arbitration and mediation of construction defect cases

5/11/2018 Arbitration and Mediation of Construction Defect Cases - slidepdf.com

http://slidepdf.com/reader/full/arbitration-and-mediation-of-construction-defect-cases

758A03-CAL

ARBITRATION AND MEDIATION OF

CONSTRUCTION DEFECT CASES:

NEW PERSPECTIVES ON ACHIEVING

SUCCESSFUL RESOLUTIONS

IVAN J. DERER

MEGAN L. MCMAHON

Gowling Lafleur Henderson LLP



I.

II.

III.

IV.

V .

VI.

VII.

v .

vi.

TABLE OF CONTENTS

PAGE

INTRODUCTION 3

IMPEDIMENTS TO ADR 5

TRADITIONAL LITIGATION REVISITED 9

COIvJ:MONCONSTRUCTION DISPUTES 13

MAXIMIZING PROSPECTS FOR SUCCESS -MEDIATION 14

ARBITRATION 18

i.

ii.

Practical Considerations......................................................................... 18

Arbitration Legislation - Introduction 19

The Arbitration Act or the ICCA 20

Remedies Against Awards under the Act or the ICCA. 26

Powers of the Arbitral Tribunal 39

Excluding the Act by Agreement. 40

iii.

iv.

CONCLUSIONS 40



3

I. INTRODUCTION

ADR is often supported by well-intentioned people who, for a variety of

reasons, are anxious to reorganize society and procedures of courts with

naive, theoretical concepts of humanity and efficiency ... society's decent

people need the no nonsense, straightforward procedures of courtroom

litigation to fight unreasonable claims and not the "soft" procedures ADR

offers ... 1

How practice and perception involving dispute resolution has changed in less than fifteen

years.

Alternative dispute resolution ("ADR"), in large measure as a reflection of real and

perceived deficiencies with traditional litigation, has become a fixture in the legal

profession and in case resolution.

Dispute resolution, either through traditional litigation or ADR, is very much an exercise

in common sense. It has been observed that laws essentially institutionalize accepted

social attitudes, create legal rights and contribute to a general social ordering.' However,

there is not always agreement on the meaning of laws or how they should be applied.

Such disagreements must then be resolved with principal regard to laws and through the

application of common sense. To take but one example of this approach, Sopinka, 1.

observed in Snell v. Farrell,3 that the legal concept of causation is essentially a practical

question of fact which can best be answered by ordinary common sense. Contracts

1 Chie f J us tic e A . McEa ch ern , Chief Justice Puts Boots to ADR, L aw yers W e ek ly (2 6 O cto be r, 1 98 9)

2 AJ. Pirie, Alternative Dispute Resolution, Skills, Science, and the Law (Irwin Law: 2000), p.18

[hereinafter "Pirie"]

3 [1 99 2] S. C.R . 31 1 at 32 8



4

between parties are typically viewed and analyzed by the courts with regard to the plain

and ordinary meaning of words employed. Where insurance contracts are concerned,

there is the added dimension of regard, in some circumstances, to the "reasonable

expectations It of the parties to the contract.

The theme of common sense spills over into the realm of ADR. In Alternative Dispute

Resolution by Andrew Pirie, the following observation is made:

ADR can mean different things to different people. Some may suggest

ADR is not an enormous concept but is simple common sense. If there isdisagreement on what is common sense, others may portray ADR as

mostly about saving time and money in dispute resolution - the

achievement of economic efficiencies. Still others may say that ADR

stands for a range of formal and informal processes that exist as

alternatives to litigation ... 4

Achieving a common sense resolution to disputes employing traditional litigation is

increasingly viewed as too expensive, protracted and destructive to prudent business

objectives. Outcomes are too uncertain and often times viewed as unsatisfactory from an

objective point of view. There is no better example of such drawbacks as in multi-party

complex construction disputes/litigation. Utilizing ADR mechanisms is typically more

cost and time efficient with outcomes that are more certain and case appropriate.

This paper will address multiple aspects of ADR, with principal focus on private

mediation and arbitration. The current state of ADR will be reviewed. With particular

regard to construction and other commonly complex disputes, commentary will be

4 Pi ri e, supra fn2 at p. 4



5

offered on ways and means, primarily with the infusion of flexibility, creativity and

focus, of achieving even greater successes with ADR. The benefits and efficiencies of

ADR are influenced to a large degree by the attitude demonstrated towards it by our

courts. A collection of recent Alberta cases will be referenced to demonstrate the

growing support from our courts for the utilization of ADR mechanisms and the dispute

resolution results that are so achieved.

II. IMPEDIMENTS TOADR

Itmust be acknowledged that not all cases or disputes are appropriate for or capable of

resolution outside of traditional litigation channels. Some commonly referenced

examples of such casesare:

(a) disputes in which there is a desire or need to create legal precedent;

(b) constitutional disputes;

(c) select disputes in the corporate context - protection of intellectual

property, corporate takeovers, etc.;

(d) circumstances in which it is important to one or more parties to a dispute

to establish and maintain certain reputation in the face of claims.

In reality, the observation that some of the above noted types of cases are not suited to

ADR is rooted in misguided perceptions, on the part of parties and their counsel,

concerning litigation risk and likely judicial outcomes. Where disputes are concerned,

there are always at least two sides to every story. In many cases, notwithstanding the

facts, circumstances and applicable law to a given dispute, the desire to create or



6

reinforce legal precedent can just as easily result in negative as opposed to positive

outcomes.

Beyond examples of cases where there might exist bona fide impediments to the

employment of ADR mechanisms, there continue to exist systemic impediments to ADR

- factors and considerations that are unrelated to the merits or subject matter of a given

case. Often cited factors in this regard are concisely catalogued in the following passage

from Beyond Winning - Negotiating to Create Value in Deals and Disputes, by Robert

Mnookin:

The system won't allow it. People place the blame on the culture of law

firms, the adversarial nature of our judicial system, the temptation to act

out of self-interest, the rewards of playing hardball, the inflated

expectations of clients, and the constraints of bargaining in the shadow of

the law. The incentives to act combatively, selfishly, or inefficiently can

be compelling. As we all know, however, the costs of adversarial tactics

can be ruinous. Deals blow up. Cases don't settle. Expenses escalate.

Relationships fail. Reputations suffer. Court dockets jam up.

Commitments fall apart. Justice is delayed. And opportunities to create

value, to make both sides better off - slip away.'

Regrettably, misguided impediments to a consideration and utilization of ADR often

resides with counsel and not the parties to the dispute. Many counsel, through words and

deeds, highlight the following tendencies:

(a) timmg and concept of ADR runs contrary to traditional training and

practice of litigators;

5 R.H. Mnookin, Beyond Winning - Negotiating to Create Value in Deals and Disputes (Cambridge:

Belknap Press of Harvard University Press, 2000) at p. 3



7

(b ) unrealistic assessment of law and litigation risk;

(c) fear and scepticism of the unknown and unfamiliar;

(d) lack oftime and motivation (and occasionally procrastination).

