Maisonneuve v. Clark, 2022 ONCA 113 (“Clark”) concerned the application of s. 5(1)(a)(iv) of the Limitations Act, 2002, SO 2002, c 24, Sch B (the “Limitations Act”) to an arbitration, more particularly, when it can be said that it is “appropriate” to commence arbitration proceedings before the two-year limitation period under the statute begins to run.
The personal appellant, Christopher Clark, and the personal respondent, Jean Maisonneuve, are cousins who were in business together as shareholders in various companies, including Eastern Ontario Real Estate Investors Inc. (“EOREI”). Their relationship deteriorated over the years and, in early 2016, they referred their business disputes to arbitration. The parties reached agreement on all issues except for those related to the payment of various expenses associated with EOREI. In September 2016, they signed a mutual release which provided that this outstanding issue was to be arbitrated. However, in 2017, the parties became involved in litigation over the validity of the settlement agreement as a whole, and, on January 31, 2018, in the context of settlement negotiations regarding the litigation, Mr. Clark’s lawyer took the position that there would be no negotiations over the EOREI expenses. In June 2019, Mr. Maisonneuve’s lawyer wrote to Mr. Clark’s lawyer seeking to initiate arbitration over the expenses, and, in September 2019, the respondents commenced an application in the Ontario Superior Court of Justice to appoint an arbitrator. It was at this point that the appellants took the position that the arbitration was time-barred because the parties had agreed that the referral to arbitration would take place within 90 days of the signing of the settlement agreement or, alternatively, because the two-year limitation period under the Limitations Act applied and the respondents were therefore required to commence the arbitration within two years of the date when the parties signed the settlement agreement.
The application judge held that there was no agreement that the parties would conduct the arbitration within 90 days of the agreement. She further held that the arbitration was not barred under the Limitations Act because, based on s. 5(1)(a)(iv) (which provides that one of the considerations in determining the day on which a person first knows that he/she/it has a claim is whether, “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”) it was not evident that the arbitration was “appropriate” until it was clear that the dispute could not be resolved through negotiations. In reaching this conclusion, the application judge relied on the wording of the arbitration clause and the context of the negotiations leading up to the settlement. Ultimately, she found that the respondents should have known by January 31, 2018 that a negotiated settlement of the EOREI expenses was not possible in light of the communications between the parties’ counsel. Thus, the application commenced in September 2019 was in time.
On appeal, the Court of Appeal for Ontario held that the application judge’s decision should be upheld. The only issue on appeal was the application judge’s interpretation of the arbitration agreement and, since it is not a standard form contract, her decision was owed deference in the absence of any palpable and overriding error.
The Court of Appeal rejected the argument that the application judge should have applied the decision in Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218 to the interpretation of the arbitration clause on the basis that it addressed the limitation period that applies in the context of an arbitration under the Insurance Act, RSO 1990, c I.8 and therefore was rightly distinguished because it concerned the interpretation of a statutory provision rather than a provision in an agreement. In any event, the arbitration provision in issue and the wording of the Insurance Act provision were significantly different.
The Court of Appeal also held that the application judge’s decision was entitled to deference with respect to the factual finding that it was not clear at the time the parties agreed to the arbitration clause in September 2016 that they would not participate in any further negotiations over the EOREI expenses. The appellants were asking the court to review and reweigh correspondence between the parties leading up to the agreement to arbitrate, and this was the province of the application judge with respect to which the court could not find any palpable and overriding error.
The Court of Appeal also rejected the argument that the application judge erred in relying on the decisions in PQ Licensing SA v. LPQ Central Canada Inc., 2018 ONCA 331 and L-3 Communication SPAR Aerospace Ltd. v. CAE Inc., 2010 ONCA 7133 as authority for the proposition that the limitation period that applies to an arbitration clause may not start to run until the parties have exhausted attempts at informal resolution.
Finally, the Court of Appeal rejected the argument that the application judge’s decision will lead to uncertainty with respect to the application of limitation periods to arbitration clauses because it is necessarily difficult to ascertain when negotiations are at an end. The application judge’s decision was based on the specific wording of the particular arbitration clause and the circumstances in which it was negotiated. Parties are free to agree to arbitration clauses that make no reference to the possibility of an informal agreement or that are more specific about the steps and time leading to arbitration. In this case, as was stated by the application judge, it was open to the appellants to let the respondents know at any time that no further negotiations would take place. Indeed, that is what occurred on January 31, 2018 which triggered the start of the limitation period.
Of all the arguments advanced on the appeal, this last one was perhaps the most compelling. It failed on the facts. But more importantly, Clark demonstrates what appears to be a softening attitude on the part of Ontario courts in determining when the limitation period under the Limitations Act starts to run, particularly with reference to when it can be said to be “appropriate” for a claimant to commence a proceeding.