What happens when a dispute resolution clause requires “any dispute … which cannot be resolved … within thirty (30) days of the dispute arising … [to] be referred to mediation,” but the parties do not meditate, and one party refers the matter to arbitration more than 30 days after the dispute arises?
In J.P. Thomson Architects Ltd. v. Greater Essex County District School Board, 2025 ONCA 378, the Ontario Court of Appeal, reversing a lower court decision, concluded that the clause did not require mediation to take place within 30 days in order for an arbitration to proceed but, instead, established a minimum 30-day period for the parties to attempt to resolve a dispute prior to requesting the appointment of a mediator. The parties were directed to proceed to mediation with the applicant retaining the right to arbitrate thereafter.
Factual background
J. P. Thomson Architects Ltd. (Thomson) was an architectural services firm. The respondent was the Greater Essex County District School Board (the Board), operating schools in Windsor, Ontario and surrounding municipalities.
Thomson had been providing architectural services to the Board for nearly 50 years. In 2016, Thomson was awarded two new contracts: one giving Thomson the status of an approved vendor for “rotational” work, and a second selecting Thomson to provide architectural services for two new schools. Both contracts included GC18, a standard dispute resolution clause used by the Ontario Association of Architects (OAA) in its contracts.
GC18 provides that any dispute “arising out of or relevant to the agreement, which cannot be resolved by the parties within thirty (30) days of the dispute arising, shall be referred to mediation, upon the request of either party.” The clause also outlines steps for selecting a mediator, the timeline for mediation and a path to arbitration if mediation is unsuccessful or a mediator is not selected within 30 days of notice of mediation.
By letter dated October 12, 2021, Thomson attempted to refer two disputes to mediation under GC18:
- Performance concerns: In August 2020, the Board had sent Thomson a notice expressing dissatisfaction with its performance and requested an action plan. Thomson responded. In March 2021, the Board sent a second notice, asserting Thomson had failed to adequately address concerns and would be ineligible to bid on further work for two years.
- Fee dispute: In June 2021, Thomson requested that its fees for a project be based on actual construction costs, rather than a lower pre-construction estimate. On July 28, 2021, the Board agreed to increase the estimate but not to the full extent requested. Thomson sought reconsideration, which the Board refused.
The Board refused to appoint a mediator, arguing that there was no dispute to refer to mediation because the disputes had arisen more than 30 days before Thomson’s mediation request. The Board maintained this position when Thomson subsequently served a notice to arbitrate. Thomson then applied to the court for an order to appoint an arbitrator pursuant to GC18 and s.10(1) of the Arbitration Act, 1991.
Application Judge’s decision
The application judge dismissed the application. She interpreted the first sentence of the GC18 dispute resolution clause to impose a strict deadline of 30 days from when a dispute arose for a party to request mediation and treated this as a condition precedent to seeking arbitration.
The application judge held that any dispute from the August 2020 notice was resolved when Thomson responded to the Board’s concerns and that, with respect to the March 2021 letter, Thomson had to notify the Board and request mediation within 30 days of the letter and that Thomson was otherwise out of time to do so.
The application judge found that the fee dispute was resolved when the Board first stated its position in July 2021. The window for requesting mediation had not been extended by Thomson’s later request for reconsideration in September 2021.
Based on these findings, the application judge concluded that any disputes were either resolved by late July 2021, or that the mediation request window had elapsed by the time Thomson made its request on October 12, 2021.
The Court of Appeal’s decision
The Court of Appeal found the application judge’s interpretation to be an error in law. The Court clarified that the GC18 dispute resolution clause did not impose a deadline for requesting mediation. Instead, the phrase “within thirty (30) days” sets a minimum 30-day period for the parties to attempt to resolve a dispute informally before they can request mediation. A party thus does not lose all right to engage in dispute resolution simply by failing to serve a mediation request within 30 days of a dispute arising.
The Court held that the correct interpretation of the dispute resolution clause must make “good commercial sense” within the overall scheme of the contract. GC18 requires parties to attempt to settle their differences at each stage before escalating to the next level, with some stages having explicit deadlines (e.g., mediation to take place within 30 days of mediator selection, appointment of an arbitrator within 10 business days of notice).
Interpreting the clause to impose a strict deadline for mediation requests, as the application judge did, would be inconsistent with other contractual terms, such as the Board’s right to terminate contracts if a party is involved in “actual pending or threatened suits, actions, litigation proceedings, arbitrations, alternative dispute resolutions, investigations or claims.” This would put a party like Thomson in a difficult position: either risk contract termination or waive their right to mediation or arbitration.
Finally, on the scope of the dispute and the arbitrator’s jurisdiction, the Court held that the application judge improperly made numerous findings of fact about the history of interactions between the parties and the scope of their disputes. Where it is arguable that a dispute falls within the terms of an arbitration agreement, any final determination as to the scope of the dispute is better left to the arbitration tribunal, as the question of jurisdiction is within that tribunal’s jurisdiction.
Key takeaways
The Court of Appeal’s decision underscores the importance of clear drafting of dispute resolution clauses.
In order to avoid disputes like this one, parties should clearly set out the timeframes for each stage of a dispute resolution process. However, where the drafting is unclear, courts will refrain from interpreting dispute resolution clauses, especially standard forms, in a way that unnecessarily displaces a party’s right to engage in a dispute resolution process. In this case, the Court of Appeal emphasized a commercially sensible interpretation that facilitates dispute resolution. The primary goal of a dispute resolution clause is to provide a pathway for resolving disputes, not to act as a blocker.
While the standard form contract issued by the OAA has been updated since the parties entered into their agreement, the current version of the dispute resolution clause does not impose any time frames for initiating mediation or arbitration. It requires the parties to provide timely written notice of a dispute, attempt to resolve it through negotiation and, if mutually agreed, proceed to mediation.
The revised clause may also give rise to practical and strategic challenges, such as disagreements over what constitutes a “reasonable time” to refer a dispute to mediation. It is helpful for parties to adopt clear language as to when a dispute or arbitration should be referred to mediation or arbitration, to the extent they wish to impose deadlines beyond those resulting from the applicable limitation period.
For more information on this topic, please reach out to the authors, Michael Schafler, Chloe Snider and Ekin Cinar.
