



COURT OF APPEAL FOR ONTARIO

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

DATE: 20120622

DOCKET: C54604

Goudge, Juriansz and Ducharme JJ.A.

BETWEEN

Penn-Co Construction Canada (2003) Ltd.

Plaintiff (Respondent)

and

Constance Lake First
    Nation, Constance Lake Education Authority
, Donald Courtnage, Paul Allan
    Seguin c.o.b. as Anokii & Associates, Anokii & Associates, Eric Leat and
    The Attorney General of Canada representing The Minister of Indian Affairs and
    Northern Development

Defendants (Appellants)

AND BETWEEN

Constance Lake First
    Nation and Constance Lake Education Authority

Plaintiffs by Counterclaim (Appellants)

and

Penn-Co
    Construction Canada (2003) Ltd.
, Penn-Co Construction Canada Ltd.,
    Northern Indemnity, Inc., St. Paul Guarantee Insurance Company and Travelers
    Guarantee Company of Canada

Defendants by Counterclaim (Respondent)

and

AAA Electric 1988 Ltd.,
    676550 Ontario Inc. carrying on business as GT Plumbing & Heating, C.
    Villeneuve Construction Co. Ltd., Crane Steel Structures Ltd., C.D.P.
    Enterprises Ltd. and A P S Engineering

Third Parties

Francis J. Thatcher, Mary D. Bird and Graeme Mew, for
    the appellant

Colin R. MacArthur, Q.C. and James A. Mercury, for the
    respondent

Heard:  June 14, 2012

On appeal from the order of Justice Douglas C. Shaw of
    the Superior Court of Justice, dated October 11, 2011.

ENDORSEMENT

[1]

At issue in this appeal is whether the ordinary two-year limitation
    period for a breach of contract claim applies to the counterclaim issued by the
    appellants, Constance Lake First Nation and Constance Lake Education Authority
    ("Constance Lake"), on July 21, 2009. The motion judge held that it
    did, and granted an order of summary judgment dismissing the counterclaim as
    being statute-barred under the
Limitations Act
, 2002.

[2]

Constance Lake raises new two issues on this appeal which were not
    raised before the motion judge. Because of the result we have reached, we do
    not need to address the respondent's argument that it is unfair to deal with
    these issues for the first time on appeal.

[3]

The appellants first argument is that the counterclaim is not
    statute-barred, because Constance Lake has or at all material times had an
    extant arbitration with the respondent, Penn-Co Construction Canada (2003)
    Limited, which it says is either still going or was terminated by order of the
    Court in 2008. Either way, the appellant contends that s. 52 of the
Arbitration
    Act
, 1991, S.O. 1991, c. 17, suspends the limitation period sufficiently
    to render its counterclaim timely.

[4]

The necessary first step in this argument is that an arbitration must
    have been commenced. The appellant argues that this step was accomplished by
    letter from its counsel to the respondent's counsel dated January 16, 2006. The
    appellant contends that this letter complies with s. 23 (1) of the
Arbitration
    Act
, 1991, which provides as follows:

23. (1) An arbitration may be commenced in any way
    recognized by law, including the following:

1. A party to an arbitration agreement serves on the other
    parties notice to appoint or to participate in the appointment of an arbitrator
under the agreement
.

2. If the arbitration agreement gives a person who is not a
    party power to appoint an arbitrator, one party serves notice to exercise that
    power on the person and serves a copy of the notice on the other parties.

3. A party serves on the other parties and notice demanding
    arbitration
under the agreement
.  (Emphasis added)

[5]

An understanding and resolution of the first issue requires some
    context, and a brief recitation of the relevant facts. In June 2003, the
    parties entered into a standard-form contract for the construction of a school.
    The dispute resolution provisions of the building contract provided for a
    tri-level procedure for the resolution of any disputes: negotiation with the
    assistance of the Consultant; mediation; and arbitration. By the summer of
    2005, several deficiencies were noted regarding the respondent's work and
    efforts were undertaken to remediate these deficiencies.