Some parties to a dispute, and their counsel, bristle at the perception that ADR employs

undesirable "touchy-feely" aspects. The vast majority of civil cases settle prior to trial.

Too often such settlements occur on the eve of trial and do not represent maximum

benefit to the parties or reflect the full potential of a litigator's skill set. ADR, for the

most part, maximizes benefits to parties through earlier settlements to disputes. Thus,

working within our adversarial traditional litigation system, ADR serves to simply

accelerate settlement and in the process often enhance benefits to the parties.

Many disputes referred to ADR are appropriately addressed against the backdrop of the

relevant legal framework that applies to them. Nevertheless, beyond a knowledge of the

law, ADR, and in particular mediation, is rendered more effective if conducted, by both

mediator and opposing counsel, with a grounding in and sensitivity toward non-legal,

multidisciplinary factors. In this regard, knowledge and skills relevant to the effective

conduct of ADR mechanisms can be found in disciplines such as psychology of human

behaviour, economics, business management, etc.". It has been observed that the best

litigators have always been dispute resolvers, skilled in many of the techniques which are

6 Pirie, supra fn2 at 26



8

fundamental to ADR. 7 .Obviously, techniques associated with dispute resolution go

beyond knowledge of the law.

To the extent "touchy-feely" aspects to ADR are viewed as a negative, it must also be

appreciated that the type of dispute, the mediator retained and the style of mediation

employed dictates the atmosphere of the process. For example, a mediation that is

focused more on interests as opposed to an assessment of litigation risks involving

disputes that fall in the family or personal injury realm might have more of a "touchy -

feely" aspect to it. Mediations involving sophisticated parties, complex issues and

considerable sums of money typically involve a more evaluative, business-oriented and,

at times, adversarial process than is the norm. Mediators with legal training are uniquely

positioned to be proactive and evaluative in such mediations, with good success to be

anticipated.

Itmust also be stressed that mediations in particular are rendered more successful by the

undesirable prospect of litigation proving necessary if resolution is not achieved. It is

important from the standpoint of balanced negotiations and the prospects for a

satisfactory resolution that the opposing parties perceive one another as determined to

achieve a fair and reasonable mediated settlement, failing which they have the

motivation, willingness and experience, along with their counsel, to see a particular

matter to a conclusion through traditional litigation channels.

7 G.F. S co tt, From Warriors to Peacemakers - Litigators and ADR, L aw yers W eekly, V olum e 1 5, N o. 4 2



9

As was previously observed, many if not most aspects of judicial decision-making are

rooted in common sense. Judges are human beings, albeit with legal training and judicial

expenence. It would be an unusual case where two individuals could agree on the

appropriate exercise of common sense with respect to all aspects of a given case, not to

mention one with multiple parties and complex issues as is characterized by construction

disputes. However, case appropriate decisions and dispute resolution can be enhanced by

the flexibility afforded to parties to a dispute in selecting a mediator or arbitrator who has

specialized knowledge in the subject matter of a dispute, combined with training and

experience, particularly where mediation is concerned, in the resolution process. Some

judges are not well positioned to address specialized subject matter such as m

construction disputes. Similar considerations are apparent in court annexed or sponsored

mediation programs where, notwithstanding the welcome support of the judiciary to such

initiatives, certain restrictions with respect, for example, to mediator candidates, timing

for the mediation, and the method of mediation to be applied, can prove to be obstacles to

successful case resolution.

III. TRADITIONAL LITIGATIONREVISITED

In speaking of traditional litigation, it is worthwhile observing that viewing Europe and

North America collectively, there exist two very distinct civil justice systems. While the

merits of each system have been the subject of much comment over the decades,

ironically there are aspects to traditional litigation, particularly where the inquisitorial



10

system is concerned, that have some worthwhile application to the conduct of ADR in

Canada.

While judges in our common law adversarial system strive to remain detached, the

inquisitorial system espoused in many European countries is anything but. Lord Denning

best described the role of judges in the common law system in Jones v. National Coal

Boarcf when he stated:

In the system of trial which we have evolved in this country, the judge sits

to hear and determine the issues raised by the parties, not to conduct an

investigation or examination on behalf of society at large, as happens, we

believe, in some foreign countries ...His object, above all, is to find out the

truth, and to do justice according to law; and in the daily dispute of it the

advocate plays an honourable and necessary role.

A judge who enters the fray runs the risk of having his vision clouded by conflict. In

Jones, the judge interrupted excessively and on appeal, a new trial was ordered.

Yet entering the fray is the v'ery purpose of the decision-makers in the inquisitorial

system. It is the philosophy behind the inquisitorial model of litigation that the judge has

a duty to intervene and demand disclosure of facts, directs issues, and takes an active and

leading role in the trial. 9 The judge sets out the facts and the issues upon which the

inquiry will be conducted. Notwithstanding this direct involvement in the resolution

process, the adjudicator is expected to remain independent and impartial.

8 [1957] 2 Q.B. 55 at 63

9 D. G1aho1 t& M. Rott erdam, Toward an Inquisitorial Modelfor the Resolution of Complex Construction

Disputes (1998),36 C.L.R. (2d) 159



11

Taking the German system as an example, if the case is complex, the Court directs the

parties to submit written argument allowing it to delineate the issues in contention for

itself At the commencement of a trial, the court outlines the facts and issues so the

parties know in advance how the court views the case. This is obviously a departure

from the procedure with which we are familiar. The court in an inquisitorial system

embarks upon a discussion of the case at trial rather than hearing the parties' presentation

of the case.

The inquisitorial court has control of lay and expert witnesses. Parties and counsel have

no contact with witnesses before trial, except in unusual circumstances. The court admits

all evidence from the witness, but will assess its value. While counsel can challenge an

expert witness on grounds of prejudice, the court maintains control over the questioning.

Consistent with the court's duty to discover the truth, the document discovery process is

. 10an ongoing one.

The inquisitorial system strives to reach the truth in an expedient manner. Short time

lines are provided by which judgment must be rendered. While provision is made for

appeal from the decision or on a point of law, being granted the opportunity to appeal on

a point of law is rare, as it is limited to higher monetary values, and the party must show

the appellate court that the issue is one of fundamental importance. The appeal from a

decision is heard de novo by the appellate tribunal, where new facts and arguments may

la/bid at 172



12

be presented. This is limited only· by the party necessarily showing why the facts,

defences or arguments were not raised in the first instance.

