Notice Commencing Several Arbitrations Held Not To Be Totally Invalid By B.C. Court

In South Coast British Columbia Transportation Authority v. BMT Fleet Technology Ltd.

2017 CarswellBC 2587, 2017 BCSC 1683, the British Columbia Supreme Court recently held that a single notice purporting to commence several arbitrations against several respondents was procedural invalid. However, the notice was not totally void and could be amended by the applicant to provide for several arbitrations and thereby correct the procedural irregularity.

In view of the absence in most arbitration statutes of the right to consolidate arbitral proceedings, this decision is important as it allows an apparently invalid commencement of arbitral proceedings to stand in a corrected form. Whether this decision has any application to arbitrations outside British Columbia, or to an ad hoc arbitration, are issues to be considered.


South Coast British Columbia Transportation Authority (known as, and referred to in this article as, TransLink) entered into two separate contracts with a ship architect, a contract with a ship consultant and a contract with a shipyard for the design and construction of a new ferry. Each contract contained a clause requiring arbitration of any disputes under the British Columbia Arbitration Act.

On April 1, 2011, TransLink delivered a Notice to Arbitrate to the British Columbia International Commercial Arbitration Centre (“BCICAC”). The notice purported to commence one arbitration proceeding under all the contracts against each of the architect, consultant and shipyard. TransLink paid a fee of $1,680 ($1,500 plus H.S.T.), the fee to be paid for one arbitration proceeding for a claim over $50,000. The Notice identified each respondent and the respective contracts with TransLink, set forth the relevant provisions of each contract and separately identified each cause of action and remedy being sought against each party.

BCICAC opened File No. DCA-1313 and wrote to the parties notifying them of the arbitration, stating in part “We acknowledge receipt of a Notice to Arbitrate (the “Notice”) . . . on behalf of . . . TransLink . . . received at this office on April 1, 2011. This arbitration is deemed to have commenced on April 4, 2011.”

Then counsel for the shipyard telephoned BCICAC to raise concerns about the propriety of a single arbitration proceeding against multiple parties under multiple contracts. TransLink advised BCICAC that the Notice to Arbitrate “may have been irregular”. BCICAC suspended the Arbitration until they “have had the opportunity to discuss the form of the Notice further with counsel”. Various correspondence was exchanged and then in May 2011, BCICAC advised TransLink that if it decided to proceed with arbitration, separate Notices to Arbitrate would have to be filed with the BCICAC since the respondents were not bound by the same arbitration agreement.

The parties participated in an unsuccessful mediation of their differences, and in April 2016, TransLink issued and served a Notice to Appoint an Arbitrator, to which the respondents replied, amongst other things, that the issue of the propriety of the commencement of the arbitral proceeding against several respondents under several arbitration agreements would have to be addressed.  Then in February 2017, TransLink’s new counsel wrote to counsel for the ship architect and consultant acknowledging that the Notice to Appoint an Arbitrator dated April 19, 2016 is “arguably irregular”, but stated that three contracts had been effectively commenced, one involving the ship architect and the other two involving the consultant. TransLink issued a new and separate Notice to Appoint an Arbitrator under each contract. TransLink’s counsel requested that BCICAC File No. DCA-1313 be administratively restructured to reflect separate arbitrations for each of the three contracts in issue, and provided BCICAC with an additional fee of $3,150 plus GST for two additional arbitrations. TransLink did not seek to maintain an arbitration against the shipyard.

TransLink then applied to the B.C. court for a declaration that an arbitration proceeding against each of the ship architect and the consultant had been effectively commenced, and for an order that a specified individual be appointed as arbitrator for each arbitration.

British Columbia Arbitration Act and BCICAC Rules

Like most of the arbitral statutes in Canada, the B.C. Arbitration Act (section 21) empowers the court to consolidate two or more arbitrations if, among other conditions, “all parties to those agreements agree on the appointment of the arbitrator and the steps to be taken to consolidate the disputes into the one arbitration.”

Unlike most other provincial arbitral statutes, the B.C. Act (section 22) provides that unless the parties to an arbitration otherwise agree, the domestic rules of the BCICAC apply to arbitrations governed by that Act, unless those rules are inconsistent with another governing arbitral statute or the B.C. Act. .

