Sep 17, 2019

Dispute Resolution Clauses: What Constitutes Sufficient Compliance?

General Cable Company Ltd. v Labrador-Island Link Limited Partnership, 2019 NLCA 56 (CanLII)

Keywords: “Prouding”; application to strike; Rule 14.24(1)(d) of the Rules of the Supreme Court, 1986.

Synopsis:

The Appellant, General Cable Company Ltd. (“General Cable”) applies to strike out the Respondent, Labrador-Island Link Limited’s (“Labrador-Island Link”) statement of claim on the basis its pursuit of an action in court is an abuse of process. According to General Cable, Labrador-Island Link fails to comply with specific requirements contained in their dispute resolution agreement, and so cannot commence “any further action” outside its terms.

The Application Judge denies the application to strike, finding

  • strict compliance with the form of notice and service requirements was not intended; and
  • Labrador-Link was compliant with the “spirit and intent” of the clause notwithstanding “trivial” departures from its specific requirements. (See Labrador-Island Link Limited Partnership v. General Cable Company, 2019 NLSC 6 (CanLII)).

General Cable appeals. The Court of Appeal dismisses the appeal; determines the Applications Judge did not err in concluding Labrador-Island Link had not breached the dispute resolution clause by filing a statement of claim. No abuse of process is established.

Importance:

Pursuant to Rule 14.24(1)(d) of the Rules of the Supreme Court, 1986, a court may strike out “any pleading” where it is “an abuse of process”. At issue in this case was whether the Applications Judge erred in concluding the Respondent’s statement of claim did not amount to an abuse of process – in other words, was the Respondent allowed to bring its statement of claim notwithstanding a dispute resolution agreement which explicitly states “…the Parties must comply with this Article 34 before commencing any further action, legal or otherwise, with respect to a Dispute under this Agreement”? (See para. 6).

To answer this question, the Court of Appeal had to determine if the Respondent breached the dispute resolution clause in the agreement. As such, this case is instructive to the analysis of such clauses – a significant piece of any corporate transaction.

On the facts of this case, Labrador-Island Link’s notice was not given to the specified person at General Cable and was delivered via email (i.e. not as specified by the dispute resolution agreement). The Application Judge was satisfied, however, that “…the intention of the parties was contained in article 34 which was directed to ensuring that General Cable received notice of the dispute” and that “[t]here was no evidence…General Cable had no knowledge of the dispute because the notice was not delivered to the specified person.” (See para. 17).

Citing “[g]eneral principles governing the interpretation of commercial agreements” as set out in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII), the Court of Appeal endorsed the Application Judge’s approach to contractual interpretation as involving a “common-sense approach not dominated by technical rules of construction” where the real objective is to determine “the intent of the parties and the scope of their understanding”. (See para. 18).

In the result, the Court of Appeal agreed that, reading this dispute resolution agreement as a whole, strict compliance with the formalities of the dispute resolution agreement was not intended:

Issuing a statement of claim in order to preserve that right in the face of a limitation period, while not explicitly stated, would have been in the contemplation of these sophisticated parties when the agreement was executed, and was recognized by the applications judge by her reference to article 1.13. (see para. 19).

As such, the Court of Appeal appears to be saying that “sufficiently complied” (see para. 20) is good enough to satisfy requirements under a dispute resolution clause. Does this outcome reflect the approach dictated by the Supreme Court of Canada in Sattva, or is further guidance from that Court required on this subject?

Counsel for the Appellant: Terry Rowe, Q.C. (Martin, Whalen, Hennebury, Stamp, St. John’s)

Counsel for the Respondent: Leanne O’Leary and Thomas Munn (Cox & Palmer, St. John’s)