The adversarial approach is counsel driven - the advocate presents the case as he or she

sees fit. In contrast, the inquisitorial approach is driven and controlled by the court. The

court determines the issues, the procedure and the facts upon which the issues will be

determined. The parties are not encouraged to discuss or resolve issues independently, 11

but the time and cost savings are potentially great.

Aspects of the inquisitorial system have been transposed into international arbitration,

particularly in civil law jurisdictions where the parties are not so entrenched in the

traditional adversarial approach to dispute resolution.F In more recent legislative

enactments in Alberta, arbitrators have the power to utilize mediation, conciliation or

similar techniques if the parties consent.i'' It remains to be seen whether attitudes or

perception of the users of arbitrations will encourage this interactivity with arbitrators

during arbitrations.

11 D. G l ah ol t & M. Ro tt er dam, An ICC Model for the Resolution of Complex Construction Disputes (2002),

14 c.L.R. (3d) 173 at 177

12 H. Raeschke-Kessler , Making Arbitration More Efficient: Settlement Initiatives by the Arbitral Tribunal,

International Business Lawyer A pril 2002: 1 58 at 1 59

13 th e A ct, s.3 5; th e ICCA , s.5 , c.I-5



13

IV. COMMON CONSTRUCTION DISPUTES

Before proceeding further, it is useful to review the most common causes of construction

disputes which, based on two extensive surveys from the early 1990s, consist of the

following: 14

(i) contract provisions that unrealistically shift project risks to parties who are

unprepared to cover those risks;

(ii) unrealistic expectations of the parties, particularly owners who have

insufficient financing to accomplish their objectives;

(iii) ambitious contract documents;

(iv) contractors who bid too low;

(v) poor communications between project participants;

(vi) inadequate contractor management, supervision and coordination;

(vii) failure of participants to deal promptly with changes and unexpected

conditions;

(viii) a lack ofteam spirit or collegiality amongst participants;

(ix) a macho or litigious mindset on the part of some or all of the project

participants; and

(x) contract administrators who prefer to take disputes to a higher level, or to

lawyers, rather than taking responsibility for resolving the problem at the

source.

Obviously, this collection of common construction disputes can form the foundation of

expensive, disruptive and protracted litigation. However, many of these causes, rooted as

14 I.e. Szlazak, Haven't Been There,Haven't Done That:An Exploration of ConstructionIndustry

Partnership and Further Applications of the Concept in Other Contexts (1999), 41 c.L.R. (2d) 216 at 236



14

they are in poor planning, poor communication and lack of team play, are particularly

well suited to ADR and prudent "partnering" efforts in the lead up to either a mediation

or arbitration session, should such sessions ultimately prove necessary.

V. MAXIMIZING PROSPECTS FOR SUCCESS - MEDIATION

As can be seen, in most cases pursuing ADR makes good sense but there are a number of

obstacles that progressive-minded parties and their counsel face in steering a matter,

through mediation, to a time and cost effective resolution. The careful selection of an

appropriate mediator and style of mediation suited to the parties and their dispute, is

critical. Once selected, a mediator can assist in addressing any remaining hesitations that

might exist amongst certain parties with respect to the process and also coordinate

scheduling matters in circumstances where, with multiple parties, the exercise can be akin

to herding cats.

The selection of a mediator should be done with regard to a number of desirable

personality characteristics, many of which have been catalogued as follows:

• the patience ofJob

• the sincerity and bulldog characteristics of the English and the wit of the Irish;

• the physical endurance of the marathon runner

• the broken field-dodging abilities of a halfback

• the guile of Machiavelli

• the personality-probing skills of a good psychiatrist

• the confidence-retaining characteristic of a mute



15

• the hide of a rhinoceros

• the wisdom of Solomon

• demonstrated integrity and impartiality

• fundamental belief in human values and potential, tempered by the ability to

assess personal weaknesses as well as strengths

• hard-nosed ability to analyze what is available in contract to what might be

desirable

• sufficient personal drive and ego, qualified by willingness to be self-

effacing. IS

Where style of mediation is concerned, reference to a so-called mediation abacus'" is of

benefit, as follows:

Therapeutic . . . • ~ Just facts and law

Co-Mediator . . . • ~ Sole mediator

Same gender . . . • ~ Different gender

No intake process . . . • ~ Lengthy intake process

No intake documentation . . . • ~ Lengthy intake

documentation

. No consulting lawyers . . . • ~ Consulting lawyer required

No lawyers at sessions . . . • ~ Lawyers present

No solutions suggested . . . • ~ Solutions recommended

Memorandum not binding . . . • ~ Binding agreements/court

orders

Multiple short meetings . . . • ~ Long single sessions

Voluntary participation . . . • ~ Mandatory - court ordered

Private meetings (caucus) . . . • ~ All joint sessions

15 F.S. Mosten, Mediation Career Guide -A Strategic Approach to Building a Successful Practice (San

Francisco - John Wiley & Sons, Ltd., 2001) at 31 [hereinafter "Mosten"]

16 Ibid at p. 85



16

This abacus demonstrates the flexibility afforded to parties in the mediation context to

establish a structure and approach that is best suited for a given dispute. The bead

placements on the abacus reflect, for the most part, an evaluative and proactive mediation

approach, which is viewed by many parties as particularly suitable and appropriate to the

successful mediation of disputes.

With a general commitment secured from the parties to a dispute to a mediation, and a

success. There must, for example, exist sufficient evidence related to the dispute and a

mediator selected, a number of considerations apply aimed at maximizing prospects for

will amongst the parties to consider and thereafter conclude a settlement. Various court

sanctioned mediation programs in Canada reveal recent success rates of 65 to 75

percent.V Court annexed mediation programs tend to promote an interest-based approach

to the process, thus further restricting the flexibility of options to maximize prospects for

successful case resolutions. The above noted rates of success fall significantly short of

success rates experienced in the private realm of mediation where timing for and

structure of the mediation is left in the hands of the parties and their counsel. However,

in this latter scenario, subtle but persistent pressure from proactive counsel and mediator

to overcome reticence or procrastination by other parties or their counsel with respect to a

contemplated mediation is often necessary. Appropriate timing for an attempt at

resolution is unique in every case.

17 Keet, Michaela and Salamone, Theresa B: From Litigation toMediation: Using Advocacy Skilisfor

Success inMandatory or Court-Connected Mediation (2001), 64 Sask.L.R. 57; Mew, GraemeA Clash of

Cultures? Attitudes Towards Mediation and an Alternative Dispute Resolution in Canada, April 2002.



17

Because, and as a reflection of the high success rates of mediations, preparation cannot be

understated. Communication between client and counsel and between the parties, with

and without the participation of the mediator, is critical. Once again, as a demonstration

of flexibility that is afforded to parties through private ADR mechanisms, the laying of

proper ground work for dispute resolution can be custom crafted to the case at hand.