The BCICAC rules provide for the payment of fees upon the commencement of an arbitration and state (in rule 10) that “the arbitration is deemed to have commenced when the Arbitration Notice or Joint Submission has been filed with the Centre and the commencement fee paid. The Centre shall notify the parties when an arbitration has commenced.”

Decision of the B.C. Supreme Court

The B.C. Supreme Court held that the Notice to Arbitrate contained all of the information required by the rules of the BCICAC relating to the commencement of an arbitration: the names of the parties and their addresses for delivery; a brief statement of the matter in dispute; the remedies sought; a precise estimate of the amount claimed; and the number of arbitrators proposed.

The court found that “the respondents clearly understood the nature and substance of the specific claims being made against them, the contractual provisions being relied upon, the remedy being sought, and the fact that a request for arbitration was being made in respect to those claims. Had TransLink photocopied the Notice to Arbitrate and filed the same document four times (including in respect of the claim against Victoria Shipyards), there could be no dispute that it was fully compliant.” The parties had “adopted arbitration as the means by which their disputes would be resolved and must now be content with the informalities of the arbitration process.”

The court noted that BCICAC accepted the fee that accompanied the Notice to Arbitrate, stated that the arbitration was deemed to have been commenced and had not returned the funds. The court held that “BCICAC’s deeming that the arbitration proceedings had commenced is analogous to the court registry having accepted a civil action for filing. The matter of the payment of a fee is for the BCICAC to address and administer. It is not a matter between TransLink and the respondents, and does not prejudice the respondents in any way. The payment of the incorrect fee can hardly be described as a fundamental breach of the parties’ contracts or going to the substance or “root” of the parties’ rights inter se.”

Accordingly, the court found that “TransLink’s April 1, 2011 Notice to Arbitrate, although an irregularity, was effective to commence four separate arbitration proceedings”, two against the ship architect and one each against the consultant and shipyard.

The court also held that the irregularity in the appointment of the arbitrator had been remedied by TransLink by its issuance of separate notices of appointment in February, 2017. The language of Section 17 of the B.C. Arbitration Act was mandatory and required the court to appoint an arbitrator if the arbitrator was not appointed by the parties. Accordingly, the court appointed the arbitrator nominated by TransLink for each of the arbitrations.


This decision deals with the classic problem faced by arbitration in construction projects. There is an arbitration agreement in each of the contracts between the owner and various participants in the project (say, the contractor and the consultant). There is also an arbitration agreement in each of the contracts between the various other participants in the project (say, the subcontractors, suppliers, etc). Standard arbitral law requires that there be separate arbitrations for each of these arbitration agreements, even though that will result in much greater time, inconvenience and the expense of multiple arbitrations instead of one consolidated arbitration, and with the possibility of inconsistent decisions.

The solution to this problem is not the one first adopted by TransLink, namely, the issuance of one Notice to Arbitrate under four contracts. Ultimately, TransLink did not gain consolidation of the arbitrations. Indeed, it was fortunate to end up with a court decision that validated the commencement of the arbitrations, and divided them into separate arbitrations. So TransLink was back to where it would have been had it commenced separate arbitrations.

Although the decision in this case seems fair, an appellate court might not uphold it having regard to section 21 of the B.C. Act. That section only contemplates the consolidation of multiple arbitrations with the parties’ consent. Accordingly, it might be read, by inference, as prohibiting the commencement of multiple arbitration by one commencement document. In addition, this decision might also not apply in the case of an ad hoc arbitration conducted under an arbitration agreement which is not subject to the auspices or rules of an arbitral tribunal.

The fact that the notice was accepted by BCICAC, that BCICAC stated that an arbitral proceeding was deemed to have been commenced, and that the BCICAC rules deem the proceeding to have been commenced, were key factors in the court’s decision. In effect, the court held that the fault was that of BCICAC, if there was “fault”, in accepting the single Notice of Arbitration in respect of several arbitrations, and that if there was something ineffective about that notice, then it was BCICAC that should not have accepted it. Having accepted the notice, separate effective arbitrations against each of the respondents had been commenced. The joinder of those arbitrations was an irregularity which could be cured.

