At Singleton Reynolds, our people are what makes us great. We come together every day with the common goal of providing exceptional legal services and ensuring we go above and beyond for each and every client.
Learn More
The range of backgrounds of the partners, counsel, associates and staff of Singleton Reynolds enables us to offer a broad range of services.
Singleton Reynolds’ lawyers spend a significant amount of time researching and thinking about how industry or legislative changes could affect your business.
All News
Singleton Urquhart Reynolds Vogel LLP is recognized as a leader in construction and infrastructure, insurance, commercial litigation, real estate and business law.
Singleton Reynolds has offices to serve you in Vancouver and Toronto.
Singleton Reynolds believes in community. Our team members are teaching at Canadian universities and abroad, lecturing the next generation of lawyers.
How was Singleton Reynolds first established? Find out more here.
Recognizing the leadership that contributes to the company successes.
Singleton Reynolds prides itself in being a leader in corporate social responsibility. We encourage diversity, charity, mentorship, civic dedication and neighbourhood support.
Singleton Reynolds strives to understand the balance between your career and your personal goals and encourages our legal and operations staff in the pursuit of their interests outside of the firm.
Our goal is to develop strong lawyers from student right through to partner. Mentoring and training start when you are a student and continue throughout your practice.
We are always on the lookout for talented professionals to contribute to our team. Singleton Reynolds offers a professional and challenging work environment, with a competitive compensation and benefits package.
In Sjostrom Sheet Metal Ltd v Geo A Kelson Company Limited,[1] the Ontario Superior Court of Justice provided a timely reminder regarding the significance of careful pleading, clear and transparent change order processes, precise record-keeping, adherence to contractual obligations, and effective communication amongst contractual counter-parties in the context of a construction project with subcontractors and sub-subcontractors performing overlapping scopes of work. Below, we discuss some of the key takeaways.
Background
This matter arose as a result of issues in respect of the construction of the University Health Network (“UHN“) Centre for Cell & Vector Production (“CCVP“). UHN hired Canadian Turner Construction Company (“Turner“) as the general contractor for this project. In this case, UHN and Turner were not parties to the action, nor were they relevant to the Court’s analysis.
Turner subcontracted with Geo A Kelson Company Limited (“Kelson“) to perform the mechanical work on the Project. Kelson then sub-subcontracted with A Amar and Associates Ltd (“Amar“) for Amar to perform certain sheet metal work for a fixed price. After being retained by Kelson, Amar subsequently faced labour issues which resulted in it hiring labourers from Sjostrom Sheet Metal Ltd (“Sjostrom“) to assist with its scope of work. Kelson was not aware of the hiring of Sjostrom at the time.
Ultimately, Sjostrom abandoned the Project as a result of non-payment by Amar.[2] Per the Court, Kelson and Sjostrom then reached an arrangement whereby Sjostrom would return to site and continue working, with Kelson being responsible for direct payments to Sjostrom on a go-forward basis. Consequently, Kelson issued a change order which reduced the total amount of Amar’s subcontract due to the work performed (and to be performed) by Sjostrom (the “Change Order”).[3] Although not explicitly stated, this Change Order was presumably agreed to by Amar, given that the change was implemented via change order rather than change directive.
Amar subsequently brought a claim against Kelson for unpaid services and materials under its sub-subcontract. In addition, Amar argued that it was relieved of its remaining sheet metal responsibilities due to the Change Order issued by Kelson and thus no longer had any obligations to Sjostrom.
In parallel with Amar’s action against Kelson, Sjostrom brought a lien action against Kelson for unpaid amounts allegedly owing pursuant to the aforementioned arrangement between Kelson and Sjostrom, which Sjostrom alleged to be a contract between the two. In response, Kelson argued that it had no contract with Sjostrom, and that as result, it had no liability for Sjostrom’s claim and that Amar was in fact required to pay any amounts proven by Sjostrom’s claim. Kelson also counterclaimed against Amar for damages, contribution, and indemnity if Kelson were found liable to Sjostrom.[4]
The Superior Court’s Decision
Given the somewhat unusual (and more importantly, disputed) contractual arrangement amongst the parties, the Court’s analysis touched in relevant part on a number of issues that are broadly relevant to the construction industry.
In particular, the Court considered the following:
Broadly speaking, Amar argued that its responsibility for sheet metal labour performed on the Project (whether by Sjostrom or otherwise) ceased after the issuance of the Change Order, and Sjostrom’s work was subsequently governed by a separate, direct sub-subcontract with Kelson. Sjostrom held the same position as Amar. Conversely, Kelson alleged that it had no direct contract with Sjostrom, alleging any responsibility for any owed amounts to Sjostrom rested with Amar.
The Agreement Between Kelson and Sjostrom
A key issue was of course whether a direct contract was established between Kelson and Sjostrom; in that regard, and despite the absence of a written agreement Sjostrom alleged that the parties entered into an oral agreement. In determining whether Kelson and Sjostrom entered into a contract, the Court considered first principles of contract formation including (1) offer, acceptance, consideration, certainty of terms and intention, (2) the factual matrix between the parties, (3) an examination based on an objective standard, and (4) the presence of a meeting of the minds.[5]
Ultimately, the Court found that it was unnecessary to rely on these contractual principles, given that Kelson’s pleadings were sufficient to establish the existence of an agreement.[6] In particular, the Court observed that subrule 25.07(3) of the Rules of Civil Procedure requires a party who intends to prove a version of facts that is different from the facts pleaded by the opposing party must plead the party’s own version of the facts in their defence.[7] However, Kelson’s statement of defence failed to dispute Sjostrom’s claim of the existence of a direct contract between Kelson and Sjostrom. Rather, the Court found that Kelson unintentionally acknowledged the existence of a direct contract with Sjostrom.
Further, in its pleadings, Kelson relied on s. 17(3) of the Construction Lien Act, which permits a party that is liable for payment to another to claim a set-off against such payment. This subsection contemplates that a payee’s outstanding debts, claims, or damages related to their payer can be set off against the amount of the payee’s lien. However, Kelson could only rely on s. 17(3) if it qualified as the “payer” of Sjostrom, which was defined under the CLA as “the owner, contractor, or subcontractor who is liable to pay for the services or materials supplied to an improvement under a contract or subcontract” (emphasis added). The Court found that Kelson’s reliance on this provision logically required privity of contract between Sjostrom and Kelson. Thus, relying on this section was effectively an admission of a direct contractual relationship by Kelson.[8]
Moreover, even in the event that Kelson’s statement of defence did not admit a direct contract, the Court would have found that the objective evidence supported the existence of a contract between Sjostrom and Kelson,[9] referring to communications between the parties, negotiations, as well as email correspondence suggesting an agreement on terms and pricing.[10] Indeed, the examination of whether a contract has been formed entails assessment based on an objective standard – in which the parties’ conduct is assessed based on how it would be construed by a reasonable, disinterested third party (i.e., a reasonable person) – rather than a subjective standard, based on the subjective understanding of each party. In applying this standard, the Court therefore found that a reasonable person would conclude that both parties intended to enter into a direct contractual relationship.
Claimed Amount of Work Performed by Sjostrom
The next issue considered by the Court was whether Sjostrom had proven the amount claimed in respect of the work it allegedly performed.
The agreement between Sjostrom and Kelson (now found to exist) was based on hours spent on sheet metal labour at a set rate, which the Court considered sufficiently similar to a cost-plus contract such that the case law on cost-plus contracts applied in this case. In that regard, the Court identified several distinct principles that applied to the assessment of a damages claim including the need for the parties to practice diligence in managing costs, prevention of wasteful or uneconomic use of labour and materials, reasonableness of estimates, examination of the context to an estimate, and the sophistication and knowledge of the parties.[11]
The Court found that Sjostrom failed to provide sufficient evidence that the time summaries it had provided were an accurate reflection of the hours worked by Sjostrom. Specifically, Sjostrom combined its overtime hours with its regular hours, leading to a distorted picture. Further, Sjostrom provided weekly summaries that were not signed by the labourers themselves, and which lacked details of the actual work undertaken.[12] Timesheets were not accurately kept, and often consisted of notes on scrap paper, pieces of drywall, cardboard and napkins.[13]
Moreover, the Court found that time summaries were not provided to Kelson on a weekly basis.[14] Rather, they were only provided with Sjostrom’s invoices, which made it such that there was “no evidence tendered at trial supporting that Kelson could reasonably have known how many hours Sjostrom was spending on site until receiving the invoices”.[15] The Court also found that there was a discrepancy between the actual hours worked and estimates, as evidence suggested that the sheet metal labour was substantially completed earlier than Sjostrom’s estimate.[16]
The Court emphasized the principle that “time spent by labourers must be strictly proven due to the difficulty in verifying them after the fact”.[17] The Court found that Sjostrom did not meet its evidentiary burden to demonstrate actual hours, how the hours were incurred, why they varied significantly from estimates, and why no notice was provided regarding the fact that actual labour hours were significantly exceeding the estimate. Thus, the Court dismissed Sjostrom’s claim for payments made exceeding the sum already remitted by Kelson due to insufficient evidence.[18]
The Change Order’s Impact on Amar’s Scope of Work
Kelson and Amar also disagreed with respect to the contractual impact of Kelson’s Change Order which reduced the amount of Amar’s sub-subcontract, but also arguably the scope – depending on the view of each party considering it. In this regard, Kelson asserted that the Change Order merely credited the cost of Sjostrom’s labour against the price of the sub-subcontract between Kelson and Amar, but did not remove sheet metal labour from Amar’s scope of work, while Amar argued that it fully removed sheet metal labour from Amar’s scope of work.[19]
In this case, the Court noted that the Change Order was ambiguous, only referring to a price reduction and a description of “work performed by others.” As a result, an analysis of the surrounding circumstances was required in order to assess the intentions of the parties.[20]
In examining the factual background, the Court observed that the labour rate as agreed upon between Kelson and Sjostrom was not discussed with Amar. The Court found this “curious” given Kelson’s assertion that, despite Sjostrom not being included in their discussions, Sjostrom continued to be Amar’s sub-subcontractor, and that Amar was liable to pay the labour rate agreed upon by Kelson and Sjostrom in their agreement.[21]
Moreover, Sjostrom sent an email to Amar stating, “going forward Sjostrom will have to follow instruction as directed by [Kelson], exclusively. This includes but not limited to, time sheet [submittal] etc.”[22]The Court found that this email was consistent with the understanding that Kelson assumed responsibility for Sjostrom, especially given the fact that there was no response from Kelson or Amar to indicate otherwise.[23]
In another e-mail exchange in response to an e-mail from Sjostrom to which Kelson was copied regarding labour required for installation of control dampers, Amar responded ” [Kelson] has received and deducted costs from my contract for the entirety for ‘cost to complete'”[24]. While Kelson responded to the e-mail, it did not dispute Amar’s characterization that the “cost to complete” was deducted from Amar’s sub-subcontract. Thus, the Court found that the Change Order had the effect of removing sheet metal labour from Amar’s scope of work. [25]
Breach of Kelson and Amar’s Subcontract
The Court then considered who breached the subcontract between Kelson and Amar. Amar claimed that Kelson breached the subcontract through non-payment, while Kelson claimed that Amar breached the subcontract due to its failure to provide sheet metal labour. The Court observed that the subcontract required a notice of default to be delivered in order for Amar to be in breach, and since no notice was provided until after the parties completed their work, “Amar was not formally in breach… at any material time”. Thus, without having issued a notice of default, Kelson had no right to back charge Amar for costs beyond the figure agreed upon in the Change Order. [26]
In addition, the Court found that Kelson breached the subcontract by failing to pay Amar the remaining holdback due upon final payment after substantial completion and found Kelson had separate holdback obligations under the Construction Lien Act for its subcontracts with both Amar and Sjostrom. Thus, Kelson breached its subcontract with Amar by not making the payments.[27]
Further, in determining the earned and unpaid amount owing to Amar, Kelson argued that Amar underbid the labour portion of the sheet metal work. However, the Court emphasized that whether Amar underbid was immaterial, as Amar’s subcontract was a fixed price contract, not a cost-plus contract. On this basis, Kelson would not have to pay anything more than the fixed subcontract price agreed by parties.[28]
Moreover, the Court found that since the sheet metal labour was removed from Amar’s sub-subcontract scope of work through the Change Order, and since they were called back to the project site in order to perform work outside of their revised scope, Amar’s invoice constituted a valid extra.[29] Lastly, the evidence did not support a finding that Amar intended or agreed to be indemnified for expenses associated with the completion of sheet metal labour.[30]
The Court’s Determination
Based on all of the above, the Court concluded overall that Sjostrom and Kelson did enter into a separate sub-subcontract for Sjostrom to complete the remaining sheet metal labour in Amar’s scope of work, but that Sjostrom has failed to prove its claimed damages, as a result of which the Court dismissed Sjostrom’s action and discharged its lien. With respect to Amar, the Court concluded that the Change Order had removed all of Amar’s remaining scope of work, and Kelson breached its subcontract with Amar due to non-payment, such that Amar was entitled to judgment against Kelson.
Commentary
Notwithstanding that the fact pattern of this case was not especially unusual, Sjostrom nevertheless offers several takeaways with respect to how a party can best protect or advance its position in a construction dispute.
First, and as it relates to pleadings, it is crucial that parties take care when drafting such documents in order to ensure their pleadings align with the theory of their case. Here, the Court found inconsistencies between Kelson’s statement of defence and its subsequent submissions, which led to a finding that a direct contract existed between Kelson and Sjostrom. Such inconsistencies, as seen in this case, can lead to unexpected outcomes.
Second, it is imperative that parties understand their rights under their contract(s) and any particular actions required to enforce them. In this case, the subcontract between Kelson and Amar required a notice of default in order to ground a finding of breach of contract, and since Kelson did not provide such notice, the Court found that Amar was not in breach and that Kelson was not entitled to exercise any associated remedies. While this may be a somewhat unusual precondition depending on the form of contract used (whether it be a standard form or a bespoke contract), it nevertheless emphasizes the importance of ascertaining all relevant preconditions to taking a given position, and then complying with those preconditions.
Third, the Court provided helpful guidance in its discussion of the judicial assessment that applies in making claims for payment under certain forms of construction contract. A cost-plus basis for payment in particular – as well as time and materials basis – is inherently uncertain, and can vary quite significantly from any estimate given before the start of work. A court will consider whether the claiming party exercised diligence and was economical in the use of its labour and materials, and the claiming party will have to meet a high evidentiary burden (among other things).
In that regard, contractors operating on a cost-plus or time and materials basis would be well advised to be cautious and comprehensive in considering the basis for any estimate they give to a client, in order to have confidence that the work can be completed for an amount roughly equivalent to that stated in the estimate. The alternative, as Sjostrom shows, entails significant scrutiny by a court or other decision-maker (e.g. an arbitrator).
In that regard, parties must ensure that their time is tracked in a reliable and accurate manner. The reliability of time sheets, and other timekeeping methods, is crucial to establishing their validity as admissible evidence – not to mention the practical and relationship benefits of doing so. As the Court observed, time spent by labourers must be proven to a strict evidentiary standard, given the difficulty in verifying hours after the fact. In this case, the Court found that Sjostrom failed to provide sufficient evidence to prove that their time summaries were an accurate reflection of their work. This lack of reliable evidence left Sjostrom with no evidentiary foundation for any additional amount claimed. Similarly, it is important to ensure that change orders or side agreements are clearly documented and agreed upon, as well as disseminated to all relevant parties.
In any event, however, construction industry participants would be well advised to be candid with counterparties if and when the cost estimate will be exceeded (or when it is anticipated to be exceeded), so as to avoid unpleasant surprises and acrimony. Successful projects are often those which operate on the basis of a cooperative and collaborative relationship, and in that regard, financial candor is arguably no different.
[1] Sjostrom Sheet Metal Ltd v Geo A Kelson Company Limited 2023 ONSC 4959.
[2] Sjostrom at paras 1-3.
[3] Sjostrom at para 3.
[4] Sjostrom at paras 4-6.
[5] Sjostrom at paras 10-11.
[6] Sjostrom at para 14.
[7] Sjostrom at para 17.
[8] Sjostrom at para 21.
[9] Sjostrom at para 24.
[10] Sjostrom at paras 25-39.
[11] Sjostrom at paras 40-41.
[12] Sjostrom at paras 42, 44-46.
[13] Sjostrom at para 62.
[14] Sjostrom at para 63.
[15] Ibid.
[16] Sjostrom at paras 53 and 59.
[17] Sjostrom at para 74, Citing Infinity Construction Inc. v. Skyline Executive Acquisitions Inc., 2020 ONSC 77 at para. 114.
[18] Sjostrom at paras 74 and 75.
[19] Sjostrom at paras 80 and 81.
[20] Sjostrom at paras 82 – 84.
[21] Sjostrom at para 94.
[22] Sjostrom at para 96.
[23] Sjostrom at para 97.
[24] Sjostrom at para 102.
[25] Sjostrom at paras 104 -105, 117.
[26] Sjostrom at para 123.
[27] Sjostrom at paras 127-130.
[28] Sjostrom at para 135.
[29] Sjostrom at para 137.
[30] Sjostrom at para 143.
Singleton Urquhart Reynolds Vogel LLP is proud to announce that Cheryl Labiris has been selected as one of the top 40 young professionals in the construction sector in Canada, as part of On-Site Magazine’s 40 Under 40 in Canadian Construction awards, presented in partnership with SitePartners.
This award celebrates the accomplishments of young construction professionals who are making an immediate impact by helping to advance the industry as a whole.
Cheryl works exclusively in the Construction and Infrastructure Practice Group and has a very broad and diverse practice acting for all members in the construction pyramid including owners, general contractors, subcontractors/suppliers, sureties, architects, engineers, designers, and consultants on a vast range of construction claims including claims for delay, disruption, prolongation, breach of contract, breach of trust, geotechnical claims, permits, licenses, and approvals, access to lands, COVID-19, negligent/fraudulent misrepresentation, and surety bond claims.
Cheryl has significant experience working on a variety of projects including large-scale public infrastructure projects including multi-billion-dollar light rail transit projects, mine remediations, power plants, and wind farms. Cheryl also has experience in complex construction litigation proceedings, arbitration proceedings, and mediation and negotiation processes.
About On-Site Magazine’s Top 40 Under 40
On-Site’s 2023 Top 40 Under 40 in Canadian Construction have been selected by a panel of judges based on professional achievements, innovation, leadership, and community involvement. The listing features individuals both on and off-site who are helping advance complex infrastructure projects, implementing, or launching powerful software tools to increase on-site safety, and building communities for families to thrive in, and are a promising reflection of where the Canadian construction industry is heading.
About Singleton Urquhart Reynolds Vogel LLP
Singleton Urquhart Reynolds Vogel LLP is a Canadian national law firm that specializes in the construction and infrastructure, insurance, and real estate sectors.
The firm consistently ranks first among Canadian construction and infrastructure firms and features prominently in the delivery of commercial litigation, corporate-commercial and employment law services.