Particularly in more complex and sophisticated disputes, it is important to appreciate

multiple aspects to ADR18

- dispute prevention, dispute management, dispute resolution

and dispute processing. Within this framework, the concept of "partnering" has figured

prominently in construction matters and is a technique well suited to addressing large

projects involving long-term business relationships and the likelihood of regular

complications and disagreements between parties. In its broad application, "partnering"

has been well described, as follows:

Partnering is an energizing alternative management process designed to

help inter dependent organizations in joint undertakings identify concerns,goals and objectives and manage conflict such as large-scale construction

. 19projects ...

18 Pirie, supra f112at 41

19 R.A. Shearer, J.D. Maes and C.C. Moore, Partnering: A Commitment to Common Goals (1995),50

Dispute Resolution Journal 30



18

VI. ARBITRATION

(i) Practical Considerations

There are numerous benefits to proceeding with an arbitration in lieu of traditional

litigation, many of which benefits mirror the cause in favour of mediation. The parties

can exercise direct control over the selection of the decision-maker, there is flexibility in

the process, generally speaking an arbitration is more time and cost effective, privacy and

confidentiality can be maintained and, as with mediation, there is a greater prospect of

preserving long term business relationships through dispute resolution achieved through

ADR.20

As a further demonstration of flexibility that parties are afforded when addressing a given

dispute through ADR, the concept of a Med Arb is worth considering. In this scenario,

an ADR process is commenced as a mediation but if ultimately unsuccessful, the

mediator assumes the role of arbitrator. The prospect of the mediation being transformed

into an arbitration can pose an impediment to the full and candid disclosure that must

take place for mediation to enjoy any prospect for success. However, as a practical

matter, parties who have selected a specific candidate to fill the role of either mediator or

arbitrator generally have sufficient respect and trust in suchan individual so as not to feel

compromised through candid communication in the mediation phase. Parties should also

consider the reverse of the typical Med Arb scenario which sees a mediation process

20 Pirie, supra fn2 at 45



19

being facilitated by binding decisions imposed by the mediator/arbitrator on specific

issues that are impeding progress with respect to a global mediated dispute resolution.

(ii) Arbitration Legislation - Introduction

More than ten years ago significant changes were made to the Alberta Arbitration Act

("the Act"il

which were intended, in many respects, to mirror the framework utilized in

international trade arbitration. The changes were intended to ensure arbitration could be

employed as a real alternative to the litigation process, thus promoting business

efficacy." In achieving these goals, the Act was structured to generally reduce a court's

ability to interfere with. the process, and to increase the independence and control of the

arbitral tribunal over its own process. Now, after ten years in use, the Act seems to have

achieved these goals: arbitration is a real alternative to the litigation process, and courts

have shown deference to the awards and the process. It is critical for parties, intent on

seeing arbitration employed in dispute resolution, to structure their agreements clearly. It

is also important to possess an understanding of circumstances in which the courts mayor

should interfere with an arbitration process.

Arbitration under the Act is not the only arbitration alternative in Alberta. The parties

may specifically exclude the application of the Act by agreement, the International

21R.S.A. 2000, c .A -4 3 [ he re in af te r th e "Act "]

22Prof . C . Levy , The New Arbitration Act: Basic Principles and Philosophy, in The New Arbitration Act,

LESA De cembe r, 1991



20

Commercial Arbitration Act ("the ICCA,,23) may apply, or the arbitration may be

conducted under another legislative scheme. 24

(iii) The Arbitration Act or the ICCA

Before an arbitration agreement will be enforced, the provision dealing with arbitration in

the agreement must be found to be an arbitration agreement. Generally, Alberta courts

have shown a disposition toward promoting arbitration of disputes," but only if the

parties' intent to arbitrate is clear and mutually agreed - courts will not force parties to

arbitrate." Often, the parties will draft their own clauses for arbitration which may raise

issues of what rules will apply for any necessary arbitration, and whether the agreement

to arbitrate may be enforced. An arbitration agreement is specifically defined in section

l(l)(a) of the Act:

"Arbitration agreement If means, subject to subsections (2) and (3), an

agreement or part of an agreement by which 2 or more persons agree to

submit a matter in dispute to arbitration;

A permissive clause in an arbitration agreement does not amount to an agreement to

submit 'a matter to arbitration pursuant to the Act. In .l-Sons Inc. v. NMPaterson &

23 RS.A. 2000, c.I-5 [hereinafter the "ICCA"]

24 section 2(3) of the Act

25 Borowski v. Fiedler (Heinrich) Perforiertechnik GmbHi et al (1994), 158 AR 213 CQ.B.) [hereinafter

Borowski] ; Kvaerner Eviropower Inc. v. Tanar Industries Ltd. (1994), 157 AR 363 CC.A) [hereinafter

Kvaerner]

26 B.E. Kennedy Design v. Kibo Group 2001 ABQB 66 CQ.B.)



21

applicant sought an order appointing an arbitrator and compelling the respondent to

Sons,27 the applicant agreed to construct a grain elevator. Problems developed, and the

submit to arbitration. The arbitration clause in issue provided that either party "may

request" that the issues be arbitrated. The chambers' justice enunciated the first issue to

be decided as follows: have both parties agreed to submit matters to arbitration by that

clause? The answer determined was in the negative. The applicant was required to give

notice that it requested arbitration, but nothing bound the respondent to accept the

request. On appeal from the decision, the Court of Appeal concurred that the clause was

permissive, not mandatory.

No indicia of what constitutes an arbitration has been defined in the Act, but the case law

has set out factors that will be considered in determining this issue. In Prec is ion Dr il li ng

Corporation v. Matthews Equipment, Justice Mason summarized these factors."

(1) the parties have the right to be heard, to argue and to present testimonial ordocumentary evidence;

(2) that lawyers are present at the hearing;

(3) reasons for the award are required and that the decision IS final and

binding on the parties;

(4) the decision-maker has to decide between opposing arguments presented

by the parties on a given point as opposed to merely supplying a necessary

component of the contract for example;

27 1998 ABQB 877; appeal dismissed 1999 ABeA 237

282000 ABQB 499 (Q.B.) [hereinafter "Precision Drilling"] citing to Sport Maska Inc. v. Zittrer et al,

[1988] 1 S.c.R. 564 andMcPeakv. Herald Insurance Co. et al. (1991), 115 A.R. 83 at 87



22

(5) the decision-maker is called upon to choose among the various positions

put forward by the parties as opposed to making a decision in light of his

personal knowledge [i.e. opinion]; and

(6) impartiality is demanded of an arbitrator. It is, for example, inconsistent

with impartiality where the arbitrator is being paid by only one party.