The arbitration agreement contained in most Canadian building contracts provide for ad hoc arbitration, not arbitration conducted under the auspices of an arbitral institute, such as the BCICAC, ADRIC, ICC, LCIA or ICDR. Thus, the arbitration clause in the CCDC contracts does not name an institute under which the arbitration is to be conducted. If the arbitration is not conducted under the auspices of an arbitral institution, the authority of the ad hoc arbitrator to decide that multiple arbitrations were commenced by one notice to arbitration seems more doubtful.

If an arbitration is commenced under the auspices of an arbitral institution other than BCICAC, the institution’s rules may not state that an arbitration is “deemed to have commenced” when an Notice to Arbitrate is received by the institution, and the facts may not otherwise satisfy a court that multiple valid arbitrations were commenced against multiple parties just because the institution accepted the notice of arbitration and stated that an arbitration proceeding has commenced.

The better solution for the multiple arbitration problem is to deal with it up-front in the arbitration agreement in each of the contracts between the owner and other parties, such as in main contract between the owner and the general contractor and in the contract between the owner and the consultant.

That arbitration agreement can provide that each party agrees to participate in, and agrees to a consolidation of the disputes into one arbitration before one arbitral tribunal in respect of all contracts on the project. The owner and general contractor can then ensure that this sort of wording is incorporated into subcontracts through an “incorporation by reference” clause in the general contract requiring that the provisions of that contract are to be incorporated into each subcontract, and for the contractor to ensure that that occurs. That “incorporation by reference” clause may appear in either the arbitration agreement itself, or may be applicable to all the parts of the general contract that are to be incorporated into the subcontracts.

See Heintzman and Goldsmith on Canadian Building Contracts, 5th ed., chapter 11, part 4

South Coast British Columbia Transportation Authority v. BMT Fleet Technology Ltd.

2017 CarswellBC 2587, 2017 BCSC 1683

Building contract – arbitration – commencement of arbitration – consolidation of arbitrations

Thomas G. Heintzman O.C., Q.C., LL.D. (ontHon.), FCIArb              January 18, 2018


Is An Agreement To Mediate Enforceable?

A recurring issue in arbitration and construction law is whether an agreement to mediate is enforceable. That is because an arbitration or building contract may contain a clause imposing an obligation to mediate before arbitrating. If the agreement to mediate is enforceable, that likely has certain consequences.  The limitation period is likely not running and the arbitration cannot be commenced until the mediation is finished. The reverse is true if the mediation agreement is not enforceable.  And if it is uncertain which is the correct position, then the parties may be in a real quandary about whether they may or must commence the arbitration and ignore negotiation.

The English High Court recently considered this issue in Wah (Aka Alan Tang) & Anor v Grant Thornton International Ltd & Ors. The court upheld an arbitral decision that a clause requiring mediation was not enforceable.  Therefore, the arbitration was not premature.

What is interesting about the decision is that the court did not hold that mediation clauses are per se unenforceable. Rather the court held that such a clause must have one of two qualities to be enforceable.

Either the mediation clause must provide reasonable certainty as to the beginning, the ingredients and the end of the mediation process;

Or the subject matter of the mediation must be determinable by fairness or reasonableness so that the court can infer the necessary procedural ingredients.

Finding that the mediation clause in the Grant Thornton case satisfied neither criteria, the court upheld the arbitrator’s decision that the mediation clause was ineffective.

In the alternative, the court found that the period for the mediation had expired by the time that the arbitration started. Therefore, the arbitration was validly commenced.


The claimants were two partners in a Hong Kong partnership, JBPB.  That partnership was a member of the international Grant Thornton organization.  JBPB was removed as a member of the international Grant Thornton organization. The claimants sought to invoke the mediation provisions of the international Grant Thornton agreement before going to arbitration. The partnership agreement contained a two stage mediation procedure involving the Chief Executive Officer and Executive committee.   The English High Court summarized those procedures as follows:

Section 14.3(a) requires that the dispute or difference should be referred to the Chief  Executive with a view to him attempting amicably to resolve that dispute or difference by amicable conciliation of an informal nature;

Section 14.3(b) prescribes that the Chief Executive shall attempt to resolve the dispute or difference in an amicable fashion within one month after receipt of a request that he should do so;

Section 14.3(c) prescribes that if the dispute or difference is not by then resolved it should be referred to a three-person Panel selected by the Board (none of whom is associated with or in any other way related to the member Firm(s) who are parties to the dispute), it being provided that the Panel is to have up to one further month to resolve the dispute or difference.

