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IN THE MATTER OF AN ARBITRATION
PURSUANT TO THE COMMERCIAL ARBITRATION ACT, RSBC 1996, c. 55
AND IN THE MATTER OF
THE TIMBER HARVESTING CONTRACT
AND SUBCONTRACT REGULATION (BC REG. 22/96)
BETWEEN:
JOE MARTIN & SONS LTD.
(Claimant)
AND:
CARRIER LUMBER LTD.
(Respondent)
PRELIMINARY AWARD ON JURISDICTION
A. Introduction
1. This arbitration arises out of certain disputes between the Claimant, Joe Martin & Sons Ltd., and the Respondent, Carrier Lumber Ltd., in relation to a Logging Agreement dated November1, 1996 (the “Agreement”). The Agreement is a replaceable Timber Harvesting Agreement pursuant to the provisions of the Timber Harvesting Contract and Subcontract Regulations, BC Reg 22/96 (the “Regulation”) and provides for the logging by a company known as Keystone Logging Ltd., the predecessor of the Claimant, Joe Martin & Sons, of certain timber on lands covered by licenses held by the Respondent, Carrier Lumber Ltd.
2. The issues in dispute between the Parties are set out in an amended Notice of Dispute dated May2, 2000. On July31, 2000, counsel for the Claimant advised the writer that he and counsel for the Respondent had agreed that if the Parties were unable to resolve their dispute by mediation, they had agreed to have the writer serve as sole arbitrator in this dispute. My appointment as arbitrator was confirmed on November6, 2000 when counsel advised that the Parties’ attempts to settle their dispute by mediation had failed.
3. Telephone conferences to organize the arbitration proceedings were held with counsel on January11 and February21, 2001. At the latter of these conference calls, counsel for the Respondent advised that the Respondent objected to my jurisdiction to deal with the Claimant’s claim for punitive damages. Counsel also expressed some doubt as to my jurisdiction to deal with claims for increased costs and breach of contract (claims6 and 7 in the Amended Notice of Dispute).
4. I determined that it would be appropriate to determine the Respondent’s objection on a preliminary basis. Accordingly, on March11, 2001, the Respondent filed its Motion to dismiss the claim for punitive damages on the basis that this Arbitral Tribunal, had no jurisdiction to deal with such a claim. The Claimant filed its Response on March21, 2001. The Respondent filed its Reply Submission on May22, 2001 once it had had an opportunity to review the Claimant’s Statement of Case which more fully described the claims advanced by the Claimant.
5. In its Reply, the Respondent conceded that claim number6 in the Amended Notice of Dispute, dealing with increased costs due to delay in the performance of the Agreement allegedly caused by the Respondent, is within my jurisdiction. However, the Respondent took the position that claim number7 is outside my jurisdiction. That claim deals with an allegation that the Respondent refused to negotiate or, in the alternative, to negotiate in good faith, the rates to be paid to the Complainant during the winter season of 1999-2000. The Claimant claims that as a result it suffered loss and expense. The Respondent says that the alleged facts are not with respect to the performance of the Agreement, but, rather, with respect to alleged tortious conduct arising outside the scope of the Agreement.
B. ArgumentS of the Parties
6. The Respondent submits that this arbitration deals with what is referred to as a “rate dispute” as defined by Section25 of the Regulation. Such a dispute may be submitted to arbitration pursuant to Section5 of the Regulation which provides that every contract within the scope of the Regulation must provide that all disputes that have arisen or may arise between the Parties to the Contract under or in connection with the Contract shall be referred to mediation and, if not resolved in that manner, shall be referred to arbitration. Section25 of the Regulation establishes the basis upon which a rate must be determined and what an arbitrator is entitled to take into account in accomplishing that task. However, Section25 does not empower an arbitrator to award punitive damages. The Respondent argues that Section5 does not empower an arbitral tribunal to entertain claims for punitive damages or to award such damages.