In Precision Drilling, the parties disputed whether their agreement provided for dispute

resolution through arbitration, or whether it provided for dispute avoidance through a

valuation of share purchase price. Following the above six factors, the Court found that

four were met: the parties were entitled to submit information, the selection of the

decision-maker ensured he or she was impartial and neutral, the parties agreed to be

bound by the decision, and the agreement contemplated a decision, not an opinion. As a

result, the parties were directed to proceed to arbitration.

Many construction related agreements containing arbitration prOVISIOns are both

commercial and international in nature. If the underlying business relationship is a

commercial one, and there exists an international aspect, then a further analysis of the

arbitration agreement must be conducted to determine whether the ICCA may apply as

opposed to the Act. 29

The ICCA adopts into Alberta law the UNCITRAL Model Law on International

C . 1 Arb' . 30ommercia . itration. The UNCITRAL model applies to all international

commercial arbitration agreements and awards in Alberta. For an agreement to constitute

an "arbitration agreement" under the ICCA, it must merely provide that the parties submit

29the Act, s.2(1)(6)

3°the U nited N atio ns C omm issio n o n Intern ation al T rad e L aw on 2 1 Ju ne 1 98 5



23

to arbitration in disputes related to a legal relationship and it must be in writing." To

determine if the arbitration falls under the jurisdiction of the Act or the ICCA, the dispute

must have an international quality:

(i ) the parties have their places of business in different States;

(ii) the place of arbitration is outside the State where the parties have their

place of business;

(iii) a substantial part of the obligations of the agreement is to be performed

outside the State where the parties have their place of business; or

(iv) the parties have expressly agreed that the subject-matter of the arbitrationagreement relates to more than one country.i''

The relationship between the parties is a commercial one if it relates to the buying, selling

and exchange of commodities for profit in its ordinary and generally understood

meaning. 33 In Borowski a regional sales manager for an international manufacturer and

distributor of equipment sued his employer for damages arising out of a breach of his

employment contract. The employment contract contained an arbitration clause that

purported to apply the commercial arbitration rules of the America Arbitration

Association ("AAA"), and the laws of the State of Georgia.

The Court addressed two issues, first whether the dispute arose out of a commercial

relationship such that the ICCA applied, and if not, whether the parties had specifically

excluded the Act by agreement. The Court found that the parties had not specifically

31rcCA, Sch.2 Art. 7

32rcCA, Schedule 2, Article 1(3)

33Borowski, supra at fn25



24

excluded the application of the Act merely by referring to the AAA rules. Further, the

relationship between them was one of master and servant, not a commercial one.

The ICCA was brought before the courts in Alberta for the first time in Kaverit Steel and

Crane Ltd v. Kone34

where a party to a commercial agreement applied for a stay of

proceedings on account of an agreement to arbitrate. 'The agreement specifically

incorporated by reference the ICCA in the arbitration clause. However, some of the

parties to the litigation were not parties to the arbitration agreement, and some issues in

the litigation were not part of the reference to arbitration or did not directly arise out of

the contract.

The ICCA provides that the court shall refer a matter to arbitration unless it finds that the

agreement is null and void, inoperative or incapable of being performed. The power to

convenience can be read into this provision particularly since the purpose of adopting the

refuse to refer a matter to arbitration under the ICCA is very limited. No criteria of

international model into Alberta law was to promote the certainty of an international

arbitration scheme thereby promoting international trade and commerce." The Court of

Appeal in Kaverit best enunciated this principle:

With respect, the nub of the case is not whether the plaintiff raised

"legitimate II causes that cannot go to arbitration. On the contrary, the

agreement to arbitrate should be honoured and enforced whether or not the

plaintiff displayed great imagination in the pleadings. .

34 (1992), 120 A.R. 346 a t pa ra . 6 (C.A.)

35 Ibid a t pa ra . 49



25

The power to grantor withhold a reference under the International

Commercial Arbitration Act is very limited, and the statute does not

permit a decision on the test invoked by the learned Chamber's judge,

which resembles the forum conveniens test.36

Consistent with the concept that dispute resolution outside of the litigation process is

encouraged, the Court of Appeal confirmed that the ICCA permitted some issues between

the parties to go to arbitration while others continued within the litigation process. In

addition, the Court found that even in connection with those parties to the litigation that

were not parties to the arbitration agreement, the litigation would be. stayed until the

bi . I d 37ar itration process was comp ete .

After holding that the parties to the agreement were to proceed to arbitration

notwithstanding the additional interested non-parties, the Court revisited whether the

particular issues could be referred to arbitration."

The Convention [UNCITRAL] and Act [ICCA] thus covers bothcontractual and noncontractual commercial relationships. They thus

extend their scope to liability in tort so long as the relationship that creates

liability is one that can fairly be described as "commercial".

By definition, the ICCA applies to disputes arising out of a commercial relationship, even

if they are tortious. The commercial relationship between the parties in Kaverit was

created by and governed by the contract, and so all issues referred to the arbitration must

36 Ibid at para. 46-47

37 Ibid at para. 54

38 Ibid at para. 26



26

arise out of that contract." One of the allegations was framed in the tort of conspiracy,

the source of which allegation arose out of the contract - it was therefore arbitrable.

Even in complex builders' lien actions arbitration agreements will be upheld and matters

referred for arbitration. In Kvaerner'" some parties to the litigation were not parties to

the arbitration agreement. The Court of Appeal confirmed that the arbitration agreement

applied notwithstanding section 3 of the Builders' Lien Act" which prohibited parties

contracting out of its provisions. Public policy supported arbitration of disputes by way

of the ICCA or the Act and was not inconsistent with a parties' lien remedies. The Court

emphasized the strength of an arbitration clause by ordering a stay of all related

proceedings until the arbitration process was completed.

(iv) Remedies against awards under the Act or the ICCA

Not only will courts ensure that one party can compel the other party to the arbitration

agreement to attend, but once there, the courts have shown they are loath to interfere with

the arbitral tribunal's process and decision.

Both the Act and the ICCA set out the procedure by which arbitration will be conducted,

the powers of the arbitral tribunal and its jurisdiction. The Act is drafted to ensure that

the tribunal is independent and governs its own procedure so long as the process is

carried out in a fair and equitable manner. There is limited court interference permitted

39 Ibid at para 29-30

40 Kvaerner supra at FN25

41 R.S.A. 1980, c.B-12



27

and narrow avenues of recourse against the decision of the arbitrator. Section 6 of the

Act reads:

No court may intervene in matters governed by this Act, except for the

following purposes as provided by this Act:

(a) to assist the arbitration process;

(b) to ensure that an arbitration is carried on in accordance with the

arbitration agreement;

(c) to prevent manifestly unfair or unequal treatment of a party to an

. arbitration agreement;

(d) to enforce awards.

