In a recent decision, J.P. Thomson Architects Ltd. v. Greater Essex County District School Board, the Court of Appeal for Ontario clarified the interpretation of a dispute resolution clause that stipulated when parties must request mediation and/or arbitration. The ruling serves as a useful reminder that timelines in dispute clauses are occasionally subject to challenge and should be closely monitored by parties so that they can best take advantage of contractually agreed-to dispute resolution mechanisms.
Relevant facts
In 2016, J.P. Thomson Architects Ltd. (Thomson) won two contracts with the Greater Essex County District School Board (the Board). The first made Thomson an approved vendor of record, and the second hired them to perform architectural services for two new schools. Both contracts included a dispute resolution clause that, among other things, provided for
- mediation for any disputes arising out of the contracts “which cannot be resolved by the parties within thirty (30) days of the dispute arising”
- arbitration “[i]n the event that any dispute between the parties has not been resolved by such mediation within thirty (30) days following selection of the mediator”
On October 12, 2021, Thomson sent a letter to the Board requesting mediation of two disputes:
- The first dispute related to an August 2020 letter from the Board raising concerns about Thomson’s performance. Thomson addressed these concerns, but in March 2021, the Board sent a second letter advising that Thomson’s response was inadequate and barring Thomson from bidding on future work for two years.
- The second dispute related to a June 2021 request from Thomson about the calculation of its fees. The Board refused the request in part on July 28, 2021. Thomspon requested a reconsideration, but the Board refused on September 23, 2021.
The Board refused to appoint a mediator, arguing that the dispute resolution clause required mediation to be sought within 30 days of the dispute arising and that the disputes raised by Thomson were out of time. The Board took the same position when Thomson later served a notice to arbitrate. As a result, Thomson applied to the Court for an order appointing an arbitrator.
The Superior Court decision: mediation is out of time
The application judge agreed with the Board, holding that the dispute resolution clause clearly required Thomson to request mediation within 30 days of a dispute arising. In coming to this conclusion, the judge relied on her interpretation of the purpose of the clause: to provide an alternative mechanism to deal with disputes between the parties promptly when they arise.
The application judge went on to make several findings about the scope of the disputes raised by Thomson, finding that they had already been resolved by the parties. In particular, the judge found
- The first dispute was resolved when Thomson agreed to undertake remedial action. Even if the March 2021 letter gave rise to a new dispute, Thomson did not request mediation within 30 days.
- The July 2021 letter resolved the dispute. Thomson’s request for a reconsideration did not extend the deadline to request mediation.
As a result, Thomson’s application to the Court to appoint an arbitrator was dismissed.
The Court of Appeal decision: no deadline imposed
The Court of Appeal overturned the application judge’s decision, finding that she erred in her interpretation of the dispute resolution clause and in making findings about the scope of the parties’ dispute. The Court of Appeal granted the application, ordered that mediation proceed within 60 days and held that Thomson retained the right to seek arbitration should the parties fail to resolve their dispute.
The proper interpretation of the dispute resolution clause
The Court found that, properly construed, the dispute resolution clause did not require the parties to seek mediation within 30 days of a dispute arising. It instead set a minimum 30-day period for the parties to attempt to resolve the dispute before they sought mediation. This interpretation aligned with the language of the dispute resolution provision, the terms of the contract as a whole and the commercial relationship between the parties.
In particular, the Court found that in light of the longstanding and complex relationship between the parties and the context of the contract as a whole, it would not make sense to require the parties to serve a notice of mediation every time they were unable to resolve a dispute within 30 days.
The arbitrator determines the scope of the parties’ dispute
The Court also held that the application judge should not have determined the scope of the parties’ dispute. This should have been left to the arbitrator, as
- The dispute resolution clause gave the arbitrator jurisdiction over any dispute between the parties “arising out of or relevant to” the contracts.
- The general principle is that the arbitrator is best positioned to determine the scope of the dispute and their jurisdiction.
Key takeaways
As this case highlights, dispute resolution clauses are critical in outlining parties’ rights with respect to resolving contractual disputes. Parties should approach drafting and administration of these clauses with care. In this case, the Court of Appeal was not prepared to read in deadlines for dispute resolution that were not there. If a contract requires action within a specific timeframe, the language must clearly say so.