7. The Respondent argues further that the Commercial Arbitration Act, which is incorporated by reference in Section6 of the Regulation, does not empower an arbitrator to award punitive damages. Although Section10 of the Commercial Arbitration Act permits an arbitral tribunal to award specific performance and Section11 of the Act allows a tribunal to award costs, there is no provision empowering arbitral tribunals to award punitive damages. Finally, the Respondent refers to the Rules for Domestic Arbitration of the British Columbia International Commercial Arbitration Centre, which are incorporated by reference in Section22 of the Commercial Arbitration Act. Although Rule29 of the said Rules sets out a list of powers of an arbitral tribunal, it does not confer upon tribunals the power to award punitive damages.
8. The Respondent relies upon the decision in Lee v. Gao (1992), 65 BCLR (2d)294 (BCSC), a case which dealt with the authority of an arbitrator appointed under the Residential Tenancy Act, S.B.C.1984, c.15, for the proposition that arbitral tribunals do not have jurisdiction to award punitive damages. Therefore, in light of the absence of any conferment of such power in the Regulation, the arbitrator in this matter has no power to award punitive damages.
9. The Claimant argues that pursuant to the terms of Section5 of the Regulation and Article27 of the Agreement between the Parties, “all disputes” that have arisen or may arise between the Parties under or in connection with the Agreement must be referred to arbitration. Further, under Section6 of the Regulation the Commercial Arbitration Act is made applicable to “disputes arising under or in connection with a contract”. The Respondent submits that the effect of the broad language of Section5 of the Regulation and Article27 of the Contract, combined with the application of the Commercial Arbitration Act, reveals a clear intent to refer “all disputes” under or in connection with an agreement prescribed by the Regulation to arbitration. As there is no express limitation in the Regulation as to the disputes which may be referred to an arbitrator, there is no basis for excluding claims for breach of contract or punitive damages.
10. The Claimant relies upon the decision of the Supreme Court of Canada in Weber v. Ontario Hydro, [1995] 2 SCR929, which dealt with the scope of jurisdiction of a labour arbitrator. In that case, the Court dealt with Section45 of the Ontario Labour Relations Act which provides that every collective agreement “shall provide for the final and binding settlement by arbitration… of all differences between the parties arising from the interpretation, application, administration or alleged violation of the agreement”. The Court held that this language provided for the exclusive jurisdiction of arbitral tribunals constituted pursuant to collective agreements if the dispute between the parties, in its essential character, arises from the interpretation, application, administration or violation of the collective agreement. The Claimant argues that the dispute in this case, in its essential character, arises under or in connection with the Agreement between the Parties in that the claim for punitive damages is based upon the Respondent’s conduct in regard of its obligations under the Agreement.
11. The Claimant relies on a number of other decisions which adopt the Supreme Court’s decision in Weber as well as the decisions of labour arbitrators in British Columbia which have applied the Weber case.
12. In its Reply, the Respondent distinguished between the disputes which fall within the scope of an arbitral tribunal’s jurisdiction and the remedies which it is authorized to grant. The Respondent repeated its position that arbitrators under the Regulation have not been granted the power to award punitive damages. With respect to the scope of disputes that an arbitrator under the Regulation may decide, the Respondent identified the relevant issue as whether or not a specific cause of action or dispute is “under or in connection with the contract” pursuant to Section5 of the Regulation. The Respondent conceded that, pursuant to the decision in Weber, an arbitral tribunal could deal with causes of action that sound in tort, provided the conduct giving rise to the dispute between the Parties arose under or in connection with the Agreement. Applying that test, the Respondent conceded that claim number6 which deals with costs incurred by the Claimant due to delay in the performance of the contract because of the alleged conduct of the Respondent in relation to the Agreement fell within the scope of my jurisdiction.
13. On the other hand, the Respondent took the position that claim number7, which deals with an allegation that the Respondent failed to negotiate or, in the alternative, to negotiate in good faith, the rates to be paid to the Complainant for the 1999-2000 winter season, did not arise under or in connection with the Agreement and was, therefore, not within my jurisdiction. The Respondent argued that the alleged facts in regard of this claim are not with respect to the carrying out of the terms of the Agreement, but with respect to alleged tortious conduct arising outside the scope of the Agreement.