Section 6 has been strictly applied. In Alta. v. 562207 Alta. Ltd,42 the Court of Appeal

considered whether the chambers' justice ought to have interfered with proceedings given

the arbitration clause. On application by 562207 Alta. Ltd. for a declaration that certain

instruments made up the lease in question between the parties, the chamber's justice was

aware of the agreement to arbitrate, but failed to consider the provisions of the Act, and,

in particular, section 6. The Court of Appeal held that none of the circumstances in

which a court may interfere in an arbitration applied, and the decision made by the

chambers' justice did not serve to assist the arbitration process:

There is nothing in the material before us to suggest that the Chambers

judge gave this direction to assist the arbitration process, or that the

arbitration process was in need of assistance. Nor is there anything to

suggest that in giving this direction, he was attempting to ensure that the

42 (1999),232 A.R. 330 Cc.A.)



28

arbitration would be carried on in accordance with the arbitration

agreement. There is nothing in the material before us to indicate that there

was any risk that the arbitration would not be carried on in accordance

with the agreement. There is no question, of course, of the enforcement of

an award."

So long as the purpose of the interference by a court is consistent with section 6, a court

may, on application, grant a stay of proceedings (section 7), may assist the arbitrator on

questions of law (section 8(2)), and has powers of preservation and detention of property

(section 8(1)). Tying into the principles of equality and fairness in section 19, a court has

the power to remove an arbitrator upon application of a party." The parties are entitled

to reasons with the delivery of a decision or award. If the arbitrator fails to provide

reasons for an award, the matter will be remitted back to the arbitrator for further

consideration. 45

Subject to select circumstances m which the court may supervise and assist the

arbitration, the arbitral tribunal maintains control over its own jurisdiction and

procedure." The arbitral tribunal determines its own jurisdiction, the procedures for the

arbitration, and can decide issues of law. Any objections to its jurisdiction are submitted

first to the arbitral tribunal, and then on application to the court to decide the matter."

43 Ibid at para. 13

44 Sections 13, 15

45 Lui v. Longay (1999), 256 A.R. 376 (Q.B.)

46 Section 17(1)

47 Section 17(6)(9)



29

Once the arbitration has been concluded and an award made, the decision is final with the

exception of the remedies for appeal or setting aside of an award as provided in

sections 44 and 45 of the Act. Since 1991, the courts in Alberta have consistently limited

their involvement and interference in arbitrations and the awards generated, consistent

with the purposes of the Act. Judicial review of an arbitral award is not available for a

consensual arbitratiorr" The parties can vary the appeal provisions in the Act with their

private agreement to allow for an appeal on a question of mixed law and fact, or on a

question of fact, but cannot exclude a right to appeal on a question of law or on

provisions setting aside an award provided in the Act. 49

An appeal on a question of law is permitted only if leave for appeal is granted by the

Court of Queen's Bench. No appeal is available if the question of law is the very one

referred to the arbitral tribunal for decision. 50 There is no appeal on questions of mixed

law and fact or questions of fact unless the arbitration agreement specifically so provides.

If the question for appeal is one of law, the court will only provide leave to appeal if it is

satisfied that:

(a) the importance to the parties of the matters at stake in the arbitration

justifies an appeal; and

48 Co-op Gen. Ins. v. Great Pacific Ind. (1998), 219 AR. 90 (C.A) a t pa ra . 2; Ellsworth v. Ness Homes

Ltd. (1999),241 AR. 186

49 Section 3, 44

50 Section 44(3)



30

(b ) determination of the question of law at issue will significantly affect the. h f h . 51ng ts 0 t e parties.

There is no appeal to the Court of Appeal from a decision by a judge of the Court of

Queen's Bench to grant or withhold leave under section 44 of the Act. 52 Provision is

made in section 48 for an appeal to the Court of Appeal from the Queen's Bench decision

in an appeal of an award, an application to set aside an award or an application for a

declaration of invalidity'". There are strong policy reasons for not permitting an appeal

from a refusal to grant leave - the general intent of the Act is to limit situations where

courts can interfere in an arbitration process.

If leave to appeal is granted, the court has the power to confirm, vary or set aside the

award, or may remit the award to the arbitral tribunal and give directions about the

conduct of the arbitration. 54

That a court's ability to interfere with an arbitral tribunal's award is limited was

reinforced in Ellsworth v. Ness.55 The respondent constructed a new home' for the

applicants. The parties submitted a dispute as to alleged deficiencies to arbitration by

way of agreement. The arbitrator delivered an award determining the deficiencies, and

then a second award evaluating the deficiencies. One of the parties disputed the value,

51 Section 44(2)(a)(b)

52 Co-op Gen. Ins. v. Great Pacific Ind. (1998),219 A.R. 90 (C.A.) a t pa ra . 2

53 Section 48

54 Section 44(5)

55 supra fn 51



31

obtained an independent evaluation and requested that the arbitrator re-determine the

value amount and determine the claim for new deficiencies. The applicants then sought

judicial review of the second award challenging the value and seeking to have a new

deficiency claim adjudicated.

In Ellsworth, the Court confirmed that judicial review was not available for consensual

arbitration. It did allow the party to bring an application to set aside the decision or to

bring an application for leave to appeal. In declining to permit judicial review the Court

The Arbitration Act is a convenient mode or guide for parties who wish to

utilize this method of settling their private disputes. The parties decide

who will arbitrate and on what issues and on what procedure. They

decide, generally, which sections of the Arbitration Act as varied, or at all,

will apply to their arbitration. There are only a few sections of the Act

which cannot be excluded or varied by the agreement of the parties.

Judicial review procedure under the Rules and the prerogative remedies do

not apply to consensual arbitration but apply to statutory bodies of persons

carrying out duties under statute the parties must submit their disputes.Accordingly, the applicants are not entitled to relief under the procedure of

the judicial review rules, and certainly not to certiorari or mandamus.

However, the substance of their complaints supporting their application

for judicial review is generally the same for an application to quash, set

side or appeal an arbitrator's award.

stated."

If there was any remaining doubt, this statement makes it clear that a court's ability to re-

determine an arbitrator's award if the Act is followed is limited to the grounds of appeal

56 Ibid, at para. 1 3



32

set out in section 44 and the grounds for setting aside a decision as set out in section 45,

unless these provisions are amended by agreement.

In Ellsworth, because the parties did not contemplate any additional appeal provisions

with respect to an appeal they were limited to the provisions in section 44. Because the

arbitrator's finding on values in its award was a finding based on fact and law, or a purely

factual finding, no appeal was available. 57 Even if the arbitrator's decision on values was

a question of law, the Court would have concluded that it was the very question which

was referred to the arbitral tribunal, and therefore no appeal was available." Finally,

there were no grounds available to set aside the award, and in any event, the applicant in

Section 12(1) of the Competition Tribunal Act contemplates a tripartite

classification of questions before the Tribunal into questions of law,

questions of fact, and questions of mixed law and fact. Briefly stated,

questions of law are questions about what the correct legal test is;

questions of fact are questions about what actually took place between the

parties; and questions of mixed law and fact are questions about whether

the facts satisfy the legal tests. A simple example will illustrate these

concepts. In the law of tort, the question what "negligence" means is a

question of law. A question of whether the defendant did this or that is a

Ellsworth was beyond the time to launch an appeal."