In Sundance Development Corporation v. Islington Chauncery Residences Corp., 2023 ONSC 5239, the Ontario Superior Court of Justice considered repudiation (broadly, the law applicable in cases where a contractual party abandons or refuses to perform its contract) in respect of a construction contract in the context of a troubled townhouse development project. Here, the Court reaffirmed that repudiation is an exceptional remedy and that there is a high bar to proving that a party has repudiated its contract.
As discussed in more detail below, unless there is sufficient evidence to prove repudiation on an objective basis, parties should be cautious when deciding whether to stop work in acceptance of an alleged repudiation. In particular, we consider the case and the implications of failing to prove repudiation in a construction project where so alleged.
Islington Chauncey Residences Corp. (“Islington”) (the developer) hired Sundance Development Corporation (“Sundance”) to act as construction manager for a townhouse development project (the “Project”) under a services agreement (the “Agreement”).
Sundance commenced its work in July 2019; however, the construction phase of the project was delayed (notably related to the early days of the COVID-19 pandemic). By late summer 2020, Islington was pushing for Sundance to complete two model units for the development.
In September 2020, the model units were still not ready, and the overall construction was far from complete. At this time, for extraneous reasons, the site superintendent (a Sundance employee) advised of his intention to leave the job at the end of October 2020. Although Sundance proposed that Sue Capobianco, another one of its personnel, be the replacement site superintendent, Sundance did not have the unilateral right to appoint the site superintendent and Islington did not agree with Sundance’s recommendation. No other proposals were made, and the replacement site superintendent was not agreed to or appointed.
Sometime after the site superintendent’s announcement, Islington’s principal engaged a project manager, Tony Murdocca (who himself was recommended by the father of the Islington principal), to help assist in getting the Project finished. Mr. Murdocca arrived on site on October 15, 2020, and began directly coordinating with trades to complete the model units.
In a telephone conversation on October 15, 2020, representatives from Islington and Sundance discussed the possibility of terminating the Agreement. By the end of the call, the parties had agreed to try to work out an agreement to end their contractual relationship effective October 31, 2020.
In the last two weeks of October 2020, the parties made efforts to negotiate the terms of the termination/settlement agreement. While the concept of a mutual agreement was agreed to in principle and most terms were agreeable to both parties, no mutual termination agreement was ultimately reached as a result of an inability to agree on the scope of the release (specifically, Islington would not agree to release Sundance from future claims). Throughout this period, Mr. Murdocca took the lead on coordinating the finishing of the two model units.
On October 30, 2020, and absent an executed termination/settlement agreement, Islington sent a memorandum to Sundance which provided a list of alleged damages arising from Sundance’s mismanagement and project delays and noted their position that Sundance had breached the Agreement. The memorandum confirmed that Islington “agreed in principle with terminating the contract, but would not agree to releasing Sundance from future claims” and that Islington intended to back charge Sundance for “costs incurred from delays and Sundance’s alleged ‘negligent mismanagement.’”
In response to the memorandum, Sundance sent a letter on the same day, taking the position that Islington had repudiated the Agreement, and that Sundance therefore accepted that repudiation. The letter included a demand for payment of three invoices (which were attached to the letter) as a precondition for delivering remaining materials and accounting records in Sundance’s possession. Sundance alleged that Islington’s collective conduct repudiated the contract and specifically referred to Islington’s decision to use Islington personnel (including Mr. Murdocca) to take over Sundance’s construction management function on the project and Islington’s conduct during the termination agreement negotiations.
Sundance withdrew from site on the next day October 31, 2020, and ceased supplying all services to the Project. After Sundance ceased services, and given that Islington did not believe that Sundance had earned the fees and had claims against them in negligence and for failing to complete the work under the Agreement, Islington made no further payments to Sundance.
Although the Court had four issues before it, for the purposes of this article we will only be focusing on the first issue: “Was Sundance justified in ceasing all services effective October 31, 2020? Specifically:
Did Islington repudiate the contract?
Broadly speaking, in Canadian Law repudiation means: “the conduct of one of the parties to a contract which demonstrates to the other that it will not fulfill the terms of the contract.”[1] Repudiation “entitles the other party not to perform its obligations under the contract and claim damages.”[2]
Looking at the totality of the evidence, the Court held that Islington did not repudiate the Agreement. The Court found that Islington’s conduct was not repudiatory for three main reasons: (i) Islington had a contractual right to direct Sundance to cooperate or coordinate with it in supervising and managing the construction; (ii) Sundance was never excluded from full and free access to the site or materially impeded in its role as construction manager (including with respect to the hiring of Mr. Murdocca); and (iii) Islington’s “hard bargaining” with Sundance in respect of the termination/settlement agreement did not rise to the level of repudiatory conduct.
The Court began its analysis by reviewing the relevant law of repudiation. The Court noted that repudiation is assessed on an objective standard, and that the court must ask “whether a reasonable person would conclude that the breaching party no longer intends to be bound by the contract, which requires considering the surrounding circumstances”. To establish repudiation, more than an ordinary, non-repudiatory breach of the contract is required. The breach must be serious and “[i]t must deprive the innocent party of substantially the whole benefit of the contract.” In this regard, the Court had to consider whether Islington breached the Agreement and whether such breach was serious and deprived Sundance of substantially the whole benefit of the Agreement.
The Court considered the Agreement and found that Islington had a “contractual right to deploy its own forces and … to require that Sundance cooperate and coordinate with those forces in supervising and managing the construction.” Pursuant to Section 3.1 of the Agreement specifically, “Sundance expressly agreed ‘to do all such acts and things as [Islington] considers necessary or desirable, whether independently or in cooperation or coordination with [Islington], to supervise and manage the accounting, financing and construction […] of the Units’”. In addition, Section 3.1 specifically enumerated several matters which captured the scope of work performed by Mr. Murdocca.
By utilizing this contractual right, Sundance argued that “Islington obstructed its free and full access to the model units by taking over the coordination of their construction”. On that point, Sundance referred to Section 7.1(d) of the Agreement, which entitled Sundance to “full and free access” to all units.
The Court found that “the fact that Islington assigned personnel to take a primary role in directing construction of the model units did not result in Sundance being excluded from ‘full and free access’ to the units to complete its work.” First, although there was a trade meeting invitation without Sundance’s inclusion, the Court found that there was no evidence supporting that “trade contractors were directed to or did cease communicating with Sundance or were directed to coordinate with Tony Murdocca to the exclusion of Sundance.” Second, the only Sundance personnel with a regular on-site presence, Ms. Capobianco, was not impeded in executing her duties. While she subjectively felt that she was being excluded from site operations, objectively there was no convincing evidence to show that Sundance’s on-site work was materially impeded. Ms. Capobianco continued to have involvement with the model units and continued to perform the same kinds of things she had done for the prior Sundance site superintendent that was leaving. Third, the site superintendent and Ms. Capobianco continued to have the controlling access to the site. Mr. Murdocca did not have the keys or codes for the electronic locks to the site, and had to be let in by either Sundance’s site superintendent or Ms. Capobianco.
On a balance of probabilities, the Court therefore found that Islington did not breach the Agreement by deploying personnel to site as the evidence did not support “that Sundance’s construction management function was genuinely impeded or superseded by the presence of Tony Murdocca or other Islington personnel.” In any event, managing the construction work was only one of Sundance’s many duties, and having its full and free access impeded would not be sufficient in itself to ground repudiation of the entire contract.
Lastly, the Court found that “what transpired in late October was hard bargaining, not repudiatory conduct.” When the parties could not agree to the terms of termination, Islington eventually offered an ultimatum: “agree to the release being proposed or face back charges for all the costs that Islington said were incurred solely by Sundance’s mismanagement of the project.” There was no language in Islington’s memorandum that treated the Agreement as being at an end. In addition, the Court found that “nothing in the evidence support[ed] a finding that, objectively, Sundance had any genuine intention or willingness to take steps to investigate and respond to the alleged breaches of contract.”
In this regard, the court found that there was no breach of the Agreement, let alone a repudiatory breach.
If the contract was not repudiated, was Sundance entitled to withdraw its services?
The Court held that Sundance was not entitled to withdraw its services, and therefore breached the Agreement by doing so.
The relevant law states that if “an owner ceases to make payments under the contract or by other conduct makes it impossible for the contractor to complete, the contractor is justified in abandoning the work and may enforce a claim in quantum meruit to the extent of the actual value of the work performed and material supplied to that time”.[3] The Court also noted that “a party cannot rely on its own breach of contract to be relieved of its contractual obligations”.
Sundance argued that because Islington was in breach of the Agreement, it was entitled to cease work. In its response letter to Islington, Sundance demanded payment of accounts and ceding control of the model units to Sundance’s forces as pre-conditions for its return. The Court ultimately held that those demands were unsupported by the terms of the Agreement, and that there was no opportunity provided to Islington to remedy the alleged defaults as Sundance walked off the job the next day.
The Court found that Sundance lacked a contractual basis to demand that Islington cede control of the model units. First, pursuant to Section 3.1, Islington was entitled to take over primary responsibility for coordinating and construction of the model units and Sundance was required to cooperate or coordinate with Islington on the construction of the units. Therefore, Islington deploying its own forces (i.e., Mr. Murdocca) was not a breach of contract under the Agreement. Second, as Sundance was factually not obstructed from “full and free access” to the units, there was no breach of Section 7.1(d) of the Agreement.
With respect to payment of accounts, the Court found that “Sundance had not met its burden of proving that Islington was in breach of the Agreement when Sundance advised it would be withdrawing all services and made demand for payment.” On the contrary, the Court found that there was no contractual basis for the three invoices that Sundance had attached (the invoices were for fees not yet due or payable or for its own materials that it left on site), and stated that “[d]emanding payment to which a contractor is not entitled or refusing to proceed unless paid is a breach of contract”.
As Islington had not repudiated the Agreement nor ceased to make payments to which Sundance was entitled, the Court found that “Sundance breached the contract by demobilizing from site with no legitimate basis and by making demand for payment of amounts to which it was not contractually entitled at the time of the demand.”
The Court ultimately ordered that Sundance repay Islington for the partial costs of the replacement construction management and the costs of extra work and work redone.
Analysis
The Court in Sundance has reaffirmed the high bar for repudiation, and that courts are reluctant to grant it as an exceptional remedy. As stated by the Court, repudiation is “only available in circumstances where the entire foundation of the contract has been undermined, namely where the very thing bargained for has not been provided”.[4]
Further, this decision confirms just how necessary objective evidence is when showing repudiation. Although a party may feel impeded or that the other party intends to not be bound by the contract, those subjective impressions are not relevant to the analysis. A party proving that there was repudiation must, on an objective basis, establish that: (1) there was a breach of the contract; (2) the breach deprived it of substantially the whole benefit of the contract; and (3) the other party evinced an intention to no longer be bound by the contract.
When considering repudiation as a remedy, it is crucial that a party carefully reread its contract with a neutral lens and ensure that there is sufficient factual evidence to prove repudiation on an objective basis, before acting on the alleged repudiation. Given the drastic outcome of such a scenario, due diligence is therefore imperative. Caution is particularly warranted given a failed repudiation allegation likely, as was the case here, gives rise to a breach of contract by the alleging party – which can result in damages being awarded against the claimant.
Sundance also raises an interesting question as to whether there is a material distinction between the legal concepts of repudiation and fundamental breach, notwithstanding some case law suggesting they are two separate things.[5] Whereas proving fundamental breach ostensibly requires only that the non-breaching party is deprived of substantially the whole benefit of the agreement, repudiation also requires proving that, by words or conduct, a party has evinced an intention not to be bound by the contract. While proving intent might arguably constitute a higher evidentiary threshold, the Court’s observation that “intent” is measured on an objective standard – in other words, a party can repudiate a contract without subjectively intending to do so – suggests that the reference to intent may be somewhat illusory.
In any event, this case also demonstrates the importance of providing contractual counterparties sufficient time to respond to allegations of breaches of contract. The Court noted at a few points in its analysis that no objections had been raised by Sundance during the time when Mr. Murdocca took over the management and coordination of the model units until after negotiations had failed and Islington provided its memorandum regarding expected costs. In addition, the Court found that Sundance breached the Agreement later when it accepted the alleged repudiation and immediately demobilized from the site. If a party does not raise issues while they are occurring and does not give the other party an opportunity to resolve those issues, this could be a breach of the contract in and of itself and/or negatively affect any legal argument it may later want to raise regarding the other party’s breach of contract.
Indeed, readers will recognize this exact rationale as the underlying principle of contractual notice provisions, breach of which is often fatal to a claiming party’s position.
To conclude, we note that construction parties specifically should consider this case to be a cautionary tale. If a party intends to allege repudiation and accept such alleged repudiation, where no repudiation exists, and begins to act as if the contract has been terminated, that party will then be potentially liable for a breach of contract. Such a course of action is, to put it simply, a high-risk maneuver. While the other party on a construction project may take subjectively extreme steps that may harm the parties’ professional and personal relationship, a party should be careful to take note of exactly what obligations and entitlements exist within the contract – indeed, in circumstances where the contractual relationship has become highly acrimonious, parties would be best served by confirming their rights and obligations under the relevant agreement(s) and, if necessary, consulting a lawyer.
[1] Barron’s Canadian Law Dictionary, 6th ed (Barron’s Educational Series, Inc, 2009), sub verbo “repudiation”.
[2] Ibid.
[3] Sundance Development Corporation v. Islington Chauncery Residences Corp., 2023 ONSC 5239 at para 82 citing D&M Steel Ltd. v. 51 Construction Ltd., 2018 ONSC 2171 at para 49, and Summers v. Harrower, 2005 CanLII 50261 (ONSC) at para 13.
[4] Sundance Development Corporation v. Islington Chauncery Residences Corp., 2023 ONSC 5239 at para 18 citing Remedy Drug Store Co. Inc. v. Farnham, 2015 ONCA 576 at paras 50-51, and Spirent Communications of Ottawa Limited v. Quake Technologies (Canada) Inc., 2008 ONCA 92 at para 37.
[5] Spirent Communications of Ottawa Limited v. Quake Technologies (Canada) Inc., 2008 ONCA 92 at para 37.
In the recent decision of C v D,[1] the Hong Kong Court of Final Appeal (“HKCFA”) unanimously found that when an arbitral tribunal concludes that pre-arbitration conditions in an arbitration agreement have been met, this is not reviewable by a court in a proceeding to set aside the award.
In reaching this conclusion, the majority adopted a conceptual distinction between subject-matter jurisdiction and procedural “admissibility” of a matter to arbitration.[2] The majority found effectively that non-compliance with pre-arbitration conditions does not negate an arbitral tribunal’s jurisdiction over a dispute; rather it merely renders the dispute not yet admissible to arbitration.
Because the question of compliance does not affect the tribunal’s jurisdiction, it is not jurisdictional in nature, and cannot be reviewed by a court (unless otherwise specified by the parties), even if the question was raised as an objection to the tribunal’s jurisdiction.
Given the similarities between Hong Kong and Canada as Model Law[3] jurisdictions, and the application of the jurisdiction/admissibility distinction in some other common law jurisdictions (in the territorial sense of the word), C v D will therefore be of interest to Canadian readers.
Company C (“C”)[4] was a Hong Kong company that owned and operated broadcasting satellites. Company D (“D”) was a Thai company that operated satellites in the Asia Pacific. The two entered into a cooperation agreement in December 2011 (the “Agreement”) regarding a jointly-owned satellite. The Agreement contained the following clauses regarding dispute resolution:
14.2 Dispute Resolution. The Parties agree that if any controversy, dispute or claim arises between the Parties out of or in relation to this Agreement, or the breach, interpretation or validity thereof, the Parties shall attempt in good faith promptly to resolve such [dispute] by negotiation. Either Party may, by written notice to the other, have such dispute referred to the Chief Executive Officers of the Parties for resolution. The Chief Executive Officers (or their authorized representatives) shall meet at a mutually acceptable time and place within ten (10) Business Days of the date of such request in writing, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute through negotiation. 14.3 Arbitration. If any dispute cannot be resolved amicably within sixty (60) Business days of the date of a Party’s request in writing for such negotiation, or such other time period as may be agreed, then such dispute shall be referred by either Party for settlement exclusively and finally by arbitration in Hong Kong at the Hong Kong International Arbitration Centre (‘HKIAC’) in accordance with the UNCITRAL Arbitration Rules in force at the time of commencement of the arbitration (the ‘Rules’)…[5]
14.2 Dispute Resolution. The Parties agree that if any controversy, dispute or claim arises between the Parties out of or in relation to this Agreement, or the breach, interpretation or validity thereof, the Parties shall attempt in good faith promptly to resolve such [dispute] by negotiation. Either Party may, by written notice to the other, have such dispute referred to the Chief Executive Officers of the Parties for resolution. The Chief Executive Officers (or their authorized representatives) shall meet at a mutually acceptable time and place within ten (10) Business Days of the date of such request in writing, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute through negotiation.
14.3 Arbitration. If any dispute cannot be resolved amicably within sixty (60) Business days of the date of a Party’s request in writing for such negotiation, or such other time period as may be agreed, then such dispute shall be referred by either Party for settlement exclusively and finally by arbitration in Hong Kong at the Hong Kong International Arbitration Centre (‘HKIAC’) in accordance with the UNCITRAL Arbitration Rules in force at the time of commencement of the arbitration (the ‘Rules’)…[5]
The foregoing clauses effectively called for a tiered or cascading dispute resolution procedure. Clause 14.2 required an attempt at good faith negotiations, while Clause 14.3 required that 60 Business days elapse between the written request for negotiations and a referral to arbitration.
On December 24, 2018, D sent a letter to C’s board of directors alleging that C breached the Agreement by interfering with D’s portion of the satellite’s payload (the “Dec 24 Letter”). In the Dec 24 Letter, D expressed a willingness to refer the dispute to the parties’ respective management teams. C responded through external counsel, who requested that all further correspondence on the matter be directed to external counsel or, if pursuant to Clause 14.2, to C’s CEO.
There was no further correspondence from D until it issued a notice of arbitration pursuant to Clause 14.3 on April 18, 2019. In its response, C claimed that the arbitral tribunal lacked jurisdiction because the pre-arbitration conditions under Clause 14.2 had not been met.
Under Article 16 of the Model Law, the tribunal was empowered to rule on its own jurisdiction:
(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. … […] (3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court specified in article 6 to decide the matter, which decision shall be subject to no appeal; …[6] [emphasis added]
(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. …
[…]
(3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court specified in article 6 to decide the matter, which decision shall be subject to no appeal; …[6] [emphasis added]
The tribunal opted to deal with C’s objection to the tribunal’s jurisdiction and the issue of liability together, rather than address the objection as a preliminary question. In a partial award on the merits, the tribunal held that D had fulfilled the requirements of Clause 14.2 by sending the Dec 24 Letter, and fulfilled the requirements of Clause 14.3 by sending its notice of arbitration more than 60 business days after the Dec 24 Letter. The tribunal also held that referring the dispute to the parties’ respective CEOs was optional under Clause 14.2. The tribunal found C liable to pay damages in an amount to be assessed.