The international agreement stated that, until the Panel determined that it could not resolve the dispute or one month passed after the reference of the dispute to that Panel, “no party may commence any arbitration procedures in accordance with this Agreement.”

It is interesting to note that the CEO recused himself from the mediation process on the ground that he had been involved in the decision to remove JBPB. In addition, nobody volunteered to be members of the three member board. These facts did not expressly figure in the decisions of the  arbitral tribunal or court. The Grant Thornton international organization and the other partners of JBPB did not object to the arbitral tribunal proceeding with the arbitration without the mediation procedures in the partnership agreement being utilized.

Arbitral and Court Decisions

The claimants took the position before the arbitral tribunal and the court that participating in the mediation process was a condition precedent to arbitration and that, since there had been no mediation, the arbitration was premature and the arbitral tribunal had no jurisdiction to proceed with it. The arbitral tribunal held that the mediation clause did not preclude the tribunal from proceeding with the arbitration.  That decision was upheld by the court.

The court held that an agreement to negotiate in good faith, without more, is unenforceable, even if that agreement is contained within an agreement that is otherwise enforceable. But this is the beginning, not the end of the debate.  The court will “strain to give effect” to a mediation agreement.

The court outlines two ways in which a mediation agreement may be effective.

First, the subject matter of the mediation may be one that can be objectively determined, and if it is, then the mediation agreement may be enforceable:

“For that purpose it may imply criteria or supply machinery sufficient to enable the Court to determine both what process is to be followed and when and how, without the necessity for further agreement, the process is to be treated as successful, exhausted or properly terminated. The Court will especially readily imply criteria or machinery in the context of a stipulation for agreement of a fair and reasonable price.

The court found that the decision in Petromec Inc and others v Petroleo Brasileiro SA Petrobras and others, [2005] EWCA Civ 891 could be explained on that basis. There, the English Court of Appeal stated that a provision requiring negotiation in good faith with respect to the cost of equipment was enforceable.  In Grant Thornton, the court said that a mediation agreement dealing with that sort of matter may be enforceable, but that was not the nature of the mediation agreement and dispute in the present case.

The second approach is to determine whether the mediation process is sufficiently clear to give rise to an enforceable agreement. But the court said that the issue is not just the clarity of the procedures, but the clarity of the end of those procedures:

The Court has been in the past, and will be, astute to consider each case on its own terms. The test is not whether a clause is a valid provision for a recognised process of ADR: it is whether the obligations and/or negative injunctions it imposes are sufficiently clear and certain to be given legal effect.

The Court set forth a three step process for making this determination:

“the test is whether the provision prescribes, without the need for further agreement, (a) a sufficiently certain and unequivocal commitment to commence a process (b) from which may be discerned what steps each party is required to take to put the process in place and which is (c) sufficiently clearly defined to enable the Court to determine objectively (i) what under that process is the minimum required of the parties to the dispute in terms of their participation in it and (ii) when or how the process will be exhausted or properly terminable without breach.”

The court concluded that the Grant Thornton partnership agreement did not satisfy these criteria:

“I have reached the clear conclusion that Section 14.3 is too equivocal in terms of the process required and too nebulous in terms of the content of the parties’ respective obligations to be given legal effect as an enforceable condition precedent to arbitration. In particular, I accept that the omission to give any guidance as to the quality or nature of the attempts to be made to resolve a dispute or difference renders the Court unable to determine or direct compliance with the provisions of Section 14.3(a), (b) and (c).”

The Court also rejected the suggestion that the mediation process could indefinitely postpone arbitration if the two steps in that process never occurred. The court said that it was not “realistic to suppose the parties to have intended that the Board or panel members could indefinitely postpone the right to arbitration.” Accordingly, the court held that, in the alternative, the mediation clause did not prevent a party to the partnership agreement from commencing any arbitration procedures after the time limits set for the in the mediation agreement. The arbitration in question started well after that time frame.


The Grant Thornton decision holds that a mediation agreement is enforceable, if properly drafted. This decision is useful because it advances the debate on this issue to a further level. For the clause to be enforceable, Grant Thornton says that the clause must be one of two kinds.

