November 2010

Mediation or court?

By Richard Gendron

Are the dispute-resolution clauses calling for negotiation, mediation or arbitration before launching proceedings of a mandatory nature?

Recently, a Superior Court judge had to decide the issue in a legal dispute between Construction Socam Ltée and the Attorney General of Canada. The construction company was suing the Attorney General for over $600 000 for additional work (Construction Socam Ltée v. Attorney General of Canada, 2010 QCCS 1841 (AZ-50635099).

In the matter, the defendant objected to an exception to dismiss action that would either dismiss the claim or stay the prosecution under an order to submit to the mandatory negotiation and mediation processes stipulated in the contract.

After discussing the matter and reviewing the applicable laws and caselaw, the judge concluded that the dispute-resolution clauses were of a mandatory nature and that the parties therefore had to go through the resolution processes before bringing their case before the court.

The judge ordered that the prosecution be stopped for the time required by the parties to fulfill the obligations stipulated in the dispute-resolution clause and instructed the parties to carry out the mandatory formal negotiation and mediation processes set forth in the contract.

This decision confirms the interest and relevance of including dispute-resolution clauses in contracts. These clauses constitute excellent preventative and legal risk management measures.