C then initiated proceedings in the Hong Kong Court of First Instance to set aside the partial award on jurisdictional grounds; namely, that the pre-arbitration conditions had not been met. C relied on Article 34 of the Model Law:
(1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this article. (2) An arbitral award may be set aside by the court…only if: (a) the party making the application furnishes proof that: […] (iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside[.][7] [emphasis added]
(1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this article.
(2) An arbitral award may be set aside by the court…only if:
(a) the party making the application furnishes proof that:
(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside[.][7] [emphasis added]
The Court of First Instance rejected C’s application to set aside the partial award, and the Hong Kong Court of Appeal upheld the decision. C then appealed to the HKCFA.
A panel of five judges unanimously dismissed C’s appeal, albeit each with separate reasons.
In the view of Justice Ribeiro, the question before the Court was “whether the Court should have reviewed [the tribunal’s] decision”; in other words, “who finally decides – the tribunal or the Court – whether [the pre-arbitration condition in Clause 14.2] has been met.”[8] The Court concluded that the tribunal has final say, and did not consider whether the pre-arbitration conditions had been met.
Four of the five judges on the panel found the admissibility/jurisdiction distinction to be – in the words of Justice Fok – “a useful principle by which to distinguish between those issues that are reviewable by a supervising court and those that are not.”[9] The fifth judge, Justice Gummow, found the distinction to be “an unnecessary distraction” which “presents a task of supererogation: there is no need to find the answer somewhere else when it is supplied by construing and applying the statute to the facts of the case.”[10]
As discussed in the Analysis section below, there is live debate about the use of the distinction and how it might apply in a given set of circumstances.
The Majority View
The majority view was expressed by Justice Ribeiro and in concurrences by three other judges. Justice Ribeiro considered Articles 16 and 34 of the Model Law (as reflected in Hong Kong’s Arbitration Ordinance[11]), and concluded that a supervisory court has the power to consider questions of jurisdiction, despite the fact that Article 34 does not explicitly mention “jurisdiction.” The Court agreed unanimously that Articles 16 and 34 must be read to confer the same powers on a supervisory court to intervene, albeit at different stages of an arbitration.
As set out above, Article 16 permits an arbitral tribunal to consider a question of jurisdiction on a preliminary basis or in its award. Article 16 lays out a procedure for dealing with the question on a preliminary basis, but does not provide one for deferring the question to the award. When the question is deferred to the award, then Article 34 instead applies, since it deals with setting aside an award.
For obvious reasons, Article 34 must permit the setting aside of an award on the same grounds as Article 16 would; otherwise, a tribunal could avoid judicial scrutiny of its ruling on jurisdiction simply by deferring the question to the award. This would be arbitrary. Therefore, as noted by the majority, Article 16 and 34 must be read “in tandem” and construed consistently.[12] As Chief Justice Cheung put it in his concurrence, Article 34 “must cover an award made by the tribunal without ‘jurisdiction’ in the [Article 16] sense.”[13]
The question for the majority, therefore, was whether the issue of compliance with pre-arbitration conditions was a jurisdictional question or not. The majority found it was not, essentially on the basis that a tribunal would have jurisdiction over the dispute regardless of whether the conditions had been met or not.
In other words, a premature dispute – one that was not yet appropriate to be heard by a tribunal – was still arbitrable in the sense that arbitration was still the appropriate forum for an eventual hearing, rather than a court. The majority observed that neither party would have wanted the underlying substantive dispute about the Agreement to go to court instead of arbitration, even though the parties disagreed about whether the pre-arbitration conditions had been met.
The question of compliance with those conditions, therefore, related to admissibility rather than jurisdiction. Jurisdiction can be understood as “the power of the tribunal to hear a case”, and admissibility as “whether it is appropriate for the tribunal to hear it”.[14] In Justice Ribeiro view, the distinction “seeks to encapsulate [the] principle…that the court may review a tribunal’s ruling on the former, but not on the latter, category of challenge.”[15]
Justice Ribeiro concluded that “pre-arbitration conditions should be regarded as presumptively non-jurisdictional”, although the parties are always free to explicitly specify in their arbitration agreement that the question of compliance with pre-arbitration conditions is reviewable by a court.[16] That is to say, pre-arbitration conditions “inherently involve aspects of the arbitral procedure”…and “are best suited for resolution by arbitral tribunal, subject to minimal judicial review, like other procedural decisions.”[17]
In the case of the Agreement, Justice Ribeiro concluded that the pre-arbitration conditions were “merely procedural and intended to be exclusively decided by the tribunal”[18]. Non-compliance with the conditions would not negate the tribunal’s jurisdiction, and therefore the issue was not jurisdictional in nature.
Justice Ribeiro also rejected C’s attempt to argue that a condition precedent to arbitration had not been met, and that this negated C’s consent to arbitration (as a matter of jurisdiction). He observed that C had argued the question of compliance in front of the tribunal, and that the correctness of the tribunal’s decision about D’s compliance with the conditions was not before the Court. Rather, the question was whether a court had the power to review the tribunal’s decision regarding compliance.
Effectively this meant that the question for the Court was whether the tribunal had jurisdiction over the question of compliance. And because the Court concluded that it did, there was no reviewable issue.
The Minority View
For his part, Justice Gummow agreed that Article 16 and 34 of the Model Law “operate in tandem”; however, unlike the majority, he considered the “scope of curial intervention under Article 34 is epexegetical of Article 16(1)”, which is to say that Article 16 should be read in light of Article 34 rather than vice versa.[19] Accordingly, Justice Gummow implied that a supervisory court did not have the power to consider all jurisdictional questions, although he was careful to emphasize that the scope of curial intervention had “not been the subject of focused submissions by the parties”.[20]
In any event, in his view, a supervising court could only intervene on the issues explicitly set out in Article 34, such as an award that deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or that contains decisions on matters beyond the scope of the submission to arbitration.
In that regard, he concluded that the question of compliance with pre-arbitration conditions was exclusively within the jurisdiction of the arbitral tribunal, because Clause 14.3 of the Agreement applied to “any controversy, dispute or claim [arising] between the Parties out of or in relation to this Agreement, or the breach, interpretation or validity thereof”, such that there was “no reason to confine the scope of arbitrable disputes…to substantive disputes…and exclude…disputes on whether the pre-arbitration procedural requirements…had been fulfilled.”[21] In short, compliance with pre-arbitration conditions was not a basis for intervention under Article 34.
Like Justice Ribeiro, Justice Gummow rejected C’s argument that a condition precedent to arbitration had not been met, albeit for different reasons. He observed that a supervisory court was not entitled under Article 34 of the Model Law to consider the merits, i.e., whether the tribunal was correct in deciding that the pre-arbitration conditions had been met.
Further, in Justice Gummow’s view, “the precondition contained in clauses 14.2 and 14.3 was directed to the obligation to arbitrate with respect to the specific claim in question, not to the agreement to arbitrate.”[22] Thus, a failure to meet the precondition(s) would not negate consent to arbitrate or the tribunal’s jurisdiction.
First, as is often the case, C v D demonstrates the general reluctance of courts to intervene in arbitrations or interfere with arbitral awards. This is, broadly speaking, a welcome reaffirmation that is consistent with global trends, and is perhaps best encapsulated in the Court’s characterization of the dispute as an issue as to the scope of the supervisory court’s review jurisdiction. This characterization may deter parties from initiating court proceedings on issues of procedural admissibility, emphasizing that they are properly matters for the tribunal to consider.
Second, C v D suggests that courts will not necessarily treat a question as jurisdictional simply because a party is objecting to the jurisdiction of the tribunal, or the tribunal itself treated the question as jurisdictional. Parties in a similar position to C would therefore be well advised to remain wary, given that C raised the issue in the form of what it thought was a jurisdictional question before the tribunal, the tribunal relied on Article 16 of the Model Law to defer an answer until its partial award on the merits, and the tribunal then concluded it had jurisdiction. It was therefore arguably reasonable for C to have assumed that its objection would be treated as a jurisdictional question, only later to discover that such an assumption was incorrect.
Third, C v D also suggests that if a party to an arbitration agreement believes that pre-arbitration conditions have not been met, then that party may be better off refusing to recognize a tribunal’s jurisdiction than arguing the question of jurisdiction in front of the tribunal. That said, refusing to recognize a tribunal’s jurisdiction carries its own set of risks, such as the tribunal deciding to proceed with the arbitration in the party’s absence (as contemplated by Article 25 of the Model Law, for example, although such article is rarely employed).
Fourth, the judges were divided on the question of how widely the jurisdiction/admissibility distinction has been adopted in other common law jurisdictions. Justice Fok argued:
[T]he distinction has gathered such support as to be widely recognised across several jurisdictions, including England and Wales, Singapore and New South Wales, and in leading academic texts on arbitration law and practice. For Hong Kong to reject the distinction now would risk placing this jurisdiction at variance with other jurisdictions which, like Hong Kong, promote international arbitration and limit the extent of court intervention in the arbitral [process.][23]
However, Justice Gummow rightly observed that the sole Australian case in question – a lower court decision[24] – did not make any reference to the distinction. Accordingly, in Justice Gummow’s view, “it would not appear that New South Wales is a jurisdiction in which the distinction has gathered support.”[25]
In Canada, there appears to be scant jurisprudence on the distinction. However, in a 2020 decision, United Mexican States v Burr (“Burr”), the Ontario Superior Court appears to have approved of the principle:
The Tribunal set out to examine the issue of jurisdiction by considering whether it had the power to adjudicate the dispute (jurisdiction), and if so, whether it should exercise that power over a particular claim (admissibility). The distinction is important in this case as this court may review and set aside findings relating to jurisdiction, but not findings relating to admissibility.[26] [emphasis added]
In a 2022 article, Professor Joshua Karton calls Burr a “rare example of a Canadian court taking seriously the distinction between jurisdiction and admissibility and using the correct terminology”.[27] In his view, the distinction “is often ignored or elided by Canadian courts”.[28]
However, it is one thing to adopt the jurisdiction/admissibility distinction as an analytical tool, and another to conclude that a pre-arbitration condition goes to admissibility rather than jurisdiction. Consider the following example from Professor Karton, who endorses the distinction, and yet concludes that pre-arbitration conditions similar to those in C v D would qualify as jurisdictional:
Suppose, for example, that the contract provides that the parties must attempt to settle any disputes by mediation and that neither party may resort to arbitration unless they have (1) commenced mediation, (2) engaged in that mediation, and (3) at least 60 days have passed since the mediation commenced. Such language will be sufficient to establish mediation as a jurisdictional precondition to arbitration.[29]
Karton reaches the opposite conclusion from the Court by treating the above conditions not as a chronological predecessor activity to arbitration, but rather as an agreed-upon requirement to achieving consent to arbitrate. As noted in Burr (a case involving a dispute under NAFTA, CUSMA’s predecessor treaty, where the tribunal similarly concluded that it had jurisdiction because arbitral preconditions went to the issue of admissibility), “Some tribunals have found that compliance with a prior recourse requirement goes to the question of whether a tribunal has jurisdiction over a dispute and that the tribunal does not have jurisdiction to waive the requirement as a procedural or admissibility-related matter”.[30]
Similarly, in C v D, Justice Gummow notes that the distinction was developed in the context of bilateral investment treaties between countries – where it was necessary to consider, unlike in C v D, whether the parties had consented to submit the dispute to arbitration – and suggests that it would be inappropriate to “transplant” the distinction to a situation, like that in C v D, where an agreement to arbitrate exists between the private parties.[31]
It has yet to be seen when the jurisdiction/admissibility distinction will receive fulsome consideration by Canadian courts and whether this approach will become more widely adopted in Canada. However, given that Canada and its provinces are all Model Law jurisdictions, it stands to reason that this distinction may – and perhaps should – be instructive for Canadian courts applying both international and domestic legislation.
Finally, it does not necessarily follow from C v D that a party has no recourse in court if a tribunal concludes that pre-arbitration conditions have not been met, and then decides to waive compliance with those conditions. Depending on the tribunal’s reasons for doing so, this might be treated by a court as an excess of jurisdiction insofar as the proper approach would likely be to suspend the arbitration pending compliance with the conditions. As noted in Burr, “If the claimant has not complied with the prior recourse requirement, the tribunal does not have jurisdiction over the claim”.[32]
In short, if a tribunal hears a dispute that the tribunal implicitly acknowledges is inadmissible, that may qualify as a jurisdictional error. However, the aggrieved party should be wary of framing the issue as a question of admissibility, given the approach taken in C v D. Rather, the issue might be better framed as a question of procedural fairness or as a breach of the rules of natural justice.[33] Such a breach has been held – at least in the Canadian context – to constitute an excess of jurisdiction.[34]
As noted recently in Mattamy (Downsview) Limited v KSV Restructuring Inc (Urbancorp) (“Mattamy”),[35] which was the subject of a previous article (available here), some procedural decisions are immune from review (e.g., declining to admit fresh evidence following delivery of an award, or ordering security for costs), while others are not (e.g., deciding to exclude evidence). In Mattamy, the Ontario Superior Court referred to “blanket categories” of procedural decisions of arbitrators that are immune from review, but did not elaborate on the underlying basis for which a given form of decision would qualify for such immunity.
Therefore, the line between what is reviewable and what is not is unclear, and, accordingly, we look forward to when Canadian courts will have the opportunity to address this issue in detail.
[1] C v D, [2023] HKFCA 16.
[2] “Admissibility” in this context should not be confused with the admissibility of evidence, which coincidentally – and perhaps confusingly – is raised in United Mexican States v Burr, 2020 ONSC 2376 [Burr], discussed below.
[3] The United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006, can be found here: https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/19-09955_e_ebook.pdf.
[4] As is common practice in certain jurisdictions internationally, the identities of the parties to the arbitration were anonymized by the Court.
[5] C v D, [2023] HKFCA 16 at para 58.
[6] C v D, [2023] HKFCA 16 at para 20.
[7] C v D, [2023] HKFCA 16 at para 23.
[8] C v D, [2023] HKFCA 16 at para 61.
[9] C v D, [2023] HKFCA 16 at para 97.
[10] C v D, [2023] HKFCA 16 at para 159.
[11] Arbitration Ordinance, Cap 609, as of December 16, 2022.
[12] C v D, [2023] HKFCA 16 at paras 22, 4.
[13] C v D, [2023] HKFCA 16 at para 4.
[14] C v D, [2021] HKCFI 1474 at para 40, citing The Republic of Sierra Leone v SL Mining Ltd, [2021] EWHC 286 (Comm) at para 18.
[15] C v D, [2023] HKFCA 16 at para 29.
[16] C v D, [2023] HKFCA 16 at para 49.
[17] C v D, [2023] HKFCA 16 at para 49, citing G B Born, International Commercial Arbitration, Vol 1: International Arbitration Agreements, 3rd ed (Wolters Kluwer, 2020) at 1000.
[18] C v D, [2023] HKFCA 16 at para 49, citing G B Born, International Commercial Arbitration, Vol 1: International Arbitration Agreements, 3rd ed (Wolters Kluwer, 2020) at 1000.
[19] C v D, [2023] HKFCA 16 at para 157.
[20] C v D, [2023] HKFCA 16 at para 157.
[21] C v D, [2023] HKFCA 16 at para 133.
[22] C v D, [2023] HKFCA 16 at para 137.
[23] C v D, [2023] HKFCA 16 at para 97.
[24] The Nuance Group (Australia) Pty Ltd v Shape Australia Pty Ltd, [2021] NSWSC 1498.
[25] C v D, [2023] HKFCA 16 at para 143.
[26] United Mexican States v Burr, 2020 ONSC 2376 at para 59. An appeal by the United Mexican States was quashed on the grounds that Article 16(3) of the Model Law prohibited the appeal; 2021 ONCA 64 at para 29.
[27] J Karton, “Multi-Tier Dispute Resolution Agreements in Canadian Law and Practice: Interpreting, Enforcing, Escaping” (2022) 3:1 Can J Comm Arb 81 at 86.
[28] J Karton, “Multi-Tier Dispute Resolution Agreements in Canadian Law and Practice: Interpreting, Enforcing, Escaping” (2022) 3:1 Can J Comm Arb 81 at 86.
[29] J Karton, “Multi-Tier Dispute Resolution Agreements in Canadian Law and Practice: Interpreting, Enforcing, Escaping” (2022) 3:1 Can J Comm Arb 81 at 87.
[30] United Mexican States v Burr, 2020 ONSC 2376 at para 106.
[31] See C v D, [2023] HKFCA 16 at para 148.
[32] United Mexican States v Burr, 2020 ONSC 2376 at para 106, citing Daimler Financial Services AG v Argentine Republic, ICSID Case No ARB/05/01, Award, 22 August 2012 at para 200, involving a request to waive pre-arbitration conditions in a bilateral investment treaty rather than an tribunal’s conclusion that such conditions were met.
[33] Natural justice has been described by the Supreme Court of Canada as “but fairness writ large and juridically”; Nicholson v Haldimand-Norfolk (Regional Municipality) Commissioners of Police, [1979] 1 SCR 311 at para 25, citing Furnell v Whangarei High Schools Board, [1973] AC 660 at 679 (PC).
[34] A “breach of the rules of natural justice is regarded in itself as an excess of jurisdiction and consequently there is no doubt that such a breach opens the way for judicial review”; Université du Québec à Trois-Rivières v Larocque, [1993] 1 SCR 471 at para 43.
[35] Mattamy (Downsview) Limited v KSV Restructuring Inc (Urbancorp), 2023 ONSC 3012.
Singleton Urquhart Reynolds Vogel LLP is recognized in the Top Tier by Chambers Canada. This year, the firm continues to be ranked Band 1 in the construction law category, and is also being recognized for insurance and dispute resolution.
Throughout the research process, the firm received exceptional client feedback:
A premier construction boutique offering excellent bench strength with expertise pertaining to project development, claims and disputes, and construction arbitration. The group represents an enviable roster of municipalities, public authorities and international clients across public and private developments. The practice is frequently called upon as counsel across a range of sectors including energy, transport and public infrastructure. The firm is further distinguished for its work on the development of federal legislation.
A Client enthused:
“The firm excels in giving excellent advice based on deep legal knowledge and true subject matter expertise. Sources praise “Their knowledge of construction law and experience in construction claim litigation.”
The following lawyers were listed: Bruce Reynolds (Construction, Band 1; Dispute Resolution: Arbitration), Sharon Vogel (Construction, Band 1; Dispute Resolution: Arbitration), John Singleton, K.C. (Construction, Band 1), Stuart B. Hankinson, K.C. (Construction, Dispute Resolution: Most in Demand Arbitrators), Peter Wardle (Litigation: General Commercial), James Little (Construction), Jesse Gardner (Construction, Dispute Resolution: Arbitration), Webnesh Haile (Construction – Associate to Watch), and Nicholas Reynolds (Construction – Associate to Watch).
About Chambers Global
Published since 1990, Chambers and Partners’ guides rank the best law firms and lawyers across 185 jurisdictions throughout the world. Rankings are based on independent and objective research, and peer and client reviews. Chambers Canada rates law firms and lawyers in more than 40 practice areas in all provinces and territories in Canada.
We are known for delivering exceptional legal services. From conversation to persuasion, from contracts to the courtroom, we are driven to meet our clients’ objectives.
