[1] The petitioner, MacDonald, Dettwiler and Associates Ltd. ("MDA"), seeks an order extending the time to deliver notice to the respondent, Bygo Inc, disputing Bygo's purported termination of an escrow agreement.  Alternatively, MDA seeks leave to appeal the arbitrator's determination that he did not have jurisdiction to consider the petitioner's application for an extension of time; and if leave to appeal is granted, an order remitting the matter to the arbitrator. I will not deal with the alternative argument as it is without merit.

[2] MDA argues that s. 20 of the Commercial Arbitration Act, R.S.B.C. 1996, c. 55, provides the court the discretion to relieve against the loss of a claim due to the failure of a party to take a procedural step to deliver notice within a contractually mandated time period. MDA relies specifically on s.20(c) and argues that it would suffer undue hardship if an extension were not granted to January 15, 2001, the date it delivered a dispute notice to Bygo.

[3] Bygo argues that MDA's dispute notice was not delivered "immediately", as required by a letter agreement, and therefore time should not be extended. Bygo submits that s. 20 creates an extraordinary discretionary power to interfere with vested contractual rights and this should not be used unless expressly provided for in the contract. Alternatively, Bygo argues that MDA has provided no explanation for the lengthy delay in applying for an extension of time after MDA received notice that Bygo was relying on the time limit to prevent MDA from disputing the escrow termination.

[4] On May 9, 2000 MDA and the parent company of Bygo entered into a contract to supply Bygo with an e-commerce system featuring a website for the sale of jewellery. Disputes arose between the parties and in an effort to resolve them, on December 12, 2000, MDA and Bygo signed two amendments to the contract ("CA2" and "CA3"). CA2 provided for the immediate launch of the website on payment by Bygo of $234,912.88 for Oracle Software ("the Oracle Funds") so that Bygo could evaluate its functionality and appearance. CA3 redefined and clarified the parties' responsibilities under the contract and contained dispute resolution procedures.

[5] Although CA3 was signed on December 12, 2000, it was placed in escrow pursuant to an escrow agreement that provided it would be held in trust until December 18, 2000 (later extended to December 19, 2000). The escrow agreement provided that the parties would be governed by CA3 unless Bygo, having had an opportunity to evaluate the website during the escrow period, terminated the escrow agreement on valid technical grounds. The escrow agreement provided that if Bygo's termination was valid (that is, in accordance with s.6 of the escrow agreement), MDA would forthwith refund the Oracle Funds, return a further sum held by the escrow agent, and the terms of the original contract would govern. The escrow agreement provided a mechanism to dispute the validity of an escrow termination notice.

[6] On December 19, 2000, the last day of the escrow period, Bygo sent MDA an escrow termination notice. Bygo indicated it was prepared to continue to evaluate the software and to resolve the problems and offered to postpone the consequences of its termination notice until January 10, 2001 (later extended to January 15, 2001). The terms Bygo proposed for the extension, accepted by MDA on December 20, 2000, formed part of a letter agreement. The relevant term provided:

[7] On January 3, 2001 MDA sent a letter to Bygo responding to Bygo's concerns relating to the termination notice. On January 8, 2001 MDA sent Bygo a letter urging it to release CA3.

[8] On January 15, 2001 Bygo informed MDA that it would not revoke the termination notice. On the same date, MDA delivered a notice disputing the termination. Bygo responded that MDA's dispute notice was out of time as it had not been delivered "immediately" after December 20, 2001, as required by the letter agreement.

[9] On January 26, 2001 MDA gave Bygo notice to arbitrate the issue of whether the escrow agreement was validly terminated. Prior to this, on January 23, 2001, Bygo had commenced a court action. MDA applied to stay this action; Bygo applied for summary judgment seeking a declaration that MDA's dispute notice was ineffective and seeking repayment of the Oracle Funds. Lowry J. dismissed both applications. MDA obtained leave to appeal but did not proceed with the appeal because the parties agreed to submit all disputes to arbitration.