In Canada v. Southam Inc.,60 the Supreme Court of Canada provided guidance on what

constitutes a question of law as opposed to a question of fact or a question of mixed fact

and law:

57 Ibid, at para. 19



60 [1997J 1 S.C.R. 748 at paras. 35 and 37



33

question of fact. And, once it has been decided that the applicable

standard is one of negligence, the question whether the defendant satisfies

the appropriate standard of care is a question of mixed law and fact. I

recognize, however, that the distinction between law on the one hand and

mixed law and fact on the other is difficult.

In short, as the level of generality of the challenged proposmon

approaches utter particularity, the matter approaches pure application, and

hence draws nigh to being an unqualified question of mixed law and fact.

See R.P. Kerans, Standards of Review Employed by Appellate Courts

(1994), at p.l03-10S.

This statement has recently been confirmed in the context of an arbitration application for

leave in Rudiger Holdings Ltd v. Kellyvone Farms Ltd..61 In Rudiger, the parties applied

for leave to appeal an arbitration award. The Court applied the test set out in Southam to

characterize the following questions for appeal: 1) Was Rudiger a proper party to the

proceedings? The Court determined that this question was one of mixed fact and law:

what constitutes a proper party is a question of law, and what Rudiger's involvement was

in the circumstances of the present case is a question of fact. That the question did not

forge any new legal principle confirmed that it was not a question of law.62 2) Was there

was any evidence to support a finding of the Tribunal? This is a question of law." 3) Was

the contract valid, or was there a negligent or innocent misrepresentation made? This

involves the application of the facts to the appropriate tests and was therefore a question

of mixed law and fact. The application of the legal principles involves a balancing test

61 [2002] A.R. TBEd. J. JL 112 (Q.B.)

62 Jbid at para.l7

63 Jbidatpara.l8



34

such as according adequate weight to certain factors, and there is no general legal

principle capable of wide application which results" 4) Did the arbitrator err in placing

too much weight on opinion evidence? This is a question of mixed law and fact or one of

fact alone65

. 5) The assessment by the tribunal of the weight to be given to the evidence

is a question of fact or a question of mixed fact or law.66 6) Did the arbitrator err in

admitting evidence? Given section 21(1) of the Arbitration Act provides that the arbitral

tribunal is not bound by rules of evidence, and has the power to determine admissibility,

relevance and weight of any evidence, this error was rejected: "The arbitrator's decision

in this regard should be afforded significant deference and I decline to interfere. ,,67

The Court further rejected the suggestion that in setting out a test for leave to appeal

If that was its intention, I find it odd in the extreme that it chose the

phrases "the importance of the matters to the parties" and "significantlyeffect the rights of the parties" [emphasis added] to convey this.

(section 44(2» that the legislature intended to mandate that some public interest must be

d68

at stake before leave would be grante .

As all questions on appeal were of mixed law and fact, leave to appeal was denied.

Another question of mixed fact and law is the arbitrator's choice of method of assessment

of value. In a dispute between a vendor and a purchaser of an amount of compensation to

64 Ibid at para. 22

65 Ibid at para.21

66 Ibid at para. 23

67 Ibid at para. 24

68 Ibid at para. 39



35

which the purchaser was entitled was found to be a question of mixed law and fact from

which there is no appeal in Pachanga Energy Inc. v. Mobil Inv. Cqn69. A similar issue

arose inAutotrol Technology Ltd v. Triple D Holdings Ltd. ,70 but with different results.

In Autotrol, the parties had submitted to an arbitrator a dispute on a rental rate for

premises which the tenant was required to pay for a renewal term. If Pachanga had been

followed, the issue of the criteria used to calculate the rental rate would have been found

to be a question of mixed law and fact, or a question of fact from which there was no

appeal. However, the tenant appealed the award to the Court of Queen's Bench. There,

the chamber's judge granted leave to appeal and held on appeal that the arbitrator

committed an error of law and varied the rate. The landlord appealed from the Court of

Queen's Bench to the Court of Appeal. The Court of Appeal allowed the appeal, set

aside the order of the chamber's judge and restored the arbitrator's award. The Court of

Appeal found that the decision made by the arbitrator was reasonable in the

circumstances and on the basis of the evidence presented to him. It overturned the

chambers' judge's decision, and reinstated the arbitrator's award. Because of this

decision, the Court declined to determine whether leave ought to have been granted given

the nature of the question raised on appeal.

The question of the amount which the respondent was obliged to compensate the

appellant for goodwill and costs was confirmed to be a question of mixed fact and law in

69 (1993), 149 AR. 73 (C.A)

70 (2000),261 AR. 188 (C.A)



36

Lui v. Longay", There, the Court followed Pachanga in finding that the matter appealed

from was a question of mixed fact and law from which there would typically be no right

of appeal. However, the arbitration agreement specificaIIy provided a right of appeal on

the grounds of natural justice or procedural fairness. Since the arbitrator had failed to

give reasons for his decision, this was a breach of the rules of natural justice and the

matter was referred back to him for further consideration.

If the application brought is not for appeal, but to set aside the award under section 45,

the court does not enjoy the same remedial powers as it does if the award is appealed. A

party may apply to the court to set aside the arbitral award on any of the following

grounds: 72

(a) the agreement was entered into under a legal incapacity;

(b ) the agreement is invalid or has ceased to exist;

(c) the award is beyond contemplation of the arbitration agreement;

(d) the composition of the tribunal, or the matter referred to the tribunal was

not in accordance with the agreement or the Act;

(e) the subject matter of the arbitration is not capable of being the subject of

arbitration under Alberta law;

(f ) the procedures of fundamental justice were not followed (fairness,

equality, opportunity to be heard, notice of the arbitration, selection of the

arbitrator) ;

(g) the procedures followed during the arbitration did not comply with the Actor the agreement;

71 Supra at fn48

72 Section 45(1)



37

(h) there is a reasonable apprehension of bias of the arbitrator;

(i) the award was obtained by fraud.

Even where the arbitral decision is set aside on application, the court cannot substitute an

award with its own, nor can it vary the decision. In Carlin v. 395772 Alta. Ltd. ,73 the

Court of Queen's Bench, on an application to set aside the decision of the arbitrator, held

that the arbitrator decided an issue that was not put before him. While the Court

acknowledged that it had the jurisdiction to substitute its own award under section 44 of

the Act dealing with appeals, it did not permit the Court to vary the award on an

application to set aside. Madam Justice Kenny stated": .