On September 14 at a gala dinner held in his honour, Singleton Urquhart Reynolds Vogel Co-Managing Partner, Bruce Reynolds, received the 2023 Ontario Bar Association Construction & Infrastructure Law Award of Excellence. The Award was presented by his long-time Partner and friend, Sharon Vogel, recognizing Bruce’s exceptional contributions both to the law and to the construction industry.
Bruce was raised in Huntsville, Ontario, in the Muskoka district, at the time a small town with a population of 2,000. He entered Victoria College at the University of Toronto in 1974, his father’s alma mater, to study English Literature. He graduated from the University of Toronto Law School in 1981.
Bruce began his legal career as an articling student at Borden & Elliot, the Toronto predecessor entity to Borden Ladner Gervais. Following this he was hired back by the firm as an Associate in 1983 — one of only two in his class of 12 — to work with Dr. Carl Morawetz, the leading insolvency lawyer in Canada and an original co-author of Bankruptcy and Insolvency Law of Canada. In late 1985, Bruce began working with Ken Scott, a leading expert in the area of surety bonding.
These experiences, and the foundational mentoring he was afforded, had a strong influence on Bruce’s path to becoming a construction lawyer. His work with Ken Scott during the depths of the two 1980s recessions provided a strong pipeline of opportunities and piqued his passion for the construction industry. Says Bruce, “from our basis in surety, we developed a strength in construction law generally, and together conceived the idea to grow the footprint of the practice to include pure construction disputes.”
Bruce’s development as a construction lawyer over the next few decades is well documented, as evidenced by the awards that adorn his office, and the list of satisfied clients who make him their first call when they are in need of counsel. He points to a casual comment made to him by Carl Morawetz many years ago: “Reynolds, you’re going to be a great success; not because you’re smart, but because you’re lucky.”
Bruce carries these words with him to this day. “Brains are table stakes” he explains. “There are many smart people out there, but smart is not enough. You have to work like a Trojan; but that is still not enough. You have to be lucky!”
“Luck is in the people you work with”, he continues. “And it’s in the opportunities that come your way,” although he omits mentioning his role in bringing out the very best in those people, as well as his track record of knocking those opportunities out of the park when called to the plate.
After 37 years building one of Canada’s premiere construction practice groups, Bruce decided to leave behind the security of a successful practice in favour of a bright new challenge. And on January 1, 2018, alongside Sharon Vogel, Bruce joined Singleton Urquhart with a vision to create a dream team and establish the firm as the premiere Construction Law practice in Canada, and one of the premiere practices in the world.
Mission accomplished! Since establishing the office only five and a half years ago, Singleton Reynolds’ Toronto Construction Practice has grown from just four lawyers to 20, who represent high profile clients on matters valued up to hundreds of millions and even billions of dollars. And the future could not be brighter.
True to form, Bruce points to the quality of the team as responsible for the success. “Building from a base of four very committed and hard-working lawyers to a platform of 20 would not have been possible without the very strong and consistent support of our Toronto office, and the unwavering support of our Vancouver office, and in particular our founder, John Singleton.”
Bruce also points to continuing engagement and reinvention as keys to his long-term success, and who could argue? Here, he provides the examples of his involvement in the Canadian and American Colleges of Construction Lawyers, the International Bar Association and the International Academy of Construction Lawyers. Not content with resting on past achievements, he hints at the next chapter, which involves continuing his counsel practice while also working in dispute resolution, with a focus on the mediation and arbitration of construction disputes.
“It will allow me to continue my counsel work, which I love, and to continue to help build the firm, and enjoy the benefits of collegiality and camaraderie with my colleagues, which I also cherish.” A win-win for all.
Congratulations Bruce on winning the 2023 Ontario Bar Association Construction & Infrastructure Law Award of Excellence, from all your friends and colleagues at Singleton Urquhart Reynolds Vogel!
In Grupo Unidos por el Canal, SA v Autoridad del Canal de Panama (“Grupo Unidos v ACP“),[1] the United States Court of Appeals for the Eleventh Circuit (the “Court of Appeals“) considered whether a lack of disclosure regarding the involvement of arbitrators in separate proceedings compromises the impartiality of a tribunal. The Court concluded that although the tribunal’s disclosure was lacking, it was insufficient to ground a finding of partiality. Below, we consider the relevance takeaways of this important decision for Canadian arbitration practitioners.
Grupo Unidos, a consortium of European companies, secured a multi-billion dollar contract to design and build new locks for the Panama Canal expansion that began in 2009 and was set to conclude by October 2014. However, unforeseen complications led to a delay of over twenty months, resulting in numerous disputes between the parties involving seven arbitrations. The appeal in Grupo Unidos v ACP concerned one of these arbitrations, namely the Panama 1 Arbitration, where Grupo Unidos brought several contractual claims against the canal authority, Autoridad del Canal de Panama (the “Arbitration”).[2]
The contract between Grupo Unidos and Autoridad del Canal de Panama contained a mandatory arbitration clause, which required that disputes be resolved through arbitration in Miami pursuant to the International Chamber of Commerce’s Rules of Arbitration (the “ICC Rules“). Each party nominated one arbitrator, confirmed by the International Court of Arbitration (“ICA“). The nominees were Dr. Robert Gaitskell, and Claus von Wobeser, who in turn appointed Pierre-Yves Gunter as the president of the tribunal.[3] Autoridad del Canal’s counsel included Andres Jana, James Loftis, and Manus McMullan.
All three arbitrators had substantial international arbitration experience, having collectively been involved in over 500 arbitrations.[4] After their confirmation, each submitted statements confirming their impartiality and independence and disclosed any potential conflicts. At that stage, neither party sought additional disclosure or other details from the arbitrators.
The Arbitration
The subject arbitration took over five years, involving thousands of pages of pleadings, over 150 fact and expert witnesses, thousands of exhibits, and a 20-day merits hearing. On September 21, 2020, the tribunal issued a Partial Award (the “Partial Award”) by which Grupo Unidos was awarded $26.8 million while Autoridad del Canal was awarded $265.3 million, amounting to a net victory of $238.5 million, plus interest, for Autoridad del Canal.[5]
Three weeks after the Partial Award was granted, Grupo Unidos began to question the arbitrators’ impartiality, seeking additional information concerning the arbitrators’ relationships with (1) each other, (2) other arbitrators in related matters, and (3) with the parties’ counsel in other arbitrations.[6] The disclosures revealed certain professional engagements amongst the arbitrators, and between the arbitrators and the parties’ counsel in the current and other, unrelated arbitrations.[7]
The ICA Decision
Based on these disclosures and prior to the issuance of a final award, Grupo Unidos filed an application with the ICA seeking the removal of the tribunal members, claiming they had concealed significant connections that raised doubts about their neutrality. After extensive proceedings, the ICA determined that although some of the professional intersections should have been disclosed, there was no conflict significant enough to sustain a challenge to the arbitrators. The tribunal then issued a Final Award on February 17, 2021, amounting to approximately $285 million in favour of Autoridad del Canal (the “Final Award“). Grupo Unidos subsequently paid the full amount of the Final Award.[8]
The District Court’s Decision
On November 25, 2020, before the ICA released its decision, Grupo Unidos moved to vacate the Partial Award in the Southern District of Florida. Additionally, by April 19, 2021, Grupo Unidos had also moved to vacate the Final Award. Grupo Unidos argued that the arbitrators showed clear bias, basing their assertions on the New York Convention . Specifically, they relied on Articles V(2)(b), V(1)(d), and V(1)(b) of the New York Convention, which allow a party to resist the enforcement of an international arbitration award if (1) enforcement would be contrary to the public policy, (2) the arbitral procedure was not in accordance with the agreement of the parties, or (3) the party was unable to present its case.[9]
The District Court determined that none of these defenses were available, and criticized Grupo Unidos’ stance as being based on skeptical (and speculative) assumptions about the arbitrators and assuming the worst about their character. Thus, the Court rejected the motion to vacate, and confirmed Autoridad del Canal’s awards. Grupo Unidos appealed this decision to the Court of Appeals. [10]
The Court of Appeals’ Decision:
Which law should govern this case?
Relying on a prior en banc decision, the Court stated that if an arbitration is seated in the United States or governed by United States law, Chapter 1 of the Federal Arbitration Act (“FAA“) dictates the grounds for vacating an award. In this case, the parties agreed that the FAA would govern the arbitration, and although the parties’ arguments on vacatur were framed as arising out of the Convention, the core dispute about vacatur centered on the FAA‘s ‘evident partiality’ exception.[11]
Deference to Arbitral Decisions
As a preliminary point, the Court emphasized that U.S. federal courts will only overturn an arbitral award under rare circumstances:
“[…] U.S. courts refrain from unilaterally vacating an award, rendered under international arbitral rules, in all but the most extreme cases. It is no surprise, then, that although the losing parties to international arbitrations often raise defenses to award enforcement before our courts, those efforts “rarely” succeed.”[12]
Moreover, with respect to international arbitrations, the reluctance to overturn decisions is even more pronounced, primarily because the New York Convention emphasizes global standards for arbitral agreement observance and award enforcement. As such, American courts only vacate international arbitral awards in exceptional cases.
Grupo Unidos argued that the Panama 1 Arbitration was one such exception due to the non-disclosure of potential biases of the arbitrators. Although the Court agreed that the ICC Rules and American arbitration law emphasized transparent disclosure, it did not accept that Grupo Unidos’ claim that mere professional familiarity amounted to potential bias.
The Appellant’s Arguments
The Court considered and rejected each of the four instances Grupos Unidos submitted as proof of evident partiality, and explained why bias could not be established. Grupo Unidos’ submissions were as follows:
Gaitskell’s Nomination of Gunter
The Court determined that this alone did not qualify as evidence of partiality, as Grupo Unidos did not present any precedent where the simple fact of one arbitrator nominating another in a separate matter was sufficient cause for vacating an award. Indeed, to the contrary, the Court cited to American precedent for the proposition that the fact arbitrators appoint each other to panels does not per se manifest evident partiality. Moreover, Gunter’s extensive arbitration experience and his affirmed impartiality negated the suspicion of bias.[13]
von Wobeser and Jana’s Concurrent Service
The Court rejected this argument, and in doing so, rejected Grupo Unidos’ reliance on prior case law holding that partiality exists where an arbitrator represented co-defendants in a different matter with a member of counsel appearing before them. The Court observed that the relationship between co-arbitrators is not the same as the relationship between co-counsel, because arbitrators do not represent a client and have a duty of impartiality. As such, there was nothing inherently suspect regarding von Wobeser and Jana having served as co-arbitrators in another case.[14]
Gaitskell and Loftis’s Prior Co-Arbitration
The Court found that because the mere fact that an arbitrator had previous contact with a party’s counsel does not automatically imply bias. In that regard, the Court observed that international construction arbitration law is a relatively small community, and as such, prior interactions or relationships is a less compelling basis for arguing partiality than might otherwise be the case in non-specialized areas (in other words, it is to some extent unavoidable that construction arbitrators will serve with other construction arbitrators, only to then appear before them as counsel).[15]
Gaitskell and McMullan Prior Involvement
The Court found this insufficient to question Gaitskell’s impartiality, re-emphasizing that repeated interactions within the small international arbitration community do not indicate bias. The record showed no actual bias in the Panama 1 Arbitration, and as such, the overlap was not a cause for concern.[16]
Thus the Court upheld the district court’s decision against vacating the awards.
Confirming the Awards:
After determining there were no grounds to vacate the awards under the FAA, the Court assessed whether to confirm the awards under the New York Convention. Grupo Unidos relied upon the same three provisions from Article V of the Convention as they had relied upon during the District Court’s proceedings.
The first defense centred on the arbitrators’ undisclosed relationships infringing Article V(2)(b) of the Convention (i.e. the award is contrary to public policy). Relying on the basic proposition that enforcement will only be refused where it would violate the jurisdiction’s most basic notions of morality and justice, the Court observed that the public policy in question here pertained to evident partiality, which was not breached (as explained above)[17]
Next, the Court rejected Grupo Unidos reliance on Article V(1)(d) of the New York Convention (i.e. refusing enforcement on the basis the tribunal or procedure was not in accordance with the parties’ agreement or the law of the country where the arbitration took place), Grupo Unidos argued that late disclosures showed a level of partiality that they would not have initially agreed to had they known at the time the tribunal was formed. While these nondisclosures did not breach the evident partiality portion, the focus shifted to whether the arbitration violated the ICC Rules. The Court found that despite late disclosures by Gaitskell and von Wobeser, the ICA did not disqualify them or question their impartiality, emphasizing their adherence to the ICC Rules. As a result, the arbitration followed the format the parties agreed upon, and the ICA’s interpretation of its rules was deemed reasonable.
Finally, Grupo Unidos relied upon Article V(1)(b) to argue that it as not given proper notice regarding the appointment of an arbitrator or the proceeding (which is intended to protect procedural fairness). The Court again rejected Grupo Unidos’ argument, stating that this exception is narrow and safeguards only against severe procedural defects that render the arbitration fundamentally unjust. The Court additionally observed that Grupo Unidos’ claim did not contradict basic principles of due process, which demands an impartial hearing where parties can present and rebut evidence. Here, the Court found no evidence that Grupo Unidos did not have such an opportunity.[18]
Thus, the Court affirmed the District Court, denying the application for vacatur and confirming the arbitral awards.
Overall, three main takeaways emerge from Grupo Unidos v ACP that are broadly applicable to construction arbitration practice in Canada.
First, this case reaffirms the basic principle that arbitral awards are not easily set aside on grounds of bias. Specifically, mere allegations or suspicions of bias will not be enough to vacate arbitral awards. This is equally true in the Canadian context, as Canadian arbitration practitioners will appreciate. Consolidated Contractors Group S.A.L. (Offshore) v Ambatovy Minerals S.A.[19] presents a perfect example of such deference, where the Ontario Court of Appeal observed that “this court has repeatedly held that reviewing courts should accord a high degree of deference to the awards of international arbitral tribunals under the Model Law”.
In this particular case, it appears that Grupo Unidos position was not assisted by the timing of its challenge – in particular, Grupo Unidos appears to only have begun to raise questions as to the impartiality of the arbitrators after it received the Partial Award, which was adverse to its interests. While this timing may have been coincidental, a disinterested observer (or, more importantly, a court) might be led to conclude that Grupo Unidos’ challenge was motivated by its loss on the merits rather than genuine concerns of partiality. Needless to say, courts will be skeptical of any challenges that exhibit such timing.
Second, this decision aptly illustrates the distinction between bias and mere professional familiarity. As the Court observed, not every professional overlap can be construed as bias, especially in specialized areas of law such as international construction arbitration.
In that regard, the Court properly rejected the suggestion of any quid pro quo flowing from the overlap of arbitral appointments; given that acting as an arbitrator inevitably involves remuneration, and given the narrow pool of arbitrators in the construction industry, a finding to the contrary would have been problematic as a practical matter insofar as party-appointed arbitrators will commonly appoint other arbitrators with whom they are familiar or with whom they have arbitrated in the past (and likely will again in future). In other words, such a situation is, in practical terms, essentially unavoidable in specialized industries, and in any event, the appointment of a tribunal president will involve agreement between both party-appointed arbitrators, such that a quid pro quo would seem speculative at best.
Finally, this case highlights the importance of judicious and timely disclosure by arbitrators. There is a delicate balance that arbitrators must maintain between disclosing any matters that could give rise to justifiable concerns as to their impartiality and avoiding over-disclosure. In respect of the latter point, it would arguably be impractical for arbitrators to disclose every conceivable professional relationship that might give rise to unjustified or unsupported concerns as to impartiality, as this would simply invite objections to the arbitrator’s appointment on spurious grounds.
In this particular case, and as the tribunal observed, the disclosure sought by Grupo Unidos following the Partial Award were different and much broader than the ICC’s Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration, which was then followed by an even more far-reaching request, which the tribunal indulged. In that regard, although the Court did not specifically rely on the ICC Note in reaching its conclusions, and although guidance prepared by leading arbitral institutions is not binding, it may nevertheless be a persuasive authority on this point (as is the case, for example, with the IBA’s Guidelines on Conflicts of Interest).
Interestingly, Grupo Unidos also provides a useful reminder that a legitimate lack of disclosure is not sufficient in and of itself for a finding of bias or partiality – there must be something more in order to ground such a finding. Here, the ICA concluded that certain of the professional relationships amongst the arbitrators and counsel should have been disclosed by the arbitrators, but nevertheless concluded that the lack of disclosure in and of itself was not sufficient to ground a finding of partiality or lack of independence. This is consistent with English case law on the topic (such as Halliburton v Chubb), as well as certain Canadian case Law (such as Aroma Franchise Company v Aroma Espresso, which we previously discussed here, although the court ultimately made a finding of reasonable apprehension of bias in that case).
On balance, then, it appears that arbitration practitioners should (and perhaps will) manage their practices with a strong emphasis on continuous disclosure, and may lean towards over-disclosure notwithstanding the potential for losing out on arbitral mandates on spurious grounds. As the aphorist has observed, sunlight is the best disinfectant.
[1] 78 F (4th) 1252, 2023 US App LEXIS 21750, 30 Fla L Weekly Fed C 106 (11th Cir 2023) [Grupo Unidos v ACP].
[2] Grupo Unidos v ACP at 4.
[3] Grupo Unidos v ACP at 4.
[4] Grupo Unidos v ACP at 5.
[5] Grupo Unidos v ACP at 7.
[6] Grupo Unidos v ACP at 7.
[7] Grupo Unidos v ACP at 8-9.
[8] Grupo Unidos v ACP at 9-10.
[9] Grupo Unidos v ACP at 10-11.
[10] Grupo Unidos v ACP at 10-11.
[11] Grupo Unidos v ACP at 11-12.
[12] Grupo Unidos v ACP at 14.
[13] Grupo Unidos v ACP at 16-17.
[14] Grupo Unidos v ACP at 17-18.
[15] Grupo Unidos v ACP at 18-19.
[16] Grupo Unidos v ACP at 19-20.
[17] Grupo Unidos v ACP at 21.
[18] Grupo Unidos v ACP at 23-24.
[19] 2017 ONCA 939 at para 23.
A recent decision of a Hong Kong court suggests that fully virtual arbitration hearings are becoming standard practice even as the COVID-19 pandemic (the “Pandemic”) has ebbed, and that courts may be reluctant to find that such a hearing in and of itself causes prejudice to one of the parties.
In Sky Power Construction Engineering Limited v IrAero Airlines JSC (“Sky Power v IrAero”),[1] Hong Kong’s Court of First Instance found that the respondent had not been prejudiced by the fact that an arbitrator had conducted a fully virtual – rather than semi-virtual – hearing over the respondent’s objections. The Court would therefore not entertain a request by the respondent to apply to set aside the Court’s earlier order to enforce the arbitrator’s award.
Hong Kong-based Sky Power Construction Engineering Limited (“Sky Power”) obtained an award against Russia-based IrAero Airlines JSC (“IrAero”) at the London Court of International Arbitration (“LCIA”) in an arbitration conducted by remote hearing in February 2022 before a single arbitrator.