Either the mediation agreement must set out a process that has a reasonably certain commencement, procedural ingredients and ending.  Or the mediation agreement must deal with a dispute over some matter of fairness or reasonableness which allows the court to infer reasonable procedural elements. Furthermore, in order to ensure that the mediation clause does not hold up dispute resolution in court or arbitration, the mediation clause should have a reasonably prompt “drop dead date.”

The court’s remarks about secondalternative, namely a mediation to determine a matter on the basis of fair and reasonableness, raise difficult issues. Must the mediation agreement itself state that it deals with the fairness of something, such as price? Or if the specific mediation is in fact about some matter of fairness or reasonableness, is that sufficient to infer the necessary procedural ingredients to validate the mediation agreement, or its application in the particular case? If it is the latter, then the validity of the mediation agreement will be determined on a case by case basis.  A mediation clause which may or may not be valid, depending on the issue being mediated, may be an unsatisfactory sort of mediation agreement.

In prior articles I have dealt with Ontario decisions dealing with the enforceability of the duty to mediate.  In an article on July 17, 2011, I reviewed the decision in L-3 Communication Spar Aerospace Limited v. CAE Inc., 2010 ONSC 7133 in which the Ontario Court of Appeal held that, in that case, there was a legally enforceable duty to mediate.  In an article on May 5, 2012, I reviewed the same court’s decision in Federation Insurance Co. of Canada v. Markel Insurance Co of Canada,, 2012 ONCA 218 in which it was held that the mediation clause in that case was not enforceable and that in the meantime the limitation period had expired.  Clearly, the law relating to the enforcement of mediation clauses remains a matter of considerable importance.

See Heintzman and Goldsmith on Canadian Building Contracts (4th ed.), Chapter10, part 6

Wah (Aka Alan Tang) & Anor v Grant Thornton International Ltd & Ors [2012] EWHC 3198

Mediation  –  Validity of Mediation Agreement  –  Uncertainty  –  Duty to Mediate  -Commencement of Arbitration

When Does An Arbitral Limitation Period Commence?

An arbitration is usually considered to be a less formal type of dispute resolution than court litigation.  For this reason it may be thought that less formal rules about limitation periods apply to arbitrations.

If you had this impression, then the recent decision of the Ontario Court of Appeal in Penn-Co Construction Canada (2003) Ltd. v. Constance Lake First Nation will quickly disabuse you of that view.  Just like a court action, unless an arbitration is started within the appropriate limitation period, the right to commence the arbitration claim will be lost. The issue may be trickier in an arbitration than in a court action since, unlike in a court action, there is no court office in which to issue the arbitration claim.  But it is still the same question: was the proceeding commenced within the limitation period?

The appeal to the Court of Appeal in the Penn-Co case was from a 2011 decision of the Ontario Superior Court.  I commented on that decision in my article of November 6, 2011.

The Legal Background

In Ontario, there are two enactments that are relevant to the limitation period for an arbitration claim.

First, the Limitations Act, 2002 says that the general limitation period in Ontario is two years from the discovery of the facts giving rise to the claim. Section 52(1) of the Ontario Arbitrations Act, 1991 (the Act) says that “the law with respect to limitation periods applies to an arbitration as if the arbitration were an action and a claim made in the arbitration were a cause of action.” So, an arbitration must be commenced within two years of the date that the would-be applicant first had knowledge of the facts giving rise to its claim.

Second, section 23 of the Act says that an arbitration may be commenced “in any wayincluding three particular ways:

A party to the arbitration agreement serving on the other parties to that agreement a notice to appoint or to participate in the appointment of an arbitrator under the agreement;

If a third party has the power to appoint an arbitrator, serving a notice on that third party to exercise that power, and serving the other parties with that notice;

A party serving on the other parties a notice demanding arbitration under the agreement.  (emphasis added by the Court of Appeal)

As a result, the limitation issue in the Penn-Co case was whether Constance Lake took one of these three steps before the limitation period expired.

