Court File and Parties
OSHAWA COURT FILE NOS.: 92193/15, 91189/15 DATE: August 11, 2016
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: HMI v. Index Energy et al AND: Topsite Contracting v. Dinamo Construction et al
BEFORE: Salmers J.
COUNSEL: D. Leduc and M. Fougere, for HMI R.S. Woods and I. Antonios, for Index Energy and Index International R. Wise, for Topsite, McFaul, and all Stream C lien claimants M. Shell, for Viking Fire M. Ruberto, for Dinamo Construction E. Pleet, for National Bank of Canada D. Winer, for Victory Energy R. Simmons, for Reftech
HEARD: May 30, 2016
ENDORSEMENT
SALMERS, J.
Background Facts and Nature of the Motion
[1] This case involves the construction of a biomass energy plant in Ajax, Ontario. Seventeen construction liens have been filed claiming, in total, $42,369,951.16. Fourteen actions have been commenced by lien claimants. On consent, the actions were consolidated into a single action which was divided into three streams for purposes of case management.
[2] Index Energy is the owner and contracted HMI to build the plant. HMI has sued Index for monies owing. That action has been designated and will be referred to as Stream A.
[3] HMI subcontracted work to five subcontractors – Construction Dinamo Inc., Viking Fire Protection Inc., Reftech International Inc., Kaefer Industrial Services Ltd., and Victory Energy Operations, LLC. Each of those five subcontractors has sued HMI for monies owing. Their actions have been designated and will be referred to as Stream B. The subcontractors are the Stream B claimants.
[4] Dinamo further subcontracted part of its work. Eight of the Dinamo subcontractors were unpaid and filed construction liens – Topsite Contracting Limited, JBG Flooring & Contracting Inc., McFaul Fencing Ltd., Transit Glass & Aluminum Ltd., Brent’s Plumbing and Heating Inc., Novascape Contractors Ltd., CRS Contractors, and D.J. Rain Co. Ltd. Those lien claimants have been designated and will be referred to as the Stream C claimants. The total of the Stream C liens is $1,215,977 which is 2.88% of the total liens filed on the project. During argument of this motion, the court was advised that D.J. Rain and CRS have been paid by HMI who has taken assignments of their liens. These assignments slightly reduce both the total amount of the Stream C liens and their percentage of the total amount liened.
[5] I have attached Schedule A to these reasons to hopefully assist the reader in understanding this structure of the litigation and the three Streams.
[6] In this motion, HMI is requesting an order referring the consolidated action to a private arbitrator pursuant to s. 58(1)(b) of the Construction Lien Act. The motion was opposed by the Stream B and Stream C lien claimants (other than D.J. Rain and CRS whose claims were assigned to HMI). Effectively, HMI is seeking a single consolidated arbitration to determine all claims with respect to the project. To put it another way, all Stream A, B, and C claims will be determined in a single arbitration.
[7] Although not formally claimed in the prayer for relief in HMI’s Amended Amended Notice of Motion, HMI has requested that the consolidated action be stayed in favour of arbitration. This request is included in the Amended Amended Notice of Motion at page 12, in paragraphs y – kk, in the grounds section for the motion. This request was advanced during argument of this motion. During subsequent argument on Index’s motion to discharge the HMI lien, Ms. Fougere, a counsel for HMI, advised that this request was not the alternate, but the primary relief requested by HMI in this motion. HMI’s request for a stay is made relying on s. 7 of the Arbitration Act, 1991 and s. 106 of the Courts of Justice Act.
[8] By endorsement dated August 2016, I advised the parties that HMI’s motion was dismissed and that my reasons would follow. These are my reasons.
Analysis
[9] The requested order for referral of the consolidated action to arbitration implicitly includes the making of an order staying the consolidated action. In Mantini v Smith Lyons LLP, [2003] O.J. No. 1831, at para. 19, the Court of Appeal directed that a three step analysis be conducted in determining whether, under s. 7 of the Arbitration Act, actions are to be stayed in favour of arbitration. Further, under s. 106 of the Courts of Justice Act, the courts retain a residuary discretion to stay proceedings.
[10] In the analysis that follows I have implicitly considered the Mantini factors and also whether to exercise my residual discretion under s. 106 of the CJA.