The hearing had originally been scheduled for December 2021, but was postponed to February 2022 because the arbitrator contracted COVID-19. Roughly a month prior to the hearing, in January 2022, the arbitrator issued Procedural Order Number 3 (“PO #3”), which set out procedural parameters for a semi-virtual hearing. Counsel and the parties’ own fact witnesses were to convene at one location in Moscow, while other fact and expert witnesses could participate remotely via video-conferencing. The arbitrator would sit in London, and conduct the hearing remotely. PO #3 appears to have reflected such an agreement between the parties.
However, shortly after the issuance of PO #3, Sky Power indicated that its only fact witness was not available to travel to Moscow “due to the inconvenience and disruptions to his business, and the safety concerns of exposure to the risk of becoming infected with Covid”.[2] Sky Power proposed a fully virtual hearing. IrAero objected, given that the parties’ agreement to hold a semi-virtual hearing had been memorialized in PO #3 earlier the same month.
The arbitrator decided that the hearing would proceed on a fully virtual basis rather than be postponed until such time as the witness could attend in Moscow. She explained that it was necessary for her “to balance both the need for the proceedings to be concluded expeditiously and for the conduct of the proceedings to be fair to the Parties”,[3] and referred to Article 14 of the LCIA Arbitration Rules (the “LCIA Rules”),[4] which imposes the following duties on an arbitral tribunal (which readers will recognize are broadly consistent standard international rules of procedure):
(i) a duty to act fairly and impartially as between all parties, giving each a reasonable opportunity of putting its case and dealing with that of its opponent(s); and (ii) a duty to adopt procedures suitable to the circumstances of the arbitration, avoiding unnecessary delay and expense, so as to provide a fair, efficient and expeditious means for the final resolution of the parties’ dispute.[5]
(i) a duty to act fairly and impartially as between all parties, giving each a reasonable opportunity of putting its case and dealing with that of its opponent(s); and
(ii) a duty to adopt procedures suitable to the circumstances of the arbitration, avoiding unnecessary delay and expense, so as to provide a fair, efficient and expeditious means for the final resolution of the parties’ dispute.[5]
Given the continuing impact of the Pandemic, the continued regulatory uncertainty it engendered, and the nature of the case, the arbitrator concluded that it was more appropriate to conduct the hearing on a fully virtual basis than to wait indefinitely in the hopes of rescheduling the semi-virtual hearing.
Ultimately, Sky Power obtained an award in its favour, and subsequently obtained an enforcement order in Hong Kong against IrAero, which IrAero sought to challenge after the statutory deadline for bringing such a challenge. IrAero therefore required leave from the Court to file an affirmation (equivalent to an affidavit) and to apply to set aside the enforcement order. In deciding whether to grant leave, the Court considered the merits of IrAero’s application to set aside the order.
The Court declined to grant leave on the basis effectively that IrAero’s application would fail on the merits, as discussed below.
Position of the Respondent (IrAero) on the Merits
In trying to resist enforcement of the arbitrator’s award, IrAero argued on the merits essentially that the arbitrator lacked jurisdiction to alter PO #3 over IrAero’s objections, and that IrAero was prejudiced by the fully virtual nature of the hearing.
With respect to jurisdiction, Article 14 of the LCIA Rules states in addition to the foregoing:
14.2 The Arbitral Tribunal shall have the widest discretion to discharge these general duties, subject to the mandatory provisions of any applicable law or any rules of law the Arbitral Tribunal may decide to be applicable; and at all times the parties shall do everything necessary in good faith for the fair, efficient and expeditious conduct of the arbitration, including the Arbitral Tribunal’s discharge of its general duty.[6] [emphasis added]
IrAero took the position that the arbitrator’s decision to proceed conflicted with applicable law, because the UK’s Arbitration Act 1996 (the “Act”)[7] provides at section 34 that a tribunal’s power to decide procedural and evidential matters is “subject to the right of the parties to agree any matter.”[8] In IrAero’s view, the arbitrator (i.e., the tribunal in this case) impermissibly overruled PO #3, which reflected the parties’ agreement to hold a semi-virtual hearing.
With respect to prejudice, IrAero argued that it was hindered from “adequately viewing the demeanour” of Sky Power’s sole fact witness because he attended remotely, and from vetting the “genuineness and the authenticity” of his oral evidence.[9] Further, IrAero claimed it was unable to present its case adequately. As well, IrAero’s director-general claimed he would have preferred to testify in person, and that, because Sky Power’s witnesses ended up testifying remotely from Irkutsk, rather than from Moscow, the time difference with London (eight hours versus three) put IrAero at a disadvantage (for reasons that are not explained).[10]
The Court’s Decision on the Merits
As noted above, Sky Power v IrAero involved a request for leave to apply to set aside an order to enforce an arbitration award. The Court considered the merits of the application. On the merits, the Court rejected both of the respondent’s arguments.
First, the Court found that there was no longer an agreement between the parties once Sky Power requested a fully virtual hearing. Therefore, the arbitrator did not exceed her jurisdiction in deciding which procedure to follow.
The Court made note of the considerable deference that is owed to arbitrators in determining procedure:
Whether it is appropriate in any particular case to permit the factual witnesses to give evidence at the hearing remotely, whether the effectiveness of cross-examination can be or was undermined, whether appropriate measures are required or were put in place to ensure the security of the process, are all matters for the consideration and final decision of the tribunal in the case.[11]
Second, the Court found no prejudice to IrAero, based on two grounds:
Indeed, as stated by the Court, “On the materials available, I cannot see any real injustice or prejudice to the Respondent, in the sense that the outcome of the Arbitration could have been different, if the hearing had not been conducted on [a] fully virtual basis.”[13]
Although Sky Power v IrAero is a Hong Kong case, and while the arbitration at issue involved special circumstances – namely, it occurred during the height of the Omicron wave of the Pandemic – it nevertheless suggests that a party to an arbitration may face an uphill battle when arguing that a virtual hearing caused it prejudice, even in a post-Pandemic context.
This is not to suggest that there are no tradeoffs involved in opting for a remote hearing. While remote hearings generally result in substantial cost savings when parties, counsel, witnesses and/or the tribunal are in different locations, there can also be technical difficulties, time zone differences, and challenges to examining witnesses.
However, as noted by the Court, both parties will generally face the same difficulties and risks in a remote hearing, the implication being that they will be able to make their respective cases in an equal manner. On the other hand, however, this potentially understates the significance of a scenario where one party calls several witnesses while the other party calls very few (particularly if the tribunal has ordered equal time-limits for the parties’ presentation of their cases). Arguably, in circumstances where one party relies much more heavily on oral testimony, their counterparty’s argument of prejudice may be more persuasive. In any event, the foregoing strengthens the proposition that, in the construction context, contemporaneous project documents are generally considered preferable over witness testimony delivered months or years after the fact.
In this case, it may be that IrAero felt genuinely misled by Sky Power, given that Sky Power had agreed to a semi-virtual hearing before requesting a fully virtual hearing. IrAero may also have found it more challenging to impeach the credibility of Sky Power’s fact witness, and IrAero’s director-general may indeed have struggled giving testimony remotely. Even so, IrAero’s arguments were decidedly unpersuasive to the Court – which serves to highlight how difficult it may be for a dissatisfied party to find a meaningful basis to obtain redress after the fact.
First, while there may be instances in which a tribunal will hold a party to a prior agreement on procedure that the party had made with the opposing party, the question of whether to do so is generally within the jurisdiction of the tribunal. In this case, once the party’s position changed, there was a disagreement to be resolved by the arbitrator, which she did by balancing the various factors at play, including uncertainty surrounding the Pandemic.
In other instances, a tribunal may insist that a prior agreement stand, and may even do so summarily, i.e., without entertaining formal submissions on the question (although declining to hear submissions on such an issue may result in allegations of parties being deprived of sufficient opportunity to present their case). Ultimately, the power of a tribunal to resolve a disagreement over procedure generally cannot be preempted simply by denying that the disagreement exists.
Conversely, it would seem that IrAero’s argument was not without some merit, insofar as it raises an interesting question as to the relationship between the parties’ arbitration agreement and the chosen procedural rules. Given that the parties were in agreement as to the content of PO #3 – that is, it was issued on consent – it may be arguable that PO #3 formed part of the parties’ arbitration agreement and accordingly, it would follow that the arbitrator could not deviate from the parties’ agreement to proceed on a semi-virtual basis.
That being said, it is standard practice for an arbitration agreement and/or Procedural Order #1 to provide the tribunal with full latitude to establish and vary rules of procedure, in which case an interpretive issue would arise as to whether the provision endowing the tribunal with procedural powers can override a different, subsequent provision that dictates a specific method of procedure. Ultimately, the answer would likely depend on the specific wording of the procedural order(s) in issue. In any event, it would appear wise for a tribunal to include in its procedural orders a provision permitting the tribunal to vary the order if necessary and appropriate.
Second, IrAero struggled to convince the Court of any real prejudice under the circumstances. For instance, IrAero could not persuade the Court that the trier of fact – i.e., the arbitrator herself – was unable to assess the demeanour of Sky Power’s sole fact witness, because even under PO #3, the arbitrator would have conducted the hearing remotely from London. Instead, IrAero could only argue that it could not assess the witness’s credibility. The corollary of the foregoing is that, if the arbitrator could assess the witness’s credibility remotely, it would be difficult for IrAero to argue that it could not.
Similarly, it is unclear from the decision why IrAero would be at a disadvantage due to the time difference between Irkutsk and London, as opposed to Moscow and London, when it was Sky Power’s witnesses that were in Irkutsk, rather than IrAero’s. If anything, it would seem that Sky Power was at a disadvantage.
That being said, it is conceivable that a different Court or judge might have decided this point differently. Over the course of the Pandemic, disputes lawyers and judges have expressed varying opinions as to the importance of being able to examine witnesses in person, with many taking the position that in-person examination is indispensable – and indeed fundamental – to interrogating a witness’s credibility and reliability. With that in mind, a likeminded judge might very well have ruled differently.
In any event, in the post-Pandemic landscape, it would appear difficult for one party to argue that it was prejudiced by the use of a remote hearing. While it is impossible to categorically dismiss the possibility of such a finding if a case were to have the right set of facts, Sky Power v IrAero suggests a high threshold for any such argument.
[1] Sky Power Construction Engineering Limited v IrAero Airlines JSC, [2023] HKCFI 1558 [Sky Power v IrAero].
[2] Sky Power v IrAero at para 12.
[3] Sky Power v IrAero at para 30.
[4] LCIA Arbitration Rules, effective October 1, 2020, available at https://www.lcia.org/Dispute_Resolution_Services/lcia-arbitration-rules-2020.aspx [The LCIA Rules].
[5] The LCIA Rules, art 14.1.
[6] The LCIA Rules, art 14.2.
[7] UK Arbitration Act 1996, 1996 c. 23 [The Act].
[8] The Act, s 34(1).
[9] Sky Power v IrAero at para 7.
[10] Given that IrAero is based in Irkutsk, and Sky Power is registered in Hong Kong, there may be a typographical error in the decision regarding which party testified from Irkutsk.
[11] Sky Power v IrAero at para 39.
[12] Sky Power v IrAero at para 37.
[13] Sky Power v IrAero at para 41.
What happens when a regulated medical professional’s use of their expressive rights conflicts with the ethical standards of their profession?
In Peterson v College of Psychologists of Ontario, 2023 ONSC 4685, the Divisional Court considered a case pitting high profile psychologist Jordan Peterson against a decision by the College of Psychologists’ Inquiries, Complaints and Reports Committee (the “ICRC“) requiring him to complete a specified continuing education or remedial program (a “SCERP”). The ICRC’s decision was based on what appeared to be inflammatory and unprofessional comments by Peterson in various venues, including on social media and podcasts.
Background Facts
Jordan Peterson is a registered clinical psychologist who has amassed a sizeable social media following. In 2022, the College received complaints regarding Peterson’s public conduct on social media and for his public appearances on several podcasts which were criticized for being degrading, demeaning, and unprofessional:[i]
The ICRC Decision
The ICRC found that Peterson’s statements could be seen as degrading, demeaning, and unprofessional, emphasizing that psychologists can reasonably regard these statements as disgraceful and dishonourable.[iii] The panel expressed concern that Peterson’s comments were inconsistent with professional standards, posed a risk of harm to the public, and had the potential of undermining public trust in the profession.[iv] The panel noted that despite not practicing clinically, he continues to be registered, and has the authority to practice.[v]
The panel ordered Peterson to undergo a SCERP which required that Peterson attend a coaching program to address his professionalism. Peterson sought judicial review.
The Divisional Court’s Decision
The main issue in judicial review was whether the Panel’s decision to order a SCERP was reasonable.[vi] Peterson’s main argument was that the ICRC did not properly consider his freedom of expression.
The Legal Framework
The court began by outlining the framework for determining how Charter guarantees are meant to be protected in the context of adjudicated administrative decisions. That framework is set out in Doré v Barreau du Québec, 2012 SCC 12, which requires administrative decision-makers like the ICRC to proportionately balance Charter rights and values and its statutory objectives. As the Court explained, this is a “highly contextual inquiry”[vii]:
A decision-maker must first consider the statutory objectives it is seeking to uphold, and then, secondly, “ask how the Charter value at issue will best be protected in view of the statutory objectives.” This requires conducting a proportionality exercise, balancing “the severity of the interference of the Charter protection with the statutory objectives”.[viii]
However, a decision-maker need not “choose the option that limits the Charter protection least”.[ix]
Review of the ICRC Decision
The Divisional Court found that the ICRC appropriately balanced Peterson’s freedom of expression with the statutory objectives of the College.[x]
With respect to the statutory objectives at issue, the Court referred to various sections of the Canadian Code of Ethics for Psychologists including a statement that “respect for the dignity of persons is the most fundamental and universally found ethical principle across disciplines, and includes the concepts of equal inherent worth, non-discrimination, moral rights, and distributive, social and natural justice”. The Code continues by requiring that members of the profession “Not engage publicly…in degrading comments about others, including demeaning jokes based on such characteristics as culture, nationality, ethnicity, colour, race, religion, sex, gender or sexual orientation.”[xi]
While Peterson argued that reliance on the Code by the ICRC was “misplaced’ given that he was expressing his “off duty opinions” (i.e. that his statements were made in his personal capacity), the Court rejected this argument and held that Peterson’s comments were “not personal comments made in conversation with friends or colleagues, but public statements to broad audiences” and that he described himself both on Twitter and on the podcast as a clinical psychologist. Peterson’s regulated status lent credibility to his words. Moreover, the Court noted that even when “off duty”, members of regulated professions can still harm public trust in the profession.[xii]
The Court then considered whether the ICRC appropriately balanced the statutory objectives of the Code with Peterson’s freedom of expression. The Court emphasized that given the ICRC’s role as a screening body, it effectively had three options: refer the matter to the Discipline Tribunal, do nothing, or direct a SCERP. By directing a SCERP, the “ICRC pursued a proportionate and reasonable option to further its objective of maintaining professional standards, and which will have a minimal impact on Dr. Peterson’s right to freedom of expression.” The ICRC’s decision “does not prevent Dr. Peterson from expressing himself on issues of interest to him and his audiences; rather, the Decision is focussed on concerns over his use of degrading or demeaning language” particularly in light of earlier warnings he had received in 2020. [xiii]
Takeaways
The freedom of expression of regulated professionals is not absolute in circumstances where their speech transgresses certain boundaries set by the profession itself. Even when “off duty”, regulated professions may still cause harm to the public trust (and therefore be subject to remedial and disciplinary measures) by engaging in conduct which is inconsistent with the core values of their profession.
[i] Ibid at para 9.
[ii] Ibid.
[iii] Ibid at para 23.
[iv]Ibid at para 24.
[v] Ibid at para 25.
[vi] Ibid at para 28.
[vii] Ibid at para 31.
[viii] Ibid at para 32.
[ix] Ibid at Para 33
[x] Ibid at para 38.
[xi] Ibid at paras 40-41.
[xii] Ibid at paras 46-47, 51-55.
[xiii] Ibid at para 64.
Singleton Urquhart Reynolds Vogel LLP is proud to be top ranked once again by Best Lawyers Canada®, with 21 lawyers listed in multiple categories, showcasing SR’s depth and breadth of expertise.
Ranked lawyers are listed in their respective practice areas:
Jane Ingman Baker (Construction Law, Corporate and Commercial Litigation, Director and Officer Liability Practice, Insurance Law)
Steve Berezowskyj (Construction Law, Corporate and Commercial Litigation, Professional Malpractice Law)
Clive Boulton (Personal Injury Litigation)
David Edinger (Entertainment Law, Corporate and Commercial Litigation)
Catherine Gleason-Mercier (Construction Law)
Webnesh Haile (Construction Law)
Stuart Hankinson, K.C. (Construction Law, Insurance Law)
Bob Hodgins (Construction Law, Corporate and Commercial Litigation, Insurance Law, Personal Injury Litigation)
Kathryn Kirkpatrick (Insurance Law)
Cheryl Labiris (Construction Law)
Seema Lal (Construction Law, Insurance Law)
James Little (Construction Law)
Robert Moore (Insurance Law)
Bruce Reynolds (Alternative Dispute Resolution, Construction Law, Insurance Law, International Arbitration)
Elizabeth (Betsy) Segal (Construction Law, Corporate and Commercial Litigation, Insurance Law)
John Singleton, K.C. (Alternative Dispute Resolution, Construction Law, Corporate and Commercial Litigation, Insurance Law, Product Liability Law, Public Procurement Law, Transportation Law)
Mark Stacey (Corporate and Commercial Litigation)
Sharon Vogel (Administrative and Public Law, Construction Law, Corporate and Commercial Litigation, Insurance Law, Public Procurement Law)
Steve M. Vorbrodt (Construction Law, Insurance Law)
Peter Wardle (Alternative Dispute Resolution, Corporate and Commercial Litigation, Director and Officer Liability Practice, Professional Malpractice Law, Securities Law)
2024 “Ones to Watch”
Quinlan Winton (Corporate Law)
About Best Lawyers®
Best Lawyers® has published their list for over three decades, with the first international list published in 2006. Since then, it has grown to provide lists in over 65 countries. Lawyers on The Best Lawyers in Canada® list are divided by geographic region and practice areas. They are reviewed by their peers on the basis of professional expertise, and undergo an authentication process to make sure they are in current practice and in good standing.
Singleton Reynolds is pleased to announce the arrival of seven new Associates to the firm.
Lauren Dinwoodie is an Associate in the Commercial and Business Litigation, and Construction and Infrastructure Law Practice Groups. She maintains a broad litigation practice, with a particular focus on shareholder disputes, construction and estate litigation, and commercial leasing disputes.
Erik Grobler is an Associate in the Commercial and Business Litigation and Insurance Practice Groups. He recently moved to British Columbia from South Africa, where he practiced as both a solicitor and barrister in various fields of law, most notably commercial and business litigation.
Sohil Heydari is an Associate in the Construction and Infrastructure, Insurance, Employment, and Entertainment Law Practice Groups. He handles complex contractual disputes, related to construction claims for compensation, delays, extra work, and builders’ lien issues. He also has experience with insurance issues such as coverage and subrogation claims, as well as various employment issues including wrongful dismissal and work-from-home privacy issues.