[10] The arbitrator was asked to consider whether para. 4 of the letter agreement prevented MDA from disputing the termination notice. In his first award, dated August 22, 2001, the arbitrator rejected MDA's argument that it did not have to deliver dispute notice until after January 15, 2001 when Bygo declared its final position. He construed "immediately" to mean as soon as reasonably possible after December 20, 2000, found that the dispute notice was more than 12 days late, and Bygo was not estopped from relying on the time limit. As well, he held that only the Court had jurisdiction to extend the time limit under s. 20 of the Commercial Arbitration Act.

[11] On September 25, 2001, the arbitrator awarded Bygo a refund of the Oracle Funds, with interest. To date, the Oracle Funds have not been refunded.

[12] Interestingly, MDA never raised the possibility of bringing an application to seek relief under s. 20 of the Act until after the arbitrator raised the issue. In the arbitration proceedings MDA asserted that the arbitrator, not the Court, had jurisdiction to extend time under s. 20 of the Act. MDA advances the opposite position here.

[13] Section 20 of the Act, in relevant part, provides:

[14] The English counterpart to s. 20 of the Commercial Arbitration Act, which is essentially the same, was the former s. 27 of the Arbitration Act, 1950 (U.K.), 14 Geo 6 c. 27, which has since been repealed and replaced with s. 12 of the Arbitration Act, 1996 (U.K.), c. 23.

[15] Section 27 of the 1950 Arbitration Act provided:

[16] The history of the creation of s.27 was discussed in Comdel Commodities Ltd. v. Siporex Trade S.A., [1990] 2 All. E.R. 552 (H.L.) at p. 556:

[17] The purpose of s. 27 was to relieve parties to a contract from unreasonable hardship where their claim was barred for failure to commence arbitration within a designated time limit. The mischief remedied by this section, as addressed by the court in Comdel Commodities, was to prevent undue or unreasonable hardship to a party who otherwise was deprived of the opportunity to pursue a contractual claim, where circumstances existed excusing the party's failure to comply with the time limit.

[18] Lord Denning M.R. explained the meaning of "undue hardship" in Liberian Shipping v. King ("The Pegasus"), [1967] 2 Q.B. 86 (C.A.) at p. 98:

[19] Comdel Commodities discussed the principles to be applied by the court in deciding whether or not to exercise discretion under s.27 because of "undue hardship". The court approved the principles set out in the judgment of Brandon LJ in The Aspen Trader, [1981] Lloyd's Rep. 273 (C.A.) at p. 279:

[20] Ultimately, the test accepted by the court was whether, in the circumstances of the case having regard to the cause for delay, undue hardship would be caused by failure to extend the time limit.

[21] The cases that applied s.27 suggested that the phrase "undue hardship" was to be given a broad interpretation and was not limited to severe financial hardship. While it was recognized that the mere loss of a substantial claim constitutes hardship, the real question to be addressed was whether it was undue, in the sense of being out of proportion to any associated fault or prejudice: The Pegasus.

[22] Section 12 of the Arbitration Act, 1996 which replaced s. 27, provides:

[23] Section 12 mirrors Lord Harmon's dissent in The Pegasus, where he advocated a narrow meaning of undue hardship, at p. 307:

[24] Lord Harmon felt strongly that the courts should exercise their discretion under s. 27 of the Arbitration Act, 1950 sparingly and restrictively. Quoting Lord Parker C.J. in The Leise Maersk, [1958] 2 Lloyd's Rep. 341, he stated, at p. 308:

And at p. 309:

[25] The court in Harbour and General Works Ltd. v. The Environmental Agency, [2000] 1 All. E.R. 50, commented on the rationale behind the change in the law. Under the old approach in s. 27 the courts entertained "a broad meaning and relatively benevolent approach" to undue hardship. This was contrasted with the new approach in s. 12, whereby party autonomy was respected unless there was full justification for the court "overriding the bargain that the parties made". The court quoted with approval the comments of Colman J. (Harbour and General Works Ltd. v. The Environmental Agency [1999] 1 All. E.R. (Comm) 953) at p. 58:

[26] The English Parliament essentially rewrote s. 27 of the Arbitration Act, 1950 to restrain the courts from interfering with contractual time limits, except in limited circumstances. The new legislation, s. 12, provides that an extension of time will be granted where the applicant establishes that the circumstances were outside the reasonable contemplation of the parties when they agreed to the provision in question and it would be just to extend the time; or alternatively, where the conduct of one party makes it unjust to hold the other to the strict terms of the provision.