In reviewing ss.44 and 45 of the Arbitration Act I am not satisfied that s.44

applies in these circumstances which would allow me to confirm, vary or

set aside the award. I am satisfied that s.45 does apply, however, there is

no jurisdiction in s.45 for the Court to vary the award. The only

jurisdiction that the court has is to either remit the matter to the Arbitration

Tribunal or to remove the arbitrator and give directions about the conductof the arbitration.

The matter was remitted back to arbitration, but the Court left it to the parties to decide if

the tribunal would be comprised of the same arbitrator who made the original decision.

Any application for leave to appeal, an appeal or an application to set aside an award

must be commenced within thirty days after the applicant receives the award, correction,

explanation, change or statement of reasons from the arbitrator. Missing these time limits

73 [1998J AR. Uned. 328 CQ.B.)

74 supra fu51



38

is fatal to an application. InMasterpiece Cabinetry and Finishing Ltd v. Risi et aC5

the

arbitration agreement provided that the arbitration was subject to the provisions of the

Act. The arbitrator provided his further explanation on June 15,2000, but the application

for leave to appeal was not filed until December 8, 2000. Following the Ellsworth v.

Ness decision, the Court found that Rule 548 of the Alberta Rules of Court permitting

time periods to be extended was inapplicable to the time period set out in the Act, and the

applicant had missed the time line. This was fatal to its application.

Arbitration awards are also protected in the ICCA by the limited provisions permitting

recourse against an arbitral award in the ICCA.76

In matters governed by the ICCA, no

court shall intervene except where:

(i ) the party was incapacitated;

(ii) the arbitration agreement was invalid;

(iii) proper notice was not provided to the opposing party;

(iv) the award is beyond the scope of the issues submitted to arbitration;

(v) the composition of the tribunal or the procedure was not in accordance

with the agreement; or

(vi) the subject matter was not legally capable of settlement by arbitration. 77

There is no right of appeal in the ICCA. Application to set aside an award must be

brought within three months of the award. 78

75 [2001J AR. Uned. 297 (Q.B.)

76 Seh.2 Art.34

77 ICCA, Seh. 2, Art. 5



39

(v) Powers of the Arbitral Tribunal

The arbitral tribunal can be given such powers as the parties desire. If an arbitration

agreement is properly drafted, an arbitral tribunal can be appointed to conclude an

agreement for the parties or merely to determine disputes-arising from that agreement."

To determine the powers of the arbitrator, the arbitration clause must be construed

according to its language and in light of the circumstances in which it is made. In Sheer

v. Lee, the parties disputed whether the arbitration clause was broad enough to permit the

arbitrator to conclude an agreement for the parties, or if the clause merely provided that

the arbitrator could determine disputes. The Court determined that the clause was limited

to determining whether formal documentation was consistent with letter agreements. The

clause in issue was as follows:

Formal agreements with respect to the above transactions shall be entered

into subject to the reasonable approval of all parties on or before April 30,

1996 failing which outstanding issues will be submitted for arbitration

pursuant to the Arbitration. Act (Alberta), it being understood that the

terms of such agreements shall be consistent with the spirit and principles

set forth above.

The Court found that it was a pre-condition to arbitration that the parties conclude an

agreement as the clause only granted the arbitrator sufficient power to resolve disputes

arising out of an already concluded contract.

78 ICCA, Sch.2, Art. 34(3)

79 Sheer v. Lee (2000), 263 AR. 305 (Q.B.) at para. 25



40

(vi) Excluding the Act by Agreement

By careful drafting, the parties can exclude application of the Act. 80 . Often in

construction agreements parties will rely upon the standard CCDC 2 - 1994 Stipulated

Price Contract. This contract provides for a three level process by which disputes will be

arbitration. If the parties are unsatisfied with the consultant's decision, the matter can be

resolved - dispute resolution conducted initially by the consultant, then mediation and

referred to a mediator. If.mediated negotiations are unsuccessful, the parties may refer

the dispute to be resolved by arbitration. There is no provision for an appeal of the

arbitrator's decision. There are Rules for both mediation and arbitration set out in the

Appendices to the Contract.81

The dispute resolution process under the CCDC 2 is mandatory, but if the requirements

set out in the Dispute Resolution section of the CCDC 2 are not complied with (i.e. time

periods are missed), the parties continue to have their remedies through the litigation

process.82

VIT. CONCLUSIONS

Our laws are intended, to a large extent, to reflect acceptable standards of human

behaviour and business activity. Applying laws to a given dispute is in large measure an

80 s. 2(1)(a); Borowski, suprafn26 at para. 22

81 Rules for Mediation of CCDC 2 Construction Disputes; Rules for Arbitration of CCDC 2 Construction

Disputes

82H. Kirsh and L, Roth, Kirsh and Roth: The Annotated Construction Contract (CCDC 2 - 1994) (Canada

Law Book: 1997 at p.198)



41

exercise in common sense. For reasons articulated in this paper, the advantages of ADR

- mediation or arbitration - in contrast to traditional litigation are clear.

Where mediation is concerned, it often takes persistence on the part of progressive

minded parties and their counsel to steer a matter, through mediation, to cost and time

efficient resolution. Creativity and flexibility are paramount considerations in the

selection of a mediator and style of mediation. An evaluative and proactive style of

mediation - borrowing from the inquisitorial model of litigation - is particularly well

suited to many disputes. Particularly in larger multi-party disputes, "partnering" and

similar mechanisms can go a long way to avoiding and resolving disputes quickly and

cost effectively.

In the event mediation proves unsuccessful, arbitration is also an attractive alternative to

traditional litigation. If it is perceived by parties to a contract or project that arbitration

does constitute a desirable ADR mechanism, then carefully considered and drafted

contractual wording is essential at the front end of a project or other business

relationship. Otherwise, once a dispute arises, an arbitration and framework to be

employed can only take place if all parties concerned voluntarily agree to it. The parties,

in this regard, should consider building into the process maximum flexibility so that the

ultimate award can even be reached by the arbitral tribunal using alternative methods to a

traditional arbitration such as mediation or conciliation.

Parties to an arbitration need to exercise some degree of reason and creativity in

addressing a dispute to ensure that the arbitration does not degenerate toward traditional



42

litigation where delay and costs are concerned. Once the parties have committed by

agreement to enter arbitration should a dispute arise, this option constitutes a timely, cost

effective method of dispute resolution, particularly as courts are increasingly more

willing to show deference to the ADR process. Parties increasingly do not face a realistic

prospect of added cost, delay and complications through judicial interference in the

arbitration process.

::ODMA\PCDOCS\CAL_LAW\898319\4

arbitration and mediation of construction defect cases

Documents

common sense resolution

realm of adr

arbitration act

ordinary common sense

utilization of adr mechanisms

theapplication of common

simple common sense

exercisein common sense