Kathryn Irwin is an Associate in the Construction and Infrastructure, Commercial and Business Litigation, and Insurance Practice Groups, where she focuses on construction and infrastructure dispute-related work.
Nicole M. Krige is an Associate in the Commercial and Business Litigation, Insurance and Estates Practice Groups. Prior to being called in British Columbia, she practiced as a barrister for a number of years in South Africa, specializing in civil litigation. Nicole has a wealth of experience in all stages of litigation and has represented an array of corporate, state, and other clients throughout her years in practice.
Harry Meiteen is an Associate in the Construction and Infrastructure Practice Group. He maintains a diverse construction law practice and has worked with various stakeholders within the construction industry, including owners, general contractors, subcontractors, architects, and engineers. Called to the bar in both Ontario and British Columbia, Harry has assisted senior counsel in litigating complex claims for lien, as well as claims for breach of contract, breach of trust, delay, deficiencies, and extras.
Rachel Poon is an Associate in the Construction and Infrastructure, Commercial and Business Litigation, and Insurance Practice Groups, where she maintains a broad construction litigation practice with experience relating to a wide range of disputes.
Benchmark Litigation has again recognized Sharon Vogel as one of the Top Women in Litigation in its annual publication. She was also named Construction Litigator of the Year for Canada for the third consecutive year.
The Top Women in Litigation publication’s extensive research process, which encompasses six months of investigation into the individual litigator’s professional activities as well as client feedback surveys and individual interviews, has culminated in the selection of the most distinguished women in the world of litigation. These women have earned their place amongst the leading female litigators by participating in some of the most impactful litigation matters in recent history as well as by earning the hard-won respect of their peers and clients. Though they hail from widely different practice areas, they all share the distinction of being recognized as top players in their respective fields.
Lawyers named to the 2023 publication were chosen through several phases of research: namely, the review of their recent case work, peer review in which we consider how lawyers at peer legal institutions might rank them, and a consideration of client feedback on their performances.
In addition to this honour, Singleton Urquhart Reynolds Vogel LLP also enjoys a number of firm-wide rankings and further individual lawyer recognition by Benchmark Litigation. For more information please see here.
About Benchmark Canada
Benchmark Canada recognizes the top litigation lawyers and firms across the country for the significance of their cases. The results listed are based on extensive interviews with litigators and their clients. For more information, please visit Benchmark Litigation.
Singleton Urquhart Reynolds Vogel LLP is proud to announce that partners Daniel Barber, Jesse Gardner and James Little have been included in the 2023 edition of Benchmark’s 40 and Under Hot List.
Each year, the Benchmark team sets out to find the best and brightest law firm partners who stand out in their practices throughout Canada and the United States. This prestigious recognition highlights ambitious and accomplished lawyers under 40 who are performing at the peak of their expertise, and who have made outstanding contributions to their industry.
Daniel Barber is a practical litigator who strives to solve his clients’ legal problems effectively and efficiently. He specializes in the areas of insurance defence, professional liability, construction, and collections. In his insurance work, Dan represents insureds in claims made by third parties and also represents insurers in first party coverage claims, bad faith claims, and recovery matters. Outside of his insurance work, Dan assists his clients to successfully navigate through complex litigation including litigated and pre-litigation construction claims, all manners of collections work, including garnishment and execution against both real and personal property, and leasing disputes. Dan has appeared as counsel at all levels of court in British Columbia and regularly represents clients at chambers, trials, mediations and arbitrations.
Jesse Gardner advises a wide range of construction industry clients, including owners, general contractors, engineers and sureties in relation to major construction and infrastructure projects on issues such as delay and deficiency claims, fee disputes, and insurance matters. His practice focuses on effective dispute resolution, advisory work and strong written and oral advocacy. He has managed complex disputes on large-scale infrastructure projects including light rail train systems, waste-water treatment and power plants, wind farms, highway construction and mining projects. He has experience managing delay and subject matter experts through the litigation process and has assisted clients through arbitration and litigation proceedings.
James Little advises his clients in relation to complex domestic and international construction disputes, including in respect of court proceedings, negotiation, arbitration and other dispute resolution alternatives and for a wide variety of construction industry clients. In particular, James has advised clients of all sizes and on a variety of different types of projects including on major national and international infrastructure projects, mining projects, hospitals, commercial and residential construction. His focus is on providing a high level of service through effective and timely advice and advocacy, while managing and resolving disputes. James is often called upon to advise on construction projects during the design and construction phase, and also provides ongoing advice in respect of dispute avoidance and claims management.
These recognitions are a testament to the exceptional legal expertise at all levels within our firm, which allows our lawyers to go above and beyond for each and every client.
In this article, we consider the Ontario Superior Court’s decision in Mattamy (Downsview) Limited v. KSV Restructuring Inc. (Urbancorp), 2023 ONSC 3012, and its implications for the limits to an arbitrator’s discretion over matters of procedure and evidence in arbitration.
Brief Factual Background
Downsview Homes Inc (“DHI“) owned land where DHI had developed a residential construction project (the “Downsview Project“). Ownership of DHI was shared by Urbancorp Downsview Park Development Inc. (“UDPDI“) and Mattamy (Downsview) Limited (“Mattamy“), where the rights and obligations between the two parties were governed by the Amended and Restated Co-Ownership Agreement (the “Co-Ownership Agreement“).
In May of 2016, KSV Restructuring Inc. was appointed monitor (the “Monitor“) over UDPDI and its affiliated entities under a Companies’ Creditors Arrangement Act (“CCAA“) proceeding. Consequently, Mattamy became a lender under a debtor-in possession (“DIP“) facility, secured by a charge over UDPDI’s property, which included UDPDI’s interest in DHI. As part of the CCAA proceeding, KSV Restructuring was appointed as the monitor (the “Monitor“) over UDPDI.
In June of 2021, the Superior Court approved a sale process (the “Sale Process Order“) proposed by the Monitor for the sale of UDPDI’s interest in DHI to Mattamy. The proceeds were intended to satisfy the outstanding DIP facility. Additionally, the Sale Process Order also directed the Monitor to arbitrate various disputes, including, among other things, the determination of any Urbancorp Consulting Fees (the “Consulting Fees“) payable by Mattamy to Urbancorp Toronto Management Inc (“UTMI“) – from the same group of companies as UDPDI (together, “Urbancorp”) under the Co-Ownership Agreement.
Notably, section 2.7 of the agreement of purchase and sale provided that the transaction was:
Without prejudice to the Purchaser’s [Mattamy’s] position that neither the Seller [UDPDI]] nor UTMI are entitled to the payment of any amounts in respect of the Urbancorp Consulting Fee, the Purchaser acknowledges that no consideration is being paid to UTMI in respect of the Urbancorp Consulting Fee and as such UTMI retains whatever rights it may have, if any, to recover such amounts.
The above-mentioned purchase and sale transaction closed in January of 2022 (the “Transfer Date“).
In March of 2022, the Monitor (on behalf of the Urbancorp parties) submitted a Notice of Request to Arbitrate. The Monitor/Urbancorp sought a determination that UTMI was entitled to receive the Consulting Fees amounting to $5.9 million as of the Transfer Date. This amount was based on a calculation of “Gross Receipts” (as defined by the Co-Ownership Agreement) for the Downsview Project and the corresponding 1.5% percent Consulting Fee entitlement.
The dispute revolved around the definition of “Gross Receipts”, in respect of which the Monitor argued that revenues from the sale of residential dwellings should be included on a “non-cash basis”. This interpretation suggested that revenues from sales were to be included under “Gross Receipts” when such dwellings were sold, regardless of whether the sale proceeds were actually collected at that time. Conversely, Mattamy contended that “Gross Receipts” only included revenues from residential dwellings once the sales had closed as of the Transfer Date.
In determining the correct interpretation of “Gross Receipts”, the Arbitrator posed questions that were not covered in the parties’ pre-filed evidence or submissions. As such, the Arbitrator introduced a new issue (the “New Issue“) regarding accounting standards and the status of specific residential units that were sold, but not closed.
Accordingly, the arbitration hearing was adjourned, and the parties were directed to provide supplementary materials addressing the New Issue. Mattamy sought to adduce an affidavit that included portions of the ASPE [accounting standards for private enterprises] and a handbook published by the Real Property Association of Canada entitled “Recommended Accounting Practices for Real Estate Investment and Development Entities Reporting in Accordance with ASPE” (the “Handbook”).
The Urbancorp parties objected to some aspects of this affidavit, but interestingly, none of these objections were related to the Handbook. Mattamy indicated that if there were further objections to their proposed supplementary evidence, they would bring a motion for leave to file the evidence based on a proper record.
However, in June of 2022, the Arbitrator orally ruled at a case conference that certain parts of Mattamy’s affidavit would not be allowed into evidence. Specifically, the Arbitrator declined Mattamy’s request to schedule a motion to determine the admissibility of the Handbook, and struck all references to the Handbook, without providing written reasons for his decision.
In accordance with the Arbitrator’s ruling, Mattamy provided a revised version of their affidavit and argued that the application of the ASPE supported the proposition that Gross Receipts should not include revenue from sales until such revenue had been recognized at the interim closing date. Since certain residential condominium sales in question reached interim closing after the Transfer Date, Mattamy contended that such sales should not be calculated as part of the Gross Receipts.
The Arbitrator dismissed Mattamy’s argument and ruled that the definition of “Gross Receipts” did not require revenues to be received in order to be included within the Gross Receipts. Hence, the residential units in question could be recognised as Gross Receipts even if certain amounts were yet to be collected, and the Arbitrator granted the Monitor/Urbancorp an award of $5.9 million (the “Award“) in respect of the unpaid Consulting Fees.
Following the Arbitrator’s ruling, Mattamy brought an application to set aside the Award and to order a new arbitration under section 46 of the Arbitration Act, 1991 (the “Act“) based on two grounds:
1) exceeding the scope of the Arbitration and the Arbitrator’s jurisdiction; and
2) breaching the requirements of procedural fairness.
The Arbitrator did not Exceed his Jurisdiction
The Court first emphasized that an arbitrator’s jurisdiction is derived “exclusively from the authority conferred by the parties in their arbitration agreement and the terms of appointment of the arbitrator.” To determine whether the Arbitrator had gone beyond his jurisdiction, the Court applied the test established in Mexico v Cargill, 2011 ONCA 622 which involved the consideration of three questions:
In applying the foregoing test, the Court identified that the issue in question was UTMI’s entitlement to any Consulting Fees and the mechanics and timing of when such fees were to be paid. This issue was clearly set out both in the Notice of Request to Arbitrate provided to the Arbitrator, and in the parties’ pleadings. Although, the New Issue raised by the Arbitrator “shifted the analysis” as to whether monies paid after the Transfer Date fell within the definition of Gross Receipts, the Court determined that this was simply “another data point and perspective” to be considered when determining UTMI’s entitlement to the Consulting Fees. Thus, the New Issue fell within the submission to arbitration.
The Court also confirmed that that there was nothing in either the Co-Ownership Agreement or the Terms of Appointment that precluded the Arbitrator from making the Award. Consequently, the Court ruled that the Arbitrator did not exceed his jurisdiction in raising and considering the New Issue.
The Arbitrator’s Conduct gave rise to Procedural Unfairness
Mattamy argued that the Arbitrator’s ruling on the inadmissibility of the Handbook gave rise to a procedural unfairness. According to Mattamy, they were denied a sufficient opportunity to present their case, as the Arbitrator failed to engage in a thorough procedure to determine the admissibility of the Handbook and further denied an appropriate way for the evidence to be received.
The Court concurred with Mattamy’s position, and highlighted that Section 46(1)6 of the Act allows a Court to set aside an award on the basis that an applicant is treated unequally and unfairly, denied the chance to present a case or to respond to another party’s case, or is not given proper notice of the arbitration or of the arbitrator’s appointment.
Furthermore, the Court observed that the Handbook was relevant to the New Issue raised during the arbitration. The Handbook not only provided context and guidance on the application of ASPE principles concerning revenue recognition from the sale of residential condominium units, but it also provided rationale as to why revenue from the sale of residential condominium units was to be recognized at the time of interim closing. As such, the Arbitrator did not have the benefit of the full context of accounting principles from an industry perspective when making his decision.
Even if the accounting approach and the contents of the Handbook were, in hindsight, not found to be determinative in interpreting the definition of Gross Receipts, the Court held that an accounting rationale remained a “relevant data point” that Mattamy should have had the opportunity to present in support of its submissions on the New Issue.
Mattamy further asserted that if the Arbitrator was concerned that the Handbook was lacking support by an expert opinion, Mattamy would have rectified this issue (including by leading expert evidence) even if it were to delay the arbitration. The Court found that this point reinforced the conclusion that Mattamy was not afforded a sufficient opportunity to present its case on the New Issue.
The Court then turned to whether the Arbitrator engaged in a thorough proceeding to determine whether to admit the Handbook into evidence. The Court considered that the Arbitrator’s decision to strike the Handbook was made despite:
Considering these findings, coupled with the fact that the Arbitrator’s decision was made without the benefit of a motion and supporting reasons for excluding Mattamy’s evidence, the Court deemed the arbitration process to be unjust and unfair. The Court therefore ordered that the Award be set aside and the parties were directed to procced with a new arbitration before a different arbitrator.
Analysis and Commentary
Broadly speaking, Mattamy provides a useful reminder of the limits to an arbitrator or tribunal’s procedural discretion. It is common practice – particularly in construction disputes – to provide that a set of procedural rules will apply to the arbitration (e.g. the UNCITRAL Arbitration Rules, which themselves provide the tribunal with wide procedural discretion), and to provide in Procedural Order No. 1 that the tribunal will then have the authority to modify those chosen rules to the extent the tribunal deems appropriate or just. However, as Mattamy shows, it is critical to bear in mind that such authority is necessarily limited by the requirement of fair and equal treatment, which is part of essentially all arbitration legislation (and cannot be excluded by the parties’ agreement, unlike other legislative provisions).
In that regard, Mattamy raises an interesting question as to the overlap between administrative law and arbitration. In particular the Court relied upon the Supreme Court of Canada’s decision in Université du Québec à Trois-Rivières v. Larocque, [1993] 1 S.C.R. 471 to conclude that a decision to exclude evidence in an arbitration is not a “procedural” decision that is immune from review, unlike certain other procedural decisions which are immune from review (e.g. declining to admit fresh evidence following delivery of an award, or ordering security for costs). Indeed, the Court referred to “blanket categories” of procedural decisions of arbitrators that are immune from review, but did not elaborate on the underlying basis for which a given form of decision would qualify for such immunity.
In any event, while the Court’s conclusion seems intuitively correct as a matter of procedural fairness, it nevertheless bears noting that the Supreme Court has clarified on several occasions that there are “important differences between commercial arbitration and administrative decision‑making”.[1] While it is important not to overstate the degree to which arbitration and administrative law are separate spheres[2], the most notable among these differences is arbitration’s greater emphasis on party autonomy and freedom of contract (particularly in respect of crafting rules of procedure). As a result, it arguably would have been preferable for the Court to more fully articulate a freestanding rationale for why such a decision in the arbitral context is not immune from review, rather than relying on an administrative law authority.[3] This would be particularly beneficial to determining a principled basis for when a form of procedural decision constitutes one of the aforementioned “blanket categories”.
Similarly, it is worth also clarifying the significance of the lack of written reasons in respect of the New Issue since, understood through an administrative lens, the absence of written reasons might (in certain circumstances) be grounds in and of itself for a finding of procedural unfairness. In this case, the Court observed that (among other things), in the absence of any written or oral reasons from the Arbitrator as to why he decided to exclude the Handbook, the Court could not satisfy itself that a thorough procedure was followed in determining whether to exclude the Handbook.
Importantly, this is not to suggest that in all instances, a lack of written or oral reasons in the arbitral context will inevitably give rise to a finding of procedural unfairness. Indeed, it is not uncommon for parties to agree (for the sake of expediency) that a tribunal will not need to provide detailed (or any) reasons as part of its final award. The more salient point in respect of this issue is that, on this set-aside application, there was insufficient evidence before the Court that a thorough procedure had been followed in arriving at the decision to exclude the Handbook.
In that regard, the Arbitrator’s decision to address the issue via case conference rather than formal motion appears to have been a significant factor, as the latter would have undoubtedly provided a more thorough procedure. In future, wary arbitrators may err on the side of caution in addressing similar issues – while this will ensure greater procedural rigour, it is arguable that some of the efficiency of arbitration may be eroded.
In addition, the nature of Urbancorp’s position as to the admissibility of the Handbook raises an interesting question as to what qualifies as ‘agreement’ between the parties and its impact on the scope of the arbitrator’s jurisdiction. As noted above, the Court observed that Urbancorp did not object to the admission of the Handbook into evidence. On that basis, the argument could be made that the parties agreed to its inclusion, thus modifying their arbitration agreement and thereby leaving the Arbitrator with no discretion to exclude the Handbook (meaning a decision to do so would exceed the arbitrator’s jurisdiction).
However, this in turn raises the question of whether a lack of disagreement (i.e. a lack of objection) is synonymous with agreement; the Court’s analysis is not clear whether Urbancorp expressly or implicitly agreed with the Handbook’s admission, or whether Urbancorp simply took no position on the issue. As readers will appreciate, the issue of whether an agreement has been reached in the contractual context is highly fact-specific, and it is accordingly difficult to state as a general proposition that a lack of disagreement amounts to acquiescence and in turn agreement (or, in fact, whether acquiescence is itself sufficient for agreement as a matter of contract law).
Clearly, though, it appears that the Court is predisposed to protect a party’s right to make its case and to be able to respond to the case against it, such that, as a conservative practice, the potential rejection of significant evidence by an Arbitrator should be accompanied by the opportunity to be heard and an articulation of the basis for exclusion.
Eric Lee (summer student) assisted with the preparation of this article.
[1] See, for example, Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7 at para 119, citing Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at para 104.
[2] See, for example, Vento Motorcycles, Inc. v. United Mexican States, 2021 ONSC 7913, where the Ontario Superior Court concluded that the applicable test for admitting fresh evidence on an application to set aside an international arbitral award on procedural fairness grounds is akin to the test for admitting fresh evidence in the context of an application for judicial review of an administrative decision.
[3] Parenthetically, this also calls to mind the current uncertainty in relation to the applicable standard of review for arbitral awards following the Supreme Court’s decision in Vavilov.
Summary
Below we consider the Divisional Court’s decision in Devlan Construction Ltd v SRK Woodworking Inc, 2023 ONSC 3035 (“Devlan Construction“) and its implications for the joinder of trust and lien claims under Ontario’s Construction Act. Broadly, based on a reading of the Construction Act’s regulations and rules of statutory interpretation, the Divisional Court concluded that trust claims could not be joined with lien claims under the Construction Act.
Below, we discuss some implications of this decision, contrasting it with the recommendation on the joinder of lien and trust claims from Striking the Balance: Expert Review of Ontario’s Construction Lien Act (“Striking the Balance“), which was one of the bases for the updating of the Construction Lien Act (or the Construction Act, as it ultimately became).
