Case in point – the 2024 judgment of the British Columbia Supreme Court – Montaigne Group Ltd. v St. Alcuin College for the Liberal Arts Society, 2024 BCSC 1465.
Montaigne Group Ltd. is a development company. St. Alcuin College owns land in North Vancouver, British Columbia (the “Land”). Montaigne agreed to build a four-storey building on the Land. The agreement contained a binding arbitration clause.
With construction still not complete, St. Alcuin terminated the agreement, claiming breaches by Montaigne.
Montaigne filed a lawsuit, despite the agreement’s arbitration clause, and filed Certificates of Pending Litigation (“CPL”) at the Land Title Office. St. Alcuin defended the action and applied to strike the CPLs and portions of Montaigne’s claim. St. Alcuin’s actions were costly – disentitling it to arbitration.
St. Alcuin turned to the British Columbia Arbitration Act – the legislation that applies to arbitration agreements. Pursuant to the Arbitration Act, if a party to an arbitration agreement commences a legal proceeding in court instead of arbitration, the other party may apply to that court to stay the proceeding. In other words, to suspend the proceeding.
However, there is a caveat – the party applying for stay of proceeding, must do so before it submits “its first response on the substance” of the dispute. The Court concluded that this was not the case in this matter, and found for Montaigne.
The Court held:
1. St. Alcuin did not meet the technical requirement under the Act for a mandatory stay of proceeding.
St. Alcuin’s conduct – bringing a motion to strike portions of the other party’s claim – was “a step in the proceeding”. The motion to strike addressed the substance of Montaigne’s claim, and was used to advance St. Alcuin’s position in the litigation. Further, it sought remedies.
By bringing the motion to strike, St. Alcuin made a choice – court of law over arbitration.
2. Second, St. Alcuin waived its right to arbitration of the dispute since it chose to proceed with litigation.
St. Alcuin’s application for a stay of proceeding, heard about one year after first delivering it to the plaintiff, was not timely. It first sought a tactical advantage to advance its position in the litigation, bringing a motion to strike parts of Montaigne’s claim.
3. Third, St. Alcuin did not follow the procedures under the agreement, such as attempting to resolve the dispute by way of mediation. Such conduct was seen as “inconsistent with a desire to have the dispute resolved through arbitration”, the Court held.
Arbitration can be less costly and more time-efficient compared to litigation. Arbitration is also typically confidential, which businesses often see as a major advantage, since a company’s reputation might be damaged should the company be involved in litigation, which the public has access to.
Arbitration clauses are mandatory, except when a party takes a “step” in a court proceeding or does something to waive its right to arbitration. Here, St. Alcuin did both; the Court held that St. Alcuin gave up its arbitration rights.
If a party wishes to resolve its case by arbitration, it should act promptly and should not take steps that the Court might interpret as a waiver of such right.
Link to judgment:
https://www.canlii.org/en/bc/bcsc/doc/2024/2024bcsc1465/2024bcsc1465.html
