COURT OF APPEAL FOR ONTARIO
CITATION: Penn-Co Construction Canada (2003) Ltd. v. Constance Lake First Nation, 2012 ONCA 430
DATE: 20120622
DOCKET: C54604
Goudge, Juriansz and Ducharme JJ.A.
BETWEEN
Penn-Co Construction Canada (2003) Ltd.,
Plaintiff (Respondent)
and
Constance Lake First Nation, Constance Lake Education Authority, Donald Courtnage, Paul Allan Seguin c.o.b. as Anokii & Associates, Anokii & Associates, Eric Leat and The Attorney General of Canada representing The Minister of Indian Affairs and Northern Development
Defendants (Appellants)
AND BETWEEN
Constance Lake First Nation and Constance Lake Education Authority
Plaintiffs by Counterclaim (Appellants)
and
Penn-Co Construction Canada (2003) Ltd., Penn-Co Construction Canada Ltd., Northern Indemnity, Inc., St. Paul Guarantee Insurance Company and Travelers Guarantee Company of Canada
Defendants by Counterclaim (Respondent)
and
AAA Electric 1988 Ltd., 676550 Ontario Inc. carrying on business as GT Plumbing & Heating, C. Villeneuve Construction Co. Ltd., Crane Steel Structures Ltd., C.D.P. Enterprises Ltd. and A P S Engineering
Third Parties
Francis J. Thatcher, Mary D. Bird and Graeme Mew, for the appellant
Colin R. MacArthur, Q.C. and James A. Mercury, for the respondent
Heard: June 14, 2012
On appeal from the order of Justice Douglas C. Shaw of the Superior Court of Justice, dated October 11, 2011.
ENDORSEMENT
[1] At issue in this appeal is whether the ordinary two-year limitation period for a breach of contract claim applies to the counterclaim issued by the appellants, Constance Lake First Nation and Constance Lake Education Authority ("Constance Lake"), on July 21, 2009. The motion judge held that it did, and granted an order of summary judgment dismissing the counterclaim as being statute-barred under the Limitations Act, 2002.
[2] Constance Lake raises new two issues on this appeal which were not raised before the motion judge. Because of the result we have reached, we do not need to address the respondent's argument that it is unfair to deal with these issues for the first time on appeal.
[3] The appellant’s first argument is that the counterclaim is not statute-barred, because Constance Lake has or at all material times had an extant arbitration with the respondent, Penn-Co Construction Canada (2003) Limited, which it says is either still going or was terminated by order of the Court in 2008. Either way, the appellant contends that s. 52 of the Arbitration Act, 1991, S.O. 1991, c. 17, suspends the limitation period sufficiently to render its counterclaim timely.
[4] The necessary first step in this argument is that an arbitration must have been commenced. The appellant argues that this step was accomplished by letter from its counsel to the respondent's counsel dated January 16, 2006. The appellant contends that this letter complies with s. 23 (1) of the Arbitration Act, 1991, which provides as follows:
(1) An arbitration may be commenced in any way recognized by law, including the following:
A party to an arbitration agreement serves on the other parties notice to appoint or to participate in the appointment of an arbitrator under the agreement.
If the arbitration agreement gives a person who is not a party power to appoint an arbitrator, one party serves notice to exercise that power on the person and serves a copy of the notice on the other parties.
A party serves on the other parties and notice demanding arbitration under the agreement. (Emphasis added)
[5] An understanding and resolution of the first issue requires some context, and a brief recitation of the relevant facts. In June 2003, the parties entered into a standard-form contract for the construction of a school. The dispute resolution provisions of the building contract provided for a tri-level procedure for the resolution of any disputes: negotiation with the assistance of the Consultant; mediation; and arbitration. By the summer of 2005, several deficiencies were noted regarding the respondent's work and efforts were undertaken to remediate these deficiencies.
[6] These efforts did not succeed. In December 2005, Constance Lake issued a notice alleging that the respondent was in default under the contract, and that it had five days to correct the default or to provide a satisfactory schedule for the correction of the default. In the same month, the respondent's counsel served notice upon Constance Lake of its intent to proceed with mediation to resolve the parties' ongoing disputes under the contract.
[7] In the letter of January 16, 2006, upon which the appellant relies, counsel for Constance Lake proposed an alternative approach of dispute resolution. The suggestion was that the parties dispense with the provisions under their own contract “and proceed directly to arbitration pursuant to CCDC 40 ‘Rules for Arbitration of Construction Disputes,’ with no right of appeal of the arbitral decision, save and except as provided by sections 20.1 - 20. 5 of the Rules.”
[8] On January 20, 2006, counsel for the respondent wrote back to counsel for Constance Lake, proposing instead yet another and less formal approach, that of a neutral third-party "peer review." Counsel for the parties then engaged in several more exchanges, each expressing, in effect, a general willingness to consider a "peer review" process, but failing ultimately to agree upon the details of the process to be followed, including who would serve as the neutral third-party arbitrator. In the result, and despite the parties’ best efforts, the proposal of a neutral-party "peer review" dispute resolution process failed, and was abandoned by no later than mid-May 2006, as found by Pierce J when she decided the respondent’s 2007 motion for mandatory arbitration.
[9] Thus, by mid-May 2006, the parties had not only long since forsaken the three-step dispute resolution procedures under the contract, but they had also failed to agree upon any mutually acceptable alternative dispute resolution by “peer review” outside the contract. They had not followed the arbitration process in their contract, nor did they have a new arbitration agreement.
[10] In these circumstances, we do not agree with the appellant’s submission that the parties had commenced an arbitration within the meaning of s. 23 of the Arbitration Act, 1991, by virtue of the letter of January 16, 2006, or indeed by virtue of any of the correspondence exchanged between the parties' counsel during the relevant period. The parties’ discussions never bore fruit, never advanced beyond mere proposals for an arbitration agreement. Absent a notice under an arbitration agreement, s. 23 of the Arbitration Act, 1991, has no application. Therefore, there can be no genuine issue for trial on whether a period of time might be excluded from the computation of the limitation period, as provided by s. 52(2) of the Act.
[11] In our view, the Counterclaim is statute-barred, because it was not issued until July 2009, more than three years after the parties failed to commence an arbitration under the building contract or under any other agreement.
[12] The second argument advanced by the appellant is that the respondent is estopped from pleading a limitations defence. Before the motion judge the appellant's position was that the respondent had waived its right to a limitations defence because it had agreed that Constance Lake could replace the statement of defence and counterclaim which Constance Lake had improperly served before the statement of defence and counterclaim was issued.
[13] Now, before this court, the appellant relies upon the doctrine of estoppel to suggest that the respondent's 2007 motion for mandatory arbitration, the motion rejected by Pierce J. in reasons released on September 20, 2007, and the ensuing appeal from her decision, created a procedurally confusing situation "which can be viewed as having caused or contributed to the timing of the commencement of the [appellant's] Counterclaim."
[14] We disagree. None of the essential factual elements required to make out a case of estoppel is present in this case. There is no evidence, for example, that the respondent made any promise or assurance that it would not rely upon the limitations defence. There is also no evidence that Constance Lake relied upon any alleged representation, or that it ever acted on any such representation. It follows that estoppel raises no genuine issue requiring a trial.
[15] For these reasons, therefore, we find no basis for interfering with the findings of the motion judge, and we dismiss the appeal accordingly.
[16] The parties have agreed on the quantum of costs payable to the successful party. The appellant shall pay to the respondent costs fixed in the sum of $15,000, including disbursements and all applicable taxes.
“S.T. Goudge J.A.”
“R.G. Juriansz J.A.”
“Ducharme J.A.”