Ontario Superior Court defers "jurisdictional" objections based on limitation defence and non-adherence to pre-arbitration procedural steps to arbitral tribunal
The City of Kingston ("the City") contracted Cruickshank Construction ("Cruickshank") to perform construction services for the City. Under the construction contract, the parties agreed to resolve disputes through arbitration.
When a dispute arose, Cruickshank applied to the Court to appoint an arbitrator. In response, the City did not deny that there was a valid arbitration agreement between the parties. Rather, the City cross-applied asking the Court to determine that any arbitrator would lack jurisdiction due to its limitation defence and due to Cruickshank's alleged failure to comply with mandatory procedural pre-arbitration steps.
On the issue of an arbitrator's jurisdiction regarding the limitations defence, the Court stated "the fact that there may be a defence on the merits available to a party does not undermine the jurisdiction of an arbitrator."
The Court emphasized the Supreme Court of Canada's affirmation of the competence-competence principle: "[t]he policy that parties to a valid arbitration agreement should abide by their agreement goes hand in hand with the principle of limited court intervention in arbitration matters." Given this, the Court stated that section 6 of the Ontario Arbitration Act, 1991 is the "dominant" approach and therefore it did not see how coming before it would be more efficient, affordable or proportionate than going to arbitration.
On the issue of procedural pre-conditions to arbitration, the Court held that a jurisdictional argument could potentially be raised if it were found that Cruickshank failed to adhere to the mandated pre-arbitration steps. However, the Court left this issue to be decided by the arbitrator, as it was of the view that summary judgement on the issue was inappropriate.
The Court's decision further reinforces the judicial trend of enforcing arbitration agreements and assiduously respecting the competence-competence principle. It is clear that there are only "narrow circumstances" as to when a Court may rule on an arbitrator's jurisdiction in the first instance. On this point, the Court has clarified that a limitations defence is not a question of jurisdiction, but rather a question of admissibility of a claim, which is best determined by an arbitrator.
Likewise, on the issue of procedural pre-arbitration steps, the Court decided if the issue of adherence to such steps is heavily fact-laden, and thus arguable, the issue is best left to the arbitral tribunal to decide in the first instance. Notably, however, the parties did not appear to have referred the Court to any authority on the correct approach to assessing the legal effect of any non-compliance with mandatory pre-arbitral procedural steps. In particular, the Court was unable to resolve whether it should be treated as an issue of admissibility of the specific claim (to be determined by the arbitrator) – which we would suggest is the correct approach – or an issue of jurisdiction (to be finally determined by the court). In the end, the Court determined that even if it were an issue of jurisdiction it should first be determined by the arbitrator.