The Superior Court decision in Maisonneuve v. Clark makes two findings about the limitation of arbitral proceedings.
First, when a party applies for an order referring a dispute to arbitration, the court has the jurisdiction to determine the timeliness of the arbitration pursuant to s. 7(2) of the Arbitration Act.
Second, where an arbitration clause requires the parties attempt to resolve a dispute prior to requesting arbitration, arbitration won’t become an appropriate remedy (and the claim pursued in the arbitration will not be discoverable) until the satisfaction of that requirement:
[46] In at least two cases, Ontario courts have held that, where the parties have agreed to exchange information, negotiate or mediate prior to arbitration, the limitations clock does not begin to run until they have done so.
[47] In L-3 Communication SPAR Aerospace Limited v. CAE Inc., 2010 ONSC 7133 (CanLII), Kershman J. considered the limitations applicable to a notice of arbitration by CAE issued pursuant to a contract with L-3 that specified that the “price and other adjustments that are not agreed between the parties may be referred to arbitration … by either party”. He held that CAE’s request to arbitrate would have been premature if attempts to negotiate a price adjustment had not yet taken place. As a result, until the failure of negotiations, an arbitration would not be an appropriate proceeding and limitations did not begin to run. Since the notice to arbitrate was served within two years of L-3’s refusal to engage in further negotiations, the arbitration was not time-barred.
[48] In PQ Licensing S.A. v. LPQ Central Canada Inc., 2018 ONCA 331 (CanLII), the Court of Appeal dismissed an appeal of an arbitrator’s ruling rejecting a limitations defence. The parties entered into a franchise agreement whereby they had to engage in mediation of any dispute before initiating arbitration. The arbitrator concluded that arbitration was not appropriate within the meaning of s. 5(1) of the Limitations Act until after the parties had mediated or one of the parties had refused to do so. Although the franchisee served a notice to arbitrate almost four years after the parties’ contract was rescinded, it was within two years from the franchisor’s refusal to respond to a notice to mediate. The Court of Appeal upheld the arbitrator’s decision that, in the circumstances, the arbitration proceeding was not time-barred.
[49] Applying these decisions to this case, if I find that Arbitration Clause required the parties to attempt to resolve the Excluded Issue prior to requesting arbitration, then arbitration did not become appropriate until this occurred. As a result, the two-year limitation period would not have begun to run until Maisonneuve realized, or ought to have realized, that Clark refused to engage in any discussions on the issue.