The Background Facts

In 2003, the parties signed a standard form building contract for the construction by Penn-Co of a school for Constance Lake.  The contract contained a three-step process for resolving disputes: negotiations involving the consultant, mediation and arbitration.  By the summer of 2005, there were several alleged deficiencies in Penn-Co’s work that were the subject matter of dispute.  In December 2005, Constance Lake served a cure notice on Penn-Co. Penn-Co’s counsel responded by asking for mediation.  Then, on January 20, 2006, counsel for Constance Lake suggested that the parties dispense with the provisions under their contract and proceed directly with arbitration under an amended form of the CCDC 40 Rules for Arbitration of Construction Disputes. In response, Penn-Co’s counsel suggested that the parties proceed with a neutral third party “peer review”. However, the parties could not agree upon the terms of the peer review and by mid-2006 that process was abandoned.

In June 2007, Penn-Co commenced an action against Constance Lake.  In response, in May 2009 Constance Lake instituted a counterclaim in that action.  That counterclaim was instituted more than two years after December 2005 when, as acknowledged in its own cure notice, Constance Lake had knowledge of its claim against Penn-Co.  Penn-Co brought a motion to dismiss the counterclaim on the ground that the counterclaim was barred by the limitation period.

The Superior Court judge had held that the counterclaim was barred, and the Court of Appeal agreed.  It held that the letter of January 16, 2006 did not commence an arbitration.  It said that that this letter, and the other correspondence between the parties, amounted to “mere proposals for an arbitration agreement” and not a notice under the existing arbitration agreement which satisfied section 23 of the Act. The Court of Appeal held that the “parties failed to commence an arbitration under the building contract or any other agreement.”  Accordingly, the limitation period to do so had expired.

In these circumstances, the Court of Appeal also held that section 52(2) of the Act had no application. That sub-section gives powers to the court when it sets aside an arbitration award or terminates an arbitration or declares an arbitration to be invalid. In those circumstances, the court may order that the “period from the commencement of the arbitration to the date of the order” is to be excluded from the computation of time for limitation purposes. The Court of Appeal held that, if no arbitration was commenced, then this sub-section had no application.

Finally, the Court of Appeal held that Penn-Co was not estopped by its conduct from relying on the limitation period. None of the elements of estoppel were present.  There was no evidence that Penn-Co gave any assurance or representation that it would not rely on the limitation period, or that Constance Lake relied upon any such assurance.


This decision is a good reminder that an arbitration is a formal proceeding and must be formally commenced. But this decision does not answer the question of what exactly such a formal commencement might encompass.

Section 23 of the Act says that an arbitration may be commenced “in any way recognized by law”.  That is just about as broad a definition as could be drafted.  One wonders what the limit of that definition might be, apart from the examples given in the section.  The legislature has said that a notice demanding arbitration is sufficient.  If that is so, and if that is included within but is not exhaustive of the definition, then something less than such a notice may amount to a commencement. The Court of Appeal has said that proposing arbitration under some other procedure or regime is not sufficient, at least until that regime is agreed to. But exactly what can amount to a “commencement” of an arbitration less than a notice of arbitration is left uncertain.

Several lessons can be learned from this decision.

One is that, before a party suggests alternatives to the arbitration agreement that is already in place, that party should first give notice of arbitration under that agreement.  Then, other dispute resolution solutions can be proposed.

The second lesson is that the institution by one party of mediation or arbitration does not protect the other party.  In the present case, Penn-Co instituted the mediation provisions of the building contract.  Whether the commencement of mediation proceedings stops the limitation period from running is open to question.  As I have commented upon in previous articles, the Ontario Court of Appeal has issued two decisions on this issue which arrived at contradictory results.  But the commencement of mediation proceedings by one party will not likely stop the running of the limitation period against the other party.

Finally, the limitation issue may not entirely deprive Constance Lake of its cause of action.  It may still be able to rely upon that cause of action by way of defence and setoff against the claim by Penn-Co.  The limitation statutes bar the commencement of a claim but not the reliance on the cause of action in any other way.

See Heintzman & Goldsmith on Canadian Building Contracts (4th ed.) at Chapter 10, part 6

Penn-Co Construction Canada (2003) Ltd. v. Constance Lake First Nation, 2012 ONCA 430

Building Contract  –  Arbitration  –  Limitation Periods  –  Commencement of Arbitration

Thomas G. Heintzman O.C., Q.C., FCIArb                                                            August 27, 2012