Legal Blog

Timely ADR

In our newsletter of September 1996, we set out a detailed explanation of the alternative dispute resolution procedures in the then relatively new CCDC2 1994 standard contract. Since the advent of that contract, however, we have found that little has changed. The courts still deal with most construction disputes and parties pay little more than lip service to the dispute settling mechanisms in their contracts. However, the times they may be a changin. They certainly changed for the general contractor in Brock University v. Stucor Construction Ltd., a 2002 decision of the Ontario Superior Court of Justice.

Ignored 

The general contract had the usual dispute resolution provisions. A dispute first had to be submitted to the consultant. A party dissatisfied with the consultant’s decision could then submit the dispute to be mediated by the project mediator and, if the dispute was still not resolved, either party could submit the dispute to an arbitrator.

When the general completed the project, it delivered a substantial claim to the owner for extras and delay. It did not deliver the claim to the consultant. The parties had never appointed a project mediator. The general then registered a claim for lien and, in July 2001, issued a statement of claim to enforce the claim for lien. The owner defended the action but the parties did nothing else.

In October 2001, the owner informed the general that it wished to invoke the dispute settling provisions of the contact. It submitted the dispute to the consultant and attempted to have a project mediator appointed. The general refused to co-operate and, accordingly, the owner issued an application to stay the lien action and have the court appoint a project mediator.

Arbitration 

Under the Arbitration Act, if a contract contains an arbitration clause, the courts must stay the action pending the arbitration result and, subject to limited rights of appeal, the parties must abide by the result. There are some exceptions. In Stucor only one exception had any relevance. The court may refuse the stay if it feels that the motion to stay has been brought after undue delay.

The judge in Stucor had to determine whether the delay in that case was undue. The judge noted that the delay ran from July 2001, the time when the statement of claim was issued, to October 2001, the date that the owner informed the general of its reliance on the provisions. The judge noted that four months, given the facts of this case, did not constitute undue delay and, accordingly, stayed the action and appointed a project mediator. We assume that if the owner had waited until after discoveries in the lien action to change its mind, it would not have been successful.

Our Experience 

We had a similar experience about six years ago. We acted for the general and brought an application to appoint an arbitrator because the owner had already refused mediation. We did not feel that mediation made much sense given the owner’s insistence to use the courts.

The judge decided that since the parties had never appointed a project mediator at all, much less at the start of the project, and since the parties really had not even used the consultant, the parties had decided to waive the use of the dispute resolution provisions. The judge therefore directed that the matter be decided in the courts. We had to commence an action, had discoveries, and went to trial. The owner lost, and, in addition to the damages it had to pay, paid approximately $50,000 in costs to us plus the legal fees for its own lawyers. It won the initial battle but lost the war.

Our application was heard relatively recently after the advent of the new contract form. The Stucor case was heard eight years after its advent. Perhaps that explains the different results.