[6]

These efforts did not succeed. In December 2005, Constance Lake issued a
    notice alleging that the respondent was in default under the contract, and that
    it had five days to correct the default or to provide a satisfactory schedule
    for the correction of the default. In the same month, the respondent's counsel
    served notice upon Constance Lake of its intent to proceed with mediation to resolve
    the parties' ongoing disputes under the contract.

[7]

In the letter of January 16, 2006, upon which the appellant relies,
    counsel for Constance Lake proposed an alternative approach of dispute
    resolution. The suggestion was that the parties dispense with the provisions
    under their own contract and proceed directly to arbitration pursuant to CCDC
    40 Rules for Arbitration of Construction Disputes, with no right of appeal of
    the arbitral decision, save and except as provided by sections 20.1 - 20. 5 of
    the Rules.

[8]

On January 20, 2006, counsel for the respondent wrote back to counsel
    for Constance Lake, proposing instead yet another and less formal approach,
    that of a neutral third-party "peer review." Counsel for the parties
    then engaged in several more exchanges, each expressing, in effect, a general
    willingness to consider a "peer review" process, but failing
    ultimately to agree upon the details of the process to be followed, including
    who would serve as the neutral third-party arbitrator. In the result, and
    despite the parties best efforts, the proposal of a neutral-party "peer
    review" dispute resolution process failed, and was abandoned by no later
    than mid-May 2006, as found by Pierce J when she decided the respondents 2007
    motion for mandatory arbitration.

[9]

Thus, by mid-May 2006, the parties had not only long since forsaken the
    three-step dispute resolution procedures under the contract, but they had also
    failed to agree upon any mutually acceptable alternative dispute resolution by
    peer review outside the contract. They had not followed the arbitration
    process in their contract, nor did they have a new arbitration agreement.

[10]

In
    these circumstances, we do not agree with the appellants submission that the
    parties had commenced an arbitration within the meaning of s. 23 of the
Arbitration
    Act
, 1991, by virtue of the letter of January 16, 2006, or indeed by
    virtue of any of the correspondence exchanged between the parties' counsel
    during the relevant period. The parties discussions never bore fruit, never
    advanced beyond mere proposals for an arbitration agreement. Absent a notice
    under an arbitration agreement, s. 23 of the
Arbitration Act
, 1991,
    has no application. Therefore, there can be no genuine issue for trial on
    whether a period of time might be excluded from the computation of the
    limitation period, as provided by s. 52(2) of the Act.

[11]

In
    our view, the Counterclaim is statute-barred, because it was not issued until
    July 2009, more than three years after the parties failed to commence an
    arbitration under the building contract or under any other agreement.

[12]

The
    second argument advanced by the appellant is that the respondent is estopped
    from pleading a limitations defence. Before the motion judge the appellant's
    position was that the respondent had waived its right to a limitations defence
    because it had agreed that Constance Lake could replace the statement of
    defence and counterclaim which Constance Lake had improperly served before the
    statement of defence and counterclaim was issued.

[13]

Now,
    before this court, the appellant relies upon the doctrine of estoppel to
    suggest that the respondent's 2007 motion for mandatory arbitration, the motion
    rejected by Pierce J. in reasons released on September 20, 2007, and the
    ensuing appeal from her decision, created a procedurally confusing situation
    "which can be viewed as having caused or contributed to the timing of the
    commencement of the [appellant's] Counterclaim."

[14]

We
    disagree. None of the essential factual elements required to make out a case of
    estoppel is present in this case. There is no evidence, for example, that the
    respondent made any promise or assurance that it would not rely upon the
    limitations defence. There is also no evidence that Constance Lake relied upon
    any alleged representation, or that it ever acted on any such representation.
    It follows that estoppel raises no genuine issue requiring a trial.

[15]

For
    these reasons, therefore, we find no basis for interfering with the findings of
    the motion judge, and we dismiss the appeal accordingly.

[16]

The
    parties have agreed on the quantum of costs payable to the successful party.
    The appellant shall pay to the respondent costs fixed in the sum of $15,000,
    including disbursements and all applicable taxes.

S.T. Goudge J.A.

R.G.
    Juriansz J.A.

Ducharme
    J.A.