In the original dispute (SRK Woodworking Inc. v. Devlan Construction Ltd. et al., 2022 ONSC 6229), SRK Woodworking Inc. (“SRK”) brought a lien action with respect to payment for the supply and installation of millwork to a local public school against the contractor, Devlan Construction Ltd. (“Devlan”). Subsequently, SRK sought to amend its pleadings by adding parties who were officers and directors of Devlan, and to claim breach of trust under the Construction Act. At issue was what the Construction Act and O Reg 302/18 provided regarding joinder of lien and trust claims.
The contract that was the subject of the proceedings was entered into in March 2019. The motion judge was unable to determine which version of the Construction Act applied. Though the subcontract between Devlan and SRK was executed in March 2019, it was unclear to the Court when the prime contract was executed or when procurement began based on the evidence available.
For this case, the motion judge specified that while s. 50(2) of the Construction Lien Act was no longer part of the Construction Act, the permissive section of joining lien claims and breach of contract claims was introduced into the Construction Act’s new regulations.
Both parties asked the motion judge to apply the legal principle of statutory interpretation which provides that the expression of one or more things of a particular class may be regarded as impliedly excluding others (the “implied exclusion” principle).
One concern raised was the proper manner in which to interpret the removal of two sections in the Construction Lien Act prior to its amendment in 2017. Specifically, the removal of the following sections:
Section 50(2) A trust claim shall not be joined with a lien claim but may be brought in any court of competent jurisdiction; and Section 55(1) A plaintiff in an action may join with a lien claim a claim for breach of contract or subcontract.
Section 50(2)
A trust claim shall not be joined with a lien claim but may be brought in any court of competent jurisdiction; and
Section 55(1)
A plaintiff in an action may join with a lien claim a claim for breach of contract or subcontract.
While both sections were removed, s. 55(1) was subsequently re-enacted, verbatim, in O Reg 302/18 at s. 3(2) – that is, as a regulation to, instead of a provision within, the Construction Act.
Devlan relied on O Reg 302/18, s. 3(2), which only specified that breach of contract or subcontract claims could be joined with lien claims (i.e. the lack of a similar permission in respect of breach of trust claims meant that it was implicitly forbidden). By contrast, SRK’s position was that since the former prohibition to join trust and lien claims no longer existed in the statute, the legislature intended that such joinder was permitted.
For the motion judge, the key issue regarding the meaning of O Reg 302/18, s. 3(2) was whether the legislature – by creating a regulation which expressly allowed joinder of breach of contract claims to lien claims – intended to signal that the joinder of all other claims to lien claims was barred.
To help determine legislative intent, the motion judge reviewed a chart prepared by the Ministry of the Attorney General titled Amendments to the construction lien and holdback provisions, which stipulated that the prohibition on joinder of lien claims and trust claims had been removed.
The judge also reviewed Striking the Balance, which recommended removing the prohibition on joinder of trust claims and lien claims under s. 50(2) of the Construction Lien Act.
The judge analyzed the totality of the Construction Act and noted that the legislation was designed to provide a scheme that would allow construction projects to move forward in an organized, efficient, effective, and timely manner.
Nevertheless, the motion judge was unconvinced by the argument that joining trust and lien claims was inconsistent with the Construction Act as a whole. This was because the parts of the Construction Act dealing with prompt payment and adjudication did not apply to the matter before them. Thus, the motion judge found that SRK should be allowed to join their trust claim with their lien claim. Devlan accordingly appealed to the Divisional Court.
The Divisional Court began by acknowledging that the Construction Act and its regulations, read together, could be clearer about this issue of joinder; however, for the purpose of this case, the Court stipulated that the key question was simply what the Construction Act and regulations provided. The current Construction Act neither permitted nor prohibited joinder of claims in a construction lien proceeding.
While the Construction Act provided for recourse to the Rules of Civil Procedure, this was only in respect to procedural matters left unaddressed by the Construction Act and regulations. Thus, once O Reg 302/18 came into effect, this regulation ousted the application of the Rules of Civil Procedure in respect of the joinder of claims. This was because of the express language of s. 50(2) of the Construction Act:
Except to the extent that they are inconsistent with this Act and the procedures prescribed for the purposes of this part, the Courts of Justice Act and the rules of court apply to the actions under this part. [emphasis added]
In that regard, O Reg 302/18 stipulated that “a plaintiff in an action may join with a lien claim a claim for breach of contract or subcontract.” By expressly permitting joinder of contract and subcontract claims, O Reg 302/18 impliedly excluded joinder of other claims. In this, the Court considered the implied exclusion principle noted above.
The Court acknowledged that the express prohibition on joinder of trust and lien claims was repealed and not reintroduced in the regulations. However, the applicable principle of statutory interpretation set out in the Legislation Act precluded construing current provisions on the basis of prior versions of the legislation:
No implication 56 (1) The repeal, revocation or amendment of an Act or regulation does not imply anything about the previous state of the law or that the Act or regulation was previously in force; Same (2) The amendment of an Act or regulation does not imply that the previous state of the law was different.
No implication
56 (1) The repeal, revocation or amendment of an Act or regulation does not imply anything about the previous state of the law or that the Act or regulation was previously in force;
Same
(2) The amendment of an Act or regulation does not imply that the previous state of the law was different.
Finally, the Court noted that the Construction Act should be as far as possible a summary procedure. Adding breach of trust claims would, it surmised, result in adding further issues that would significantly complicate the narrow issue of breach of contract in a lien action. This would then increase documentary production, examinations for discovery, and the number of parties and issues to be tried, which would undoubtedly increase the cost and the length of the proceeding.
Furthermore, the Court observed that even if it were wrong in its reading of the Construction Act and the regulations, this could be remedied by amending the regulations to expressly address joinder of trust and lien claims.
Accordingly, Devlan’s appeal was allowed, with the breach of trust claims struck from the proceeding and the action struck as against the trust defendants.
Analysis & Commentary
Devlan Construction provides helpful clarification about relevant rules of statutory interpretation used by the Divisional Court to make its determination, including:
That being said, Devlan Construction raises important issues for further consideration.
First, it is arguable whether the Legislation Act explicitly precludes analysis of prior versions of legislation in all cases. Section 56(1) of the Legislation Act lists repeal, revocation, and amendment of an act or regulation as elements that do not imply anything about the previous state of the law. In Devlan Construction, what is at issue is re-enactment of a provision as a regulation, which might arguably not be captured by s. 56(1).
Also, s. 46 of the Legislation Act indicates that every provision of “Part IV – Interpretation” – that is, the Part wherein s. 56 appears – applies to every Act and regulation. However, an exception appears in s. 47:
47 Section 46 applies unless; (b) its application would give to a term or provision a meaning that is inconsistent with the context. [emphasis added]
47 Section 46 applies unless;
(b) its application would give to a term or provision a meaning that is inconsistent with the context. [emphasis added]
According to Sullivan’s Statutory Interpretation, courts work with an expansive view of admissible context, meaning very little cannot be considered if it is relevant to the interpretive problem at hand.[1] This includes legislative history, which is anything that is prepared to facilitate the passage of legislation[2], and legislative evolution, which begins with analysis of the first enactment of legislation, followed by subsequent amendments, up to final repeal.[3]
Even if current provisions cannot be construed based on prior versions of the legislation, s. 56(2) of the Legislation Act only specifies that “amendment of an Act or regulation” does not imply anything about the previous state of the law. This language arguably does not extend to the context surrounding the amendments.
This proposition is also supported by the Superior Court’s recent decision in Director of Employment Standards v Sleep Country Canada, 2023 ONSC 3975. There, the Court observed that an amendment to the statute at issue in and of itself did not reveal anything; rather, the Court referred to the lack of evidence (such as Hansard) that would have demonstrated a reason for why the legislature made the amendment in question. This suggests that the context surrounding the amendments forms a valid part of the assessment. In the present case, there was ample evidence of context surrounding the intent of the amendments and the desire to remove the prohibition against joinder of lien and trust actions specifically.
As such, the position of the Divisional Court appears to somewhat understate available extrinsic context, such as legislative history, especially in light of s. 47(b) of the Legislation Act. For example, this creates a situation where the recommendation to remove the prohibition on joinder of trust and lien claims in the Striking the Balance report was not followed.
This is despite the fact that Ontario is the only common law province that prohibits this type of joinder, and despite the fact that multiple stakeholders consulted in Striking the Balance believed that this type of joinder should be allowed. The ultimate question is of course what the legislature intended; however, since this report was commissioned and written in order to aid the legislature in updating the Construction Lien Act – in addition to which the drafters of the report were engaged by the legislature to consult in the drafting of the legislation – it still forms part of the relevant interpretive context.
Additionally, removing the prohibition on joining trust and lien claims was expressly included in the chart prepared by the Ministry of the Attorney General on July 1, 2018 in Amendments to the construction lien and holdback provisions. This document, described as “a chart describing some of the key changes”, was part of a summary prepared by the Ministry of the Attorney General to explain the amendments to the Construction Act.
The chart specified the following: “the prohibition on joinder on lien claims and trust claims has been removed.” This chart followed the Hansard debates from November 15, 2017, where the removal of the prohibition on breach of trust claims being joined with lien claims was described as a “well overdue” amendment. Again, this forms part of the context surrounding the updates to the Construction Lien Act.
Second, without a regulation being added to explicitly prohibit joinder of trust claims to lien claims, the arguable implication of Devlan Construction appears to be that this explicit removal of the prohibition on joinder of trust and lien claims ultimately served no purpose.
However, both s. 50(2) and s. 55(1) were removed from the Construction Lien Act, but only s. 55(1) was re-enacted as a regulation. According to Sullivan’s Statutory Interpretation, departure from a pattern or practice is one reason why Courts may reject certain interpretations of legislation.[4]
This re-enactment of s. 55(1) as a regulation may create a fixed pattern of expression where the legislature seems to have been aware of the need to re-enact certain provisions as regulations. Despite the legislature knowing about the removal of the provision that prohibited joinder of trust and lien claims based on the contextual evidence above, they did not re-enact said provision as a regulation.
Third, the issue of implied exclusion raises questions regarding other related principles of statutory interpretation, including analysis of legislative intent and the objective of the amendments. In Rizzo v Rizzo Shoes Ltd (Re), [1998] 1 SCR 27 (“Rizzo”), the Supreme Court stated that there is only one principle or approach to the interpretation of legislation:
[T]he words of the Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.
The objectives of amending the Construction Lien Act to the Construction Act included the following:
While prompt payment was one objective of the amendments, modernizing the construction lien rules was also another expressly-stated objective. Permitting joinder of trust claims with lien claims would arguably help modernize the construction lien rules because the basis for the prohibition was from a Report of the Attorney General’s Advisory Committee in 1983. At the time, it was decided that issues related to lien and trust claims were very different, and resolving lien claims was the primary concern under the Construction Lien Act.[6]
However, in practice, courts had been willing to join lien and trust claims while the Construction Lien Act was in force.[7] Thus, permitting joinder of these types of claims in the Construction Act at least to some degree would only be following the actual practice of the courts themselves. Furthermore, as readers will appreciate, the Courts of Justice Act (along with the Rules of Civil Procedure) emphasize the avoidance of a multiplicity of proceedings, which proposition is particularly relevant in respect of this issue given that trust issues often overlap to a significant extent with lien issues. In other words, such a change would modernize the legislation by bringing it into line with modern practice, both specifically in the construction context and in the litigation context more generally.
As stated by the Supreme Court in Rizzo, using legislative history to help determine the intention of the legislature is an “entirely appropriate” exercise that has frequently been employed by the Supreme Court. In conjunction with the potential applicability of s. 47 of the Interpretation Act, it may be possible to look at the legislative history of s. 50(2) of the Construction Lien Act and the provision’s subsequent removal in the Construction Act.
In that regard, one point made by the motion judge bears repeating: the principle of implied exclusion should be used carefully, as much depends on the context, and thus it is not a principle of universal application.
Due to the significance of the questions raised by Devlan Construction, we look forward to seeing how it will be subsequently interpreted or applied, or if the provincial legislature will subsequently respond with additional regulations to clarify this issue. In that regard, it bears noting that Devlan may somewhat understate the ease with which regulations are revised. While moving the relevant provisions from the Construction Act to its regulations may have avoided the issue of having to formally amend the legislation through the legislature, the practical reality remains that revising regulations requires significant input from stakeholders both within and outside of government. Ultimately, the legislature will ideally consider the original intent behind Striking the Balance in making any subsequent changes; in the interim, however, there will likely be some confusion and difficulties in matters involving breach of trust issues under the Construction Act, and associated additional costs will be borne by litigants.
Jeff Wong (summer student) assisted in the preparation of this article.
[1] Ruth Sullivan, Statutory Interpretation, 3rd ed (Toronto: Irwin Law Inc, 2016) at 51 [Statutory Interpretation].
[2] Ibid at 259.
[3] Ibid at 260.
[4] Ibid at 149-150.
[5] Ministry of the Attorney General, “Summary” (October 1, 2019), online <https://www.attorneygeneral.jus.gov.on.ca/english/construction_law_in_ontario_chart.php>.
[6] Bruce Reynolds & Sharon Vogel, “Striking the Balance” (April 30, 2016), online <https://wayback.archive-it.org/16312/20210402052122/http:/www.attorneygeneral.jus.gov.on.ca/english/about/pubs/cla_report/#_Toc450127325>.
[7] Ibid.
The Ontario Superior Court’s recent decision in Arad Incorporated v Rejali et al, 2023 ONSC 3949[1] (“Arad”) provides helpful guidance on motions for the return of posted security in circumstances where an interim adjudication process has concluded in accordance with Ontario’s Construction Act (the “Act”).[2]
In particular, the court confirmed that it would be wary of relying on the determinations of adjudicators (which are, of course, interim binding) when deciding to reduce or return security that has been paid into court to vacate a lien claim.[3] In fact, the court in Arad suggests that the determinations of adjudicators themselves will generally not be sufficient for a court to grant such relief.
In Arad, the plaintiff (or its principal – this fact was unclear) entered into a contract to provide services and materials for the improvement of a residential property owned by two of the defendants (a third defendant was alleged to have acted as the owners’ agent or joint venture partner). The plaintiff alleged that the defendants owed it money in respect of the supply of such services and materials, and as a result, the plaintiff registered a claim for lien and certificate of action against the property. The claim for lien and certificate of action were vacated from title pursuant to s. 44 of the Act, with the defendants paying money into court as security.
The plaintiff then commenced a construction dispute interim adjudication under Part II.1 of the Act. The third defendant (the alleged agent or joint venture partner) also brought an adjudication for monies allegedly overpaid to the plaintiff’s principal. An engineer, acting as the adjudicator for both issues, concluded that no additional monies were owed to the plaintiff, and that the plaintiff’s principal was not responsible for any overpayment by the third defendant.
Neither party sought judicial review or a stay of the adjudicator’s decision. Instead, the defendants brought a motion to reduce or return the security paid into court, on the basis that the adjudicator had found no additional monies were owed to the plaintiff.
No details are provided in the decision as to the status of the lien action.
As noted by the Court, “in a nutshell, the issue [of this case was] whether the determinations of the adjudicator that no monies are owed means that the money paid into court should be returned”.
In bringing their motion, the defendants relied on s 44(5) of the Act, which states:
Reduction of amount paid into court (5) Where an amount has been paid into court or security has been posted with the court under this section, the court, upon notice to such persons as it may require, may order where it is appropriate to do so, (a) the reduction of the amount paid into court, and the payment of any part of the amount paid into court to the person entitled; or (b) the reduction of the amount of security posted with the court, and the delivery up of the security posted with the court for cancellation or substitution, as the case may be.[4]
Reduction of amount paid into court
(5) Where an amount has been paid into court or security has been posted with the court under this section, the court, upon notice to such persons as it may require, may order where it is appropriate to do so,
(a) the reduction of the amount paid into court, and the payment of any part of the amount paid into court to the person entitled; or
(b) the reduction of the amount of security posted with the court, and the delivery up of the security posted with the court for cancellation or substitution, as the case may be.[4]
Relying on prior case law[5], the Court found that the applicable test was whether the Court was “satisfied on the basis on the motion material that there is no reasonable prospect of the lien claimant proving that the lien claimed attracts the requirement to attract security per ss 44(1) or (2) of the Act.”[6]
While the defendants filed two affidavits, the Court observed that the “sole evidentiary basis” they provided were the determinations of the adjudicator.[7] The Court therefore considered whether or not it was appropriate to reduce or return the security based solely on the determinations of the adjudicator (who, as noted above, found against the plaintiff entirely).
In that regard, the Court found it necessary to examine the adjudicator’s methodology and conclusions. In doing so, the Court discussed the nature of interim adjudication, and adopted the following statement from Pasqualino v MGW-Homes Design Inc:
The Adjudication provisions were introduced into the Construction legislation to provide a quick, efficient, interim determination allowing funds to flow down the contractual “pyramid”. I stress that adjudication determinations are interim, allowing the parties to continue litigating the issues, including those the subject of the Adjudication determination to a final and binding determination in the courts or by arbitration.[8]
The Court also added the following observations about the interim nature of adjudication under the Act:
As interim decisions, it does not put an end to the proceeding. The proceeding continues between the parties including that which was subject of the adjudication process. The determinations of the adjudicator are not binding upon this court. The findings and conclusions of an adjudicator set out in the determination is evidence, like any other evidence, this court may take into consideration in determining whether to exercise its discretion to reduce security “where it is appropriate to do so.” But an adjudicator’s conclusions are not determinative on the decision to reduce security.[9] […] For the adjudication process, I make no assertion that such a methodology is or is not permitted. … Not all evidentiary rules may be adhered to. Not all evidence provided may be subject to scrutiny through the discovery process or subject to cross examination.[10] [emphasis added]
As interim decisions, it does not put an end to the proceeding. The proceeding continues between the parties including that which was subject of the adjudication process. The determinations of the adjudicator are not binding upon this court. The findings and conclusions of an adjudicator set out in the determination is evidence, like any other evidence, this court may take into consideration in determining whether to exercise its discretion to reduce security “where it is appropriate to do so.” But an adjudicator’s conclusions are not determinative on the decision to reduce security.[9]
For the adjudication process, I make no assertion that such a methodology is or is not permitted. … Not all evidentiary rules may be adhered to. Not all evidence provided may be subject to scrutiny through the discovery process or subject to cross examination.[10] [emphasis added]
In other words, although the Court recognized that statutory adjudication was deliberately designed to allow for the relaxation of certain rules of procedure and evidence, it appears that this relaxation was itself cause for skepticism from the Court of the weight to be assigned to the adjudicator’s determination.