ANALYSIS AND DECISION
14. The claims in regard of which the Respondent disputes the arbitrator’s authority read as follows:
“7. a dispute regarding the refusal of the Licencee to negotiate its base rate, or, in the alternative to negotiate in good faith with respect to the rates to be paid to JM&S for tree to truck and hauling rates during the winter season of 1999/2000, thereby compelling JM&S to submit the rates to the dispute resolution process specified under the Replaceable Harvesting Agreement dated November1, 1996, and to incur substantial expense without any opportunity to negotiate, or, in the alternative, without any meaningful opportunity to negotiate competitive rates or the resolution of such disputes; and
8. a dispute regarding a claim of JM&S for punitive damages respecting the failure of the Licencee to negotiate or to negotiate in good faith or to provide an opportunity to negotiate or to provide any meaningful opportunity to negotiate rates or other matters in dispute, such refusal being a premeditated plan to utilize the potential for the expense of the use of the rate dispute process as a means to compel the Contractor to work for rates that are not negotiated but imposed without reference to bargaining or negotiation or the potential for the Contractor to make a reasonable profit or to cover its costs of operations of a full phase logging operation;”
15. Normally, an arbitrator’s jurisdiction is defined by the scope of the arbitration agreement or submission to arbitration. In this case, the arbitration clause contained in Article27 of the Agreement is mandated by Sections5 and 48 of the Regulation. The relevant part of Article27 reads as follows:
All disputes that have arisen or may arise between the parties under or in connection with this agreement will be referred to mediation and, if not resolved by the parties through mediation, will be referred to arbitration in accordance with the dispute resolution system established by Division2 of Part4 of the contract Regulation.
16. This language is taken from Schedule3 of the Regulation. Section48 requires that contracts falling within the scope of the Regulation contain Schedule3 or a provision agreed by the Parties that is consistent in all material ways with the requirements of the language of Schedule3.
17. Section5 of the Regulation reads as follows:
Every contract or subcontract must provide that all disputes that have arisen or may arise between the parties to the contract or subcontract or under or in connection with the contract or subcontract will be referred to mediation and, if not resolved by the parties through mediation, will be referred to arbitration.
18. Division2 of Part4 of the Regulation is entitled “Dispute Resolution System” and contains Sections6 to 10. Section6 states that the Commercial Arbitration Act applies to the arbitration of disputes arising under or in connection with a contract between the parties to the contract to which the Regulation applies. The other sections of Part4 of Division2 contain general provisions on the commencement of proceedings, the appointment of a mediator or arbitrator in the absence of agreement between the parties, a brief description of the notice of dispute and its delivery and certain details regarding the costs of mediation proceedings. None of these provisions deal with or otherwise affect the scope of the issues submitted to arbitration.
19. In my view the scope of the arbitration clause contained in Article27 of the Agreement and the language of Section5 of the Regulation are sufficiently broad to include claims for breach of contract and punitive damages. It is clear that this language is not restricted to disputes specifically referred to in the Regulation (Section23: Amount of Work Dispute; Section25: Rate Disputes; Section32: Dispute Resolution for an AAC Reduction Proposal). Apart from these specifically defined or described disputes, there is no general definition of a “dispute” in the Regulation. However, it is clear that disputes other than those specifically defined by the Regulation may arise. For example, the Regulation requires that contracts and subcontracts be replaceable except in certain limited circumstances. In the event a contract was not replaced or was terminated for unsatisfactory performance or otherwise, a dispute between a licensee and a contractor or a contractor and a subcontractor, as the case may be, would arise. Such disputes would clearly arise “under or in connection with the contract or subcontract”. Failing an exclusion under the terms of the Regulation, such disputes fall within the scope of disputes subject to the dispute resolution regime contained in Section5 of the Regulation.