The Request for a Consolidated Arbitration
[11] Firstly, there are conflicts between the arbitration clauses in the contracts for the three Streams.
[12] The Stream A contract between Index and HMI contains a dispute resolution clause calling for arbitration of disputes.
[13] All of the contracts between HMI and the Stream B claimants contain the exact same dispute resolution clause that calls for disputes to be arbitrated. However, the arbitration clause in the Stream B contracts is different than the arbitration clause contained in the Stream A contract.
[14] Neither D.J. Rain nor CRS had contracts with Dinamo that called for arbitration of disputes. All of the other Stream C claimants had contracts with Dinamo that called for arbitration. The arbitration clause in the Stream C contracts is very similar to the arbitration clause in the Stream A contract.
[15] The parties consented to a consolidation of the actions that include all of the construction lien claims and sheltering lien claims. Accordingly, at first glance, the idea of a single consolidated arbitration would seem to make sense. However, there are other factors that must be considered.
[16] The Stream A contract provides for arbitration by either a single arbitrator or before a panel of three arbitrators. HMI suggested requested Stephen Morrison be appointed as the single arbitrator. Mr. Morrison is not acceptable to Index. The Stream B contracts contain a clause providing for arbitration before a three person panel. With respect to Stream C, apart from Topsite, whose counsel has stated that he will very soon be bringing a summary judgment motion, all of the Stream C liens are for under $250,000. Accordingly, pursuant to their arbitration clause, each of those Stream C lien claimants agreed to an arbitration before a single arbitrator; a less costly and perhaps quicker method of resolution than with a three arbitrator panel. If HMI’s consolidated arbitration request were to be granted, some Stream C lien claimants would be forced to have a more expensive arbitration than that to which they had agreed.
[17] Also, while the contracts for each Stream provide for arbitration of disputes, no contract calls for a consolidated arbitration involving many other parties other than the parties to that contract.
[18] In these circumstances, if HMI’s consolidated arbitration request were to be granted, probably all lien claimants would be forced to have a more expensive arbitration than that to which they had agreed in their contracts.
[19] Secondly, some of the individual actions involve third parties or defendants who had no contract calling for arbitration. These parties include the two mortgagees, Index International and National Bank of Canada, and a bonding company, Intact Insurance. None of these parties agreed to arbitration as a dispute resolution mechanism. To impose arbitration removes these parties’ rights to have their matters determined in the courts.
[20] Thirdly, clause GC 8.2 of the Stream A contract provides for a dispute resolution protocol involving a series of steps that must be taken before a dispute will be resolved by arbitration. The Stream B contracts include a similar, but simpler, dispute resolution protocol. The Stream C contracts contain a dispute resolution protocol that is very similar to the Stream A protocol. But, none of these protocols have been followed. For Streams A and C, several required steps have not been taken. Further, the contracts of all Streams provide for mediation to have occurred prior to arbitration. With respect to Stream A, HMI requested mediation several times in emails to Index, but none has taken place. No motion has been brought to compel mediation. With respect to Streams B and C, there is no evidence of any requests that mediation take place. To order arbitration, in these circumstances, would be to amend the contracts of every party when only one party, HMI, wishes to amend its contracts in this manner.
[21] Fourthly, the contracts for each Stream state that the contracts are governed by the law of the place of work, in this case Ajax, Ontario. However, the Stream B contracts specify that with respect to any arbitration, “the provisions of the Code of Civil Procedure of the Province of Quebec shall apply.” There is insufficient evidence before me to satisfy me whether there are any differences in Ontario and Quebec law that are engaged by this clause. Also, Stream A and C contracts provide that the arbitration shall be held in Ajax, Ontario. The Stream B contracts call for arbitration in Montreal, Quebec. HMI states that it does not care in which city the arbitration is held. But, there is no evidence that any other party is of that same view. Also, there may be significant expenses incurred by relatively small parties based in Ontario, a significant distance from Montreal, if they were ordered to an arbitration in Montreal.
[22] Another possible problem is that HMI’s action against Index is the main action of all of the actions that were consolidated on consent. HMI is the only party requesting arbitration. A plaintiff cannot request a stay of its action in order that the dispute be referred to arbitration (s. 7 of the Arbitration Act).