In that regard, with respect to the methodology of the adjudicator in this case, the judge noted that the adjudicator indicated that no witnesses were called and that determinations were made based on documentary evidence, oral submissions, and a site visit.[11] Further, the Court noted as follows:
The adjudicator made findings based on his opinion as an engineer and not based on the expert opinion or reports of others presented by either of the parties. His opinion was not subject to contestation by any of the parties. He made findings based on a site visit and verbal statements during the oral hearing. His findings were not all based on admissible evidence. He admitted that there was contradicting claims and statements made by the parties on the facts: the agreement and the scope of work to be performed and the worked performed. The adjudicator conceded that he did not consider the extra claims of the plaintiff for, in his opinion, he did not receive “proper evidence”. The adjudicator also decided to just rely on the documentation provided and use his own construction and engineering experience to make final determinations.[12] [emphasis added]
The Court therefore found that the “determinations of the adjudicator alone do not meet the evidentiary threshold required for the court to conclude that the lien claim does not attract need for security.”[13]
Ultimately, the Court concluded that courts should be wary of solely relying on the findings of an adjudicator in deciding whether to reduce or return security for a lien claim.[14] In this particular case, the Court also found that there was no basis to reduce the amount of the security, given that any reduction would be arbitrary without evidentiary basis.[15]
While Arad suggests that courts may be wary of relying solely on the determinations of an adjudicator, it is also important to note that the Court did not rule out the possibility that an adjudicator’s determinations could provide sufficient evidence to reduce or return security in the right circumstances.
In the Court’s view, consideration must be given to whether the adjudicator’s determinations provide the “necessary evidentiary foundation” for reducing or returning the security[16], meaning that a court will scrutinize the adjudicator’s methodology and conclusions in deciding whether the adjudicator’s findings provide a sufficient evidentiary basis.
It follows that the closer an adjudicator adheres to evidentiary rules and elements of the adversarial system such as cross-examination of witnesses – in short, to standard civil procedure – the likelier it would be that a court would find an adjudicator’s determination to be sufficient evidence. The same would seem to hold true more broadly, in other circumstances in which a party may seek to rely on an adjudicator’s determinations as evidence in a proceeding, such as in a motion for summary judgment. Therefore, in commencing a construction dispute interim adjudication, it is important to consider that the quicker and more efficient the process is, the less likely it will subsequently be relied on by a court as evidence in a proceeding.
It therefore remains to be seen if this will incentivize parties to avoid or curtail the summary nature of adjudication in favour of a more robust procedure that they might then rely upon in the context of related lien litigation (or other construction court proceedings). As readers will appreciate, adjudication was intended from its inception to forego procedural trappings in favour of a quicker, “rough justice” approach in order to maintain the flow of funds down the construction pyramid. If parties begin to view this skepticism as it relates to related proceedings, then this aspect of adjudication might unfortunately be undermined.
The summary nature of adjudication (and its contemplation of subsequent court proceedings) is, of course, one of the reasons that adjudication is interim. By contrast, the return of posted security removes a protection for lien claimants granted by statute, and is itself more akin to a final determination (except to the extent that such an order is successfully appealed). It would seem inconsistent with the purpose of the Act – and the purpose of adjudication – for a lien claimant to lose its right to the protection of posted security on the basis of an interim determination alone, and accordingly, this decision appears to strike the appropriate balance in that regard.
[1] Arad Incorporated v Rejali et al, 2023 ONSC 3949.
[2] Construction Act, RSO 1990, C-30.
[3] While the Act distinguishes between security posted with the court and monies paid into court as security, they are equivalent for the purposes of this analysis and treated as interchangeable. See Construction Act, RSO 1990, C-30, s 44(5).
[4] Construction Act, RSO 1990, C-30, s 44(5).
[5] Pentad Construction Inc v 2022988 Ontario Inc, 2021 ONSC 824; and Chesney et al v Malamis et al, 2023 ONSC 1742.
[6] Arad Incorporated v Rejali et al, 2023 ONSC 3949 at para 22.
[7] Arad Incorporated v Rejali et al, 2023 ONSC 3949 at para 19.
[8] Pasqualino v MGW-Homes Design Inc, 2022 ONSC 5632 at para 30.
[9] Arad Incorporated v Rejali et al, 2023 ONSC 3949 at para 17.
[10] Arad Incorporated v Rejali et al, 2023 ONSC 3949 at para 28.
[11] Ibid at para 20.
[12] Ibid at para 25.
[13] Ibid at para 24.
[14] Ibid at para 28.
[15] Ibid at para 30.
[16] Ibid at para 24.
In CZT v CZU,[1] the plaintiff – seeking to set aside the award of an arbitral tribunal on the basis of serious allegations by the dissenting arbitrator against the two other members of the tribunal – brought an application to compel the arbitrators to produce records of their deliberations.
The Singapore International Commercial Court (“SICC” or “Court”) dismissed the plaintiff’s production application, concluding that the plaintiff had not demonstrated that the interests of justice outweighed the policy reasons for protecting the confidentiality of deliberations. In the Court’s view, the application to set aside the award could proceed without those records.
The decision is an important benchmark in terms of deliberative secrecy in arbitration, which according to the Court, will only yield in the rarest of cases, which generally would not include bare allegations even of a serious nature.
The plaintiff entered into a contract with the defendant to deliver certain component packages that included materials, machinery and equipment, which the defendant subsequently alleged were defective. The defendant commenced arbitration proceedings in Singapore under the Rules of Conciliation and Arbitration of the International Chamber of Commerce (“ICC”) in Singapore. The majority on a panel of three (the “Majority”) found in favour of the defendant. However, the dissenting arbitrator (the “Minority”) made various allegations against the majority, accusing them of:
The Minority concluded in his dissent that he had “lost any and all trust in the impartiality of [his] fellow arbitrators”.[3]
On the basis of this apparent “smoking gun,” the plaintiff brought an application before the SICC to have the award set aside under Singapore’s International Arbitration Act 1994 (2020 Revised Edition). When the ICC Secretariat and all three members of the panel refused voluntarily to hand over records of the deliberations, the plaintiff filed summonses in the SICC against the three arbitrators for production of their records.
The SICC’s Decision
With respect to general principles of deliberative secrecy, it was common ground between the parties that the records of arbitral deliberations are confidential by default and therefore protected against production orders, and the Court agreed that “it can scarcely be argued otherwise” even though no statutory provision expressly protects the confidentiality of arbitrators’ deliberations.[4] In the Court’s view, the confidentiality of deliberations, like the confidentiality of arbitral proceedings themselves, “exists as an implied obligation in law”[5] – that is, it exists at common law independent of (or in addition to) any statutory, institutional, or contractual provision to similar effect, for the following well-recognized policy reasons (which readers will recognize as very similar to the reasons justifying deliberative secrecy for courts):
The parties were also in general agreement that the default rules of confidentiality with respect to arbitral deliberations are subject to exceptions. The plaintiff argued that confidentiality will yield in appropriate circumstances to “considerations of due process, the interests of justice and the public policy of preserving the integrity and reputation of Singapore as a seat of arbitration.”[7]Conversely, the defendant and one of member of the Majority (who was present before the Court) argued that confidentiality will yield only in the “rarest of cases”, and requires “the most compelling reasons and exceptional circumstances”.[8] The member of the Majority further drew a distinction between “process issues” and “disagreements on substance”, and submitted that there is an exception for process issues, such as “allegations that one arbitrator has been excluded from deliberations”.[9]
The Court agreed that the plaintiff’s formulation was too wide in scope, and found that confidentiality of deliberations only applies to protect substantive disagreements that involve an arbitrator’s thought processes or reasons for his/her decision; conversely, confidentiality does not apply to “essential process issues”. However, the Court did not consider the protection of essential process issues to be an exception to the principle of confidentiality, because such process issues do not represent the tribunal’s thought processes or reasons for decision, and therefore do not engage the policy reasons for protecting confidentiality in the first place.[10] The Court relied on case law from the UK and Australia, as follows:
In Duke of Buccleuch,[11] the court held (at 457) that an arbitrator may be questioned as to what had taken place before him, including what matters had been submitted to him for decision, but he could not be questioned as to how he arrived at his decision. In Nathan v MJK Constructions [1986] VR 75 (“Nathan”), the Australian Supreme Court of Victoria held that whilst an arbitrator may not be questioned as to his reason for making a particular decision, there was no policy reason why he should not give evidence as to what took place before him.[12]
The Court also acknowledged that the line between process issues and substantive issues is not always clear, and that “there may also well be some issues which are described as ‘process issues’ which raise questions of fact and degree as to the extent of consultation between arbitrators which could give rise to the need to explore deliberations”. On the facts of this case, the Court did not find it necessary to consider that issue further.[13]
The Court found that there can be an exception to confidentiality when the facts and circumstances are such that the interests of justice in ordering the production of records of deliberations outweigh the policy reasons for protecting the confidentiality of deliberations.[14] This would only occur in the “very rarest of cases”, and would require a case involving allegations that (1) are very serious in nature, and (2) have a real prosect of succeeding.[15] For example, the Court observed allegations of corruption would be serious enough because they “attack the integrity of arbitration at its core.”[16]
The Decision
The plaintiff argued that it was entitled to production on the following grounds:
With respect to the first argument, the Court found that even if it were true, it would be insufficient to displace the protection of confidentiality, and that this allegation could in any event be decided on the basis of the arbitration record alone (i.e. without reference to deliberation records). On that basis, the Court concluded that this ground could not amount to an exception to the default rule of deliberative secrecy for arbitrations.
With respect to the second argument, the Court found it “difficult to follow”.[18] The plaintiff alleged that the ICC, which reviewed the drafts of the Final Award, had approved an earlier draft (the “May Award”, and that the majority then concealed from the ICC that the final version of the Final Award included substantial changes made after the ICC had approved an earlier version. The Court was skeptical that this amounted to an impropriety, and found that the Final Award would stand or fall on its own merits, since it contained the reasons that the Majority “chose to give to justify the findings they made”.[19] The Court therefore similarly found that this ground could not constitute an exception to the default rule of deliberative secrecy for arbitrations.
With respect to the third argument, the Court found that it could – as a general proposition – constitute an exception, because “impartiality is fundamental to the integrity of arbitration proceedings”[20], and that the general principle of deliberative secrecy was not intended to facilitate the concealment from the parties of an arbitrator’s partisanship.
On the facts of this case, however, the Court did not come to a definitive conclusion, because it found that the plaintiff had not shown that its allegations on this issue had any real prospect of succeeding. This is because, while the allegations of the Minority were serious, they were bare allegations. No facts were stated in the dissent that would support the Minority’s views or opinions. The dissent did not explain how the draft May Award differed from the Final Award, nor how the Majority had allegedly distorted the history of deliberations or misstated the record.
The plaintiff argued that the Minority was constrained by what he was permitted say in the dissent, but the Court found that the Minority seemingly did not feel any such constraint given that his allegations of serious misconduct and improprieties were contained within his dissent. Rather, the Court’s analysis suggests that it was incumbent upon the Minority to fully articulate the allegations of fact necessary to support an argument that could justify an argument that the Majority lacked impartiality. In other words, if an arbitrator is to allege misconduct by other members of the same tribunal, it would seem that the arbitrator would have to go much further in particularizing such allegations in order to justify intervention by a court. Accordingly, the Court refused to allow a “fishing expedition” based on bare allegations regarding the dishonesty of the Majority.[21]
Finally, The Court found that the May Award – which the plaintiff relied upon to argue that the Majority had concealed its true reasons for rendering its ultimate decision – was protected by the confidentiality of arbitral deliberations, such that the May Award need not be produced (and the plaintiff was not entitled to receive it).
Although CZT is a Singaporean case, and although it may be appealed, it is nevertheless of interest to Canadian readers given the novelty of deliberative secrecy in the arbitration context. Given the lack of similar case law in Canada, it may also stand as persuasive authority for parties faced with a similar situation in future (particular where Canada, much like Singapore, has placed an emphasis on presenting itself as an arbitration-friendly jurisdiction).
To that end, as CZT v CZU illustrates, the party seeking to set aside the award will, generally speaking, only be able to rely on the record. Bare allegations, even serious ones made by a member of an arbitral panel, will generally not displace the protection of confidentiality of arbitral deliberations, particularly if the case for setting aside an award can be made using the arbitration record.
This is particularly true in circumstances where the standard of proof requires ‘real prospects of succeeding’, meaning that bare allegations will invariably fail to meet that threshold. It is unclear what level of detail would be required of such allegations in order to meet such a threshold, but it stands to reason that evidence directly from the dissenting arbitrator (e.g. an affidavit or testimony) might suffice.
In that regard, the Court’s decision raises an interesting question of whether it in fact serves as guidance for dissenting arbitrators in a similar situation to CZT. In this case, the plaintiff’s argument faltered in large part due to what, in the Court’s view, was a lack of particularization in the Minority’s reasons. Going forward, it is possible that dissenting arbitrators might particularize allegations of impropriety in much greater detail, thereby pre-empting judicial concern for arbitral confidentiality by exposing the tribunal’s deliberations.
In any event, while the Court raised four policy reasons for protecting confidentiality of deliberations, it also arguably raises a fifth: finality (which, as readers will know, is arguably the most attractive aspect of arbitration). Here, the Minority alleged that the Majority was “wrong in its findings”, and disagreed with the Majority’s “conclusions and reasoning… (vehemently, in fact)”[22] – in other words, that the Majority and the Minority were in fundamental disagreement as to substantive aspects of the arbitration. Disagreements between arbitrators are not uncommon, and indeed are an aspect inherent to the very nature of the process. Such substantive disagreements, although they may be vehement and may sometimes dovetail with allegations of impropriety, are not grounds in and of themselves to interrogate the legitimacy or finality of an award.
Finally, it is also worth noting that the Court did not appear to be seriously concerned by the allegation – bare though it was – that the Majority concealed its “true” reason(s) for its decision. While this allegation can be quite serious if accompanied by allegations of corruption, or potentially allegations of partiality (assuming there is a real prospect of success), the Court observed that the “reasons for the Final Award are those that the Majority chose to give to justify the findings they made, and they stand or fall on their own merits.”[23] The distinction between the stated and unstated reasons for an award would appear to be immaterial, since the reasons that a tribunal does provide are subject to scrutiny and/or challenge.
We await with interest to see if CZT is appealed, and if so, its outcome.
[1] CZT v CZU, [2023] SGHC(I) 11. As readers will appreciate, in certain jurisdictions – Singapore among them – courts frequently anonymize party names for matters being referred from arbitration, in order to preserve (insofar as possible) the confidentiality ostensibly afforded by arbitration. This practice is typically not followed in Canada.
[2] CZT v CZU, [2023] SGHC(I) 11 at para 19.
[3] Ibid.
[4] Ibid at para 43.
[5] International Coal Pte Ltd v Kristle Trading Ltd, [2009] 1 SLR(R) 945 at 82.
[6] Ibid at para 44.
[7] Ibid at para 46.
[8] P v Q, [2017] EWHC 148 at para 68(3)(d).
[9] CZT v CZU, [2023] SGHC(I) 11 at para 49.
[10] Ibid at para 50.
[11] Duke of Buccleuch v The Metropolitan Board of Works (1872), LR 5 HL 418
[12] CZT v CZU, [2023] SGHC(I) 11 at para 51.
[13] Ibid at para 52.
[14] CZT v CZU, [2023] SGHC(I) 11 at para 52.
[15] Ibid at para 53.
[16] Ibid.
[17] CZT v CZU, [2023] SGHC(I) 11 at para 58.
[18] Ibid at para 60.
[19] Ibid.
[20] Ibid at para 61.
[21] Ibid at para 67.
[22] CZT v CZU, [2023] SGHC(I) 11 at paras 65, 69.
[23] CZT v CZU, [2023] SGHC(I) 11 at para 60.
Bruce Reynolds and Sharon Vogel have published the second edition of A Guide to Canadian Construction Insurance Law, published by Thomson Reuters. It covers new and important developments since the first edition was published in 2013.
This book is a key risk management tool for participants in the Canadian construction industry and lawyers as it provides a comprehensive review of the many types of insurance products applicable to Canadian construction projects and summarizes relevant case law. It is written in plain language and is accessible. It is based on the authors’ extensive experience in respect of construction insurance.
This resource covers the key insurance policies critical to any construction project, including:
With the new edition, readers will benefit from a thorough analysis of updated case law throughout the text, including the Supreme Court of Canada’s watershed decision in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., as well as a host of decisions from courts of appeal across Canada.
The book also features significant updates to the commentary, including most notably in sections on Conditions and Warranties, Subrogation, Policy Interpretation, Builders’ Risk Policies, the Resultant Damage Exception, the relationship between CGL Coverage and Builders’ Risk Coverage, Pollution Insurance, Coverage for Additional Insureds, and Relief from Forfeiture, along with several brand new sections including but not limited to the Reasonable Expectations of the Parties, and the Priority of Concurrent Policies.
For more information on the second edition and to purchase, click here.
Singleton Urquhart Reynolds Vogel LLP is pleased to welcome new associate David Leck to the firm.
David Leck is an Associate in the Construction and Infrastructure Practice Group at Singleton Urquhart Reynolds Vogel LLP.
David’s practice focuses on all facets of the construction industry, acting for owners, general contractors, sureties, architects, engineers, design professionals and consultants. He advocates and advises on claims for delay, deficiencies, breach of contract and insurance matters, as well as construction lien and breach of trust actions. David also enjoys working with clients and subject matter experts on complex technical issues – always seeking to achieve a reasonable and cost-effective resolution.
Where disputes cannot be resolved, David has the experience and expertise to serve as a zealous advocate for his clients, having appeared regularly before the Ontario Superior Court of Justice, as well as various administrative boards and tribunals.
Singleton Urquhart Reynolds Vogel LLP is proud to announce that six of its lawyers have been featured in Who’s Who Legal Canada: 2023. John Singleton, Bruce Reynolds, Sharon Vogel, Stephen Berezowskyj, Jesse Gardner and James Little have been named leading lawyers in the area of construction law. Bruce and Sharon have also been named North America’s Best Construction Law Global Thought Leaders.
Please join us in congratulating our esteemed practitioners:
“John Singleton, K.C. has real expertise in construction law. He excels in complex and challenging construction disputes.”
“Bruce Reynolds is a strategic thinker who is able to find practical solutions to complex problems. He has a vast knowledge of surety and construction law. He is Canada’s top construction lawyer.”
“Sharon Vogel is a very hard working and intelligent construction lawyer. She is an internationally respected counsel and a brilliant advocate.”
“Stephen Berezowskyj is a deeply experienced lawyer. He possesses extensive knowledge of construction, scheduling and delay matters.”
“Jesse Gardner is a professional, approachable and extremely knowledgeable lawyer. He has the ability to turn things around very quickly. He is an amazing practitioner.” (Future Leader)
“James Little is a keen-minded lawyer with clear strategies to advocate for his clients. He has deep experience and knowledge of the infrastructure sector. He is a rising star with a bright future.” (Future Leader)
Who’s Who Legal identifies the foremost legal practitioners in 35 areas of business law around the globe. Who’s Who Legal: Canada is a special report by the publication that provides an in-depth analysis of the Canadian legal market. For more information, please visit Who’s Who Legal.
Singleton Urquhart Reynolds Vogel LLP is a Canadian national law firm that specializes in the Construction and Infrastructure, Insurance, and Real Estate sectors.
The firm consistently ranks first among Canadian construction and infrastructure firms and features prominently in the delivery of Commercial Litigation, Corporate-Commercial and Employment Law services.