Executive Summary: Key Legal and Evidentiary Issues

• A construction contract dispute between 2197 Otter Point Properties Nominee Ltd. and GT Mann Contracting Ltd. raised the threshold question of whether the matter should be stayed in favour of arbitration under s. 7 of the British Columbia Arbitration Act.

• The plaintiff, though not a named party to the May 31, 2022, CCDC 14 contract, sued on it as the registered landowner, creating a contested issue over whether it was bound by the arbitration clause.

• Without prejudice privilege shielded the December 19, 2024, settlement offer from admission, as the plaintiff failed to establish detrimental reliance necessary to invoke the representation estoppel exception.

• Settlement offers referencing Rule 9-1 of the Supreme Court Civil Rules were held not to constitute "steps in the proceeding" that would preclude the defendants from seeking a stay for arbitration.

• Estoppel failed for lack of evidence of detrimental reliance, while the waiver argument was rejected because referring to Rule 9-1 in settlement offers did not amount to an election or affirmation of court litigation.

• Claims against the personal defendant Graeme Mann were found to be inextricably interwoven with those against GT Mann Contracting, warranting a complete stay of the entire proceeding in favour of arbitration.

The construction project and the parties involved

Robert G. Foster and GT Mann Contracting Ltd. entered into a standard form construction contract (CCDC 14, 2013) on May 31, 2022, to build a rental housing development called Park View on lands located at 2193 and 2197 Otter Point Road in Sooke, British Columbia. The contract included a dispute resolution mechanism under Section 8.1.1, which provided that disputes would be settled in accordance with Part 8 of the General Conditions, including the ability to give the other party notice to arbitrate no later than 10 working days after a mediation to resolve the dispute is terminated. The project was completed on July 1, 2024.

The dispute and mediation process

Following project completion, GT Mann Contracting filed a builder's lien in the amount of $3,483,753.36 on August 7, 2024, pursuant to the Builders Lien Act. The parties consented to an order discharging the lien upon the posting of a lien bond. A mediation was subsequently held, with GT Mann Contracting represented by counsel and by its principal, Graeme Mann. Mr. Foster attended the mediation, asserting he did so as a representative of 2197 Otter Point Properties Nominee Ltd. ("2197 Otter Point Properties") and in his personal capacity. The mediation adjourned without settlement on December 16, 2024.

Commencement of litigation and the applications

On April 6, 2025, 2197 Otter Point Properties commenced an action in the Supreme Court of British Columbia claiming damages for breach of contract, fraud, breach of fiduciary duty, breaches of duty of care, negligence, and negligent misrepresentation against both GT Mann Contracting and Graeme Mann personally. Notably, 2197 Otter Point Properties described itself as the "Owner" in the notice of civil claim and pleaded that it entered into the May 31, 2022, contract, even though it was not a named party to that contract — Mr. Foster was. GT Mann Contracting and Graeme Mann responded by filing a jurisdictional response on June 12, 2025, and GT Mann Contracting terminated the mediation the following day, giving notice to refer the matter to arbitration. GT Mann Contracting subsequently filed the application to stay this proceeding on July 8, 2025. It also brought a separate application to strike portions of the plaintiff's affidavits that appended without prejudice settlement offers and to strike portions of the application response referring to those offers.

The admissibility of settlement offers

A significant preliminary issue concerned the admissibility of three settlement offers made by GT Mann Contracting, dated December 19, 2024, April 22, 2025, and May 20, 2025. The plaintiff argued these offers contained representations that the dispute would be litigated in court rather than arbitrated, and thus were relevant to the stay application. The Court held that settlement privilege, or without prejudice privilege, is a class privilege supported by an exceedingly strong public interest in encouraging settlement of disputes. For the December 19, 2024, offer, the Court found that the plaintiff failed to lead any evidence of detrimental reliance on any representations allegedly contained in it, and therefore no compelling reason existed to overcome the privilege. As for the April 22 and May 20, 2025, offers, while GT Mann Contracting agreed to admit redacted versions, the Court rejected the plaintiff's argument that this constituted a waiver of privilege over the unredacted portions, finding that fairness and public interest supported letting parties make such narrowing agreements without forfeiting broader privilege.

Whether the plaintiff was a party to the arbitration agreement

The Court examined whether 2197 Otter Point Properties could be considered a "party" to the contract containing the arbitration clause, given that it was not a named signatory. Applying the Supreme Court of Canada's guidance in Peace River Hydro Partners v. Petrowest Corporation, which rejected a narrow interpretation of "party" and held that entities connected with a signatory may become bound by operation of law, the Court found it was at least arguable that 2197 Otter Point Properties was a party to the agreement. The plaintiff itself pleaded that it was the "Owner" and a party to the contract, and Mr. Foster — the director and sole shareholder of 2197 Otter Point Properties — was the named contracting party. The Court observed that the situation raised concerns that Mr. Foster might be attempting to avoid arbitration by directing his corporate entity to commence proceedings on a contract to which it was not a named party, thereby seeking to neutralize the agreement to arbitrate.

Settlement offers as steps in the proceeding

The plaintiff argued that GT Mann Contracting's settlement offers referencing Rule 9-1 of the Supreme Court Civil Rules constituted "steps in the proceeding" that would preclude the defendant from seeking a stay. The Court rejected this argument, distinguishing between actions that engage with court litigation — such as demands for particulars or applications to strike — and settlement offers, which are merely attempts to resolve the underlying dispute. The Court held that referring to Rule 9-1 in a settlement offer, particularly where the same offers expressly stated the matter should be arbitrated, was not an election to proceed with the court action but rather a safeguard in the event the action proceeded despite the party's efforts to arbitrate. The Court further noted that treating settlement offers as steps in litigation would have a chilling effect on the worthwhile endeavour of settlement attempts.

Estoppel, waiver, and the claim against Graeme Mann

The plaintiff's arguments that the arbitration clause was rendered inoperative through representation estoppel and waiver under s. 7(2) of the Arbitration Act both failed. The estoppel claim was dismissed because there was no evidence that 2197 Otter Point Properties relied on the Rule 9-1 reference in the offers to its detriment. The waiver argument, premised on a negative obligation not to seek resolution in domestic courts, was rejected because the Court found that referring to Rule 9-1, especially in the context of also expressly asserting that the matter should be arbitrated and reserving the right to bring the offers to the attention of the arbitrator for the purposes of arguments on costs, was not an election or affirmation of court litigation. Regarding Graeme Mann, the Court found that the claims against him were inextricably interwoven with those against GT Mann Contracting, as 2197 Otter Point Properties itself pleaded that Mr. Mann was GT Mann's director, directing mind, and employee acting within the scope of his employment, and sought damages against both defendants jointly and severally on all causes of action.

The ruling and overall outcome

Justice Matthews of the Supreme Court of British Columbia granted both of GT Mann Contracting's applications. The content of the December 19, 2024, settlement offer was ruled inadmissible, and the affidavit material appending or referring to it was struck. The entire proceeding — including the claims against both GT Mann Contracting and Graeme Mann — was stayed in favour of arbitration pursuant to s. 7 of the Arbitration Act. GT Mann Contracting, as the successful party on both applications, was awarded its costs of the applications, subject to any matters of which the Court was unaware. No specific monetary amount on the merits was determined, as the underlying dispute was referred to arbitration for resolution.