rejected the premise that the franchisor was at the mercy of the franchisee’s decision to delay making any claim:
As [the arbitrator] fairly observed, either party could have put in motion the ADR process under their agreement, to start the running of the limitation period. As for the franchisor’s argument to this court that it would have no incentive to initiate the mediation of a dispute that might simply go away, the mediation process to which the parties have agreed is no less certain or available simply because a party for one reason or another might choose not to invoke it.
[72] Similarly, in the present case, Clark could have taken steps at any point after September 27, 2016 to ensure that the limitations period for Maisonneuve’s claim for EOREI expenses began to run. He simply had to advise Maisonneuve, either directly or through counsel, that an amicable resolution of the Excluded Issue remained impossible. This is what in fact happened at the end of January 2018.
Disposition
[73] Clark’s motion is dismissed. Maisonneuve’s application is granted for the relief sought at para. 1(a), (b) and (c) of its notice of application.
[74] If the parties are unable to agree on costs, Maisonneuve shall serve and file a costs outline, attaching a draft bill of costs and any other relevant documents, within ten days. Clark shall serve and file a responding costs outline, to which he may attach directly relevant documents, within ten days of receipt of Maisonneuve’s submissions. Each costs outline shall not exceed three pages in length. Materials shall be submitted to the Court in searchable pdf format by email to ottawa.scj.courts@ontario.ca.
Justice Sally Gomery
Released: March 16, 2021
COURT FILE NO.: 19-81424 DATE: 2021/03/16 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: JEAN MAISONNEUVE and 3721094 CANADA INC. Applicants – and – CHRISTOPHER CLARK and LANCITER CONSULTING INC. Respondents REASONS FOR JUDGMENT Justice Sally Gomery Released: March 16, 2021