[23] It must also be noted that, in this motion, HMI requested that a single arbitrator, Stephen Morrison, be appointed. Index opposes the appointment of Mr. Morrison. There is no evidence that any other party consents to Mr. Morrison’s appointment as the single arbitrator in a single consolidated arbitration. Further, the Stream B contracts give the Stream C parties the option to have their claims arbitrated by a panel of three arbitrators. There is no evidence that the Stream B parties, other than HMI, have agreed whether their claims will be heard by a single arbitrator or a panel of three arbitrators. Also, Topsite’s claim is sufficiently large that it could elect to have its claim arbitrated by a panel of three arbitrators. In these circumstances, there is no person agreed by the parties as an arbitrator as is required by s. 58(1)(b) of the Construction Lien Act. Accordingly, there is no basis under that section for staying the consolidated action.
[24] Finally, since the many actions were consolidated, court orders have been made, mainly on consent, as case management, including a litigation timetable. Steps have been taken that have moved the litigation forward towards resolution, whether in the courts or by way of settlement(s). If a consolidated arbitration were ordered, there would be significant delay in any single arbitrator or panel getting up to speed and, also, in setting up the arbitration process.
[25] Considering and balancing the totality of the aforesaid reasons, a consolidated arbitration cannot and will not be ordered.
The Stay Request
[26] As discussed above, HMI has requested that the consolidated action be stayed in favour of arbitration.
[27] HMI’s stay request is made pursuant to various sections of various statutes. In the analysis above, I dealt with the request that was made pursuant to s. 58(1)(b) of the Construction Lien Act. HMI also requests stays under s. 7 of the Arbitration Act and s. 106 of the Courts of Justice Act.
[28] I agree with the reasoning of Master Albert in Carillion Construction Inc. v. Imara (Wynford Drive) Ltd., 2015 ONSC 3084 that under s. 7 of the Arbitration Act, the court retains a residual discretion not to order a stay of proceedings if required by the interests of justice. That residual discretion also exists for requests for a stay pursuant to s. 106 of the Courts of Justice Act.
[29] For the reasons set out above, a consolidated arbitration cannot and will not be ordered. Accordingly, whether under s. 58(1)(b) of the Construction Lien Act or under s. 7 of the Arbitration Act or under s. 106 of the Courts of Justice Act, it makes no sense to stay the consolidated action or any of the individual actions unless a single consolidated arbitration takes place.
[30] For those reasons, a stay will not be ordered for the consolidated action or any of the individual actions.
Conclusion
[31] For a number of common sense, business, and legal policy reasons, it is desirable that this very complicated and very technical set of disputes, involving multiple parties, be resolved under the umbrella of a single comprehensive proceeding, whether that be in the courts or by arbitration. Except for two relatively small lien claims now assumed by HMI, every lien claimant had a clause in their contract that provided for arbitration of disputes. There are differences in these arbitration clauses. The moving party, HMI, has requested that a large and liberal interpretation be given to these clauses to reflect all parties’ contractual obligation to arbitrate disputes. HMI submitted that this should be done in a single consolidated arbitration.
[32] The essence of arbitration is that it is consensual. As discussed above, if a single consolidated arbitration were ordered, that would effect non-consensual amendments to almost every lien claimant’s contract. To do so would result in an arbitration in a form that would be different, sometimes significantly so, than almost every parties’ consent that was given in their contracts involving this project. Further, HMI seeks to include in this arbitration, several parties whose contracts did not have clauses providing for arbitration of disputes. In these circumstances, it would certainly not be consensual to order a single consolidated arbitration as HMI has requested.
[33] Additionally, it makes no sense to order a stay of the consolidated action unless a consolidated arbitration can take place. Also, there are other more specific reasons why a stay of the consolidated action will not or cannot be ordered.
[34] For all of these reasons, HMI motion requesting a consolidated arbitration and stay of the consolidated court action is dismissed.
[35] If the parties cannot agree on costs, they are to contact the Oshawa trial coordinator to schedule a costs hearing before me.
Order to go accordingly.
The Honourable Mr. Justice Salmers
RELEASED: August 11, 2016