[27] While a number of factors were identified for determining whether relief from a time bar should be granted under the Arbitration Act, 1950 the courts placed great weight on delay in seeking relief once an applicant is put on notice about reliance on a time bar. English case law strongly favored the view that the applicant should apply promptly for an extension once an applicant has knowledge that the other party is relying on a time bar: Comdel v. Siporex; Tradax Export S.A. v. Volkswagonwerk A.G. ("La Loma"), [1970] 1 Q.B. 357 (C.A.); Richmond Shipping Ltd. v. Argo Co. of Canada Ltd., [1973] 2 Lloyd's Law Rep. 145 (Q.B.); and The Eurotrader, [1987] 1 Lloyd's Law Rep. 418 (C.A.).

[28] Many of the cases cited by MDA in support of its argument that delay in and of itself is not a significant consideration and should be qualified in light of other considerations, pertain to cases dealing with delay in appointing an arbitrator, not delay in seeking relief once a time bar is raised. The courts treat delay in the latter event differently. In such cases it is not enough to show that the delay was brief. Once a time bar has been raised, delay is an important consideration. The authorities are clear that any remedy is discretionary and, once a party realizes that an extension of time is required, an application to the court must be made without delay: The Simonburn (No. 2), [1973] 2 Lloyds 145.

[29] I agree with the respondent that s. 20 of the Commercial Arbitration Act should be interpreted more strictly than the English cases following The Pegasus. While the clear purpose of the section is to permit the courts to override contractual agreements between parties in limited circumstances, what constitutes "undue hardship" should be interpreted more restrictively than in the English courts before the enactment of s. 12 of the Arbitration Act, 1996. The liberal approach taken by the English courts under the old law failed to give effect to contractual autonomy.

[30] I see no reason to depart from the traditional presumption that statues affecting vested contractual rights should be read restrictively. As stated in 44 Hals. (4^th), Statutes, at p. 557, para. 906, in relevant part:

[31] This principle is reflected in Lord Harmon's dissenting judgment in The Pegasus, and this ultimately formed the foundation for s. 12 of the 1996 Arbitration Act. In applying s. 20 of the Commercial Arbitration Act, hardship alone will not suffice unless it can be shown to be undue. In using the words "undue hardship", Parliament clearly intended to limit interference with the agreement of contracting parties.

[32] While s. 20 of the Act permits the Court to override the contractual agreement between the parties, the proper approach to s. 20 must start from the assumption that when the parties agreed to a contractual time limit they contemplated the effect of their agreement and realized that a claim would be time barred unless brought within the contractual time limit.

[33] There is vested in the court a discretion to extend time where a claim may otherwise be barred where a failure to extend the time would create undue hardship that would be unjust in the circumstances. Simple hardship will not suffice. A valid claim may be barred even where there is hardship. The Court must be satisfied that such hardship is undue and unjust in the circumstances before it will extend a contractual time limit.

[34] MDA argues that unless this court grants an extension of time, it will suffer prejudice because it will be precluded from advancing claims in arbitration that: (i) Bygo's termination notice is not valid; (ii) the escrow agreement completed in accordance with its terms; (iii) CA3 is deemed delivered; (iv) MDA is entitled to retain the Oracle Funds; and (v) CA3 governs all disputes between the parties.

[35] There is no explanation for MDA's lengthy delay in applying for an extension of time after MDA had express notice of Bygo's position in January 2001 that it was relying on the time bar in the parties' agreement. Bygo did not misrepresent its position, making it clear to MDA at the outset that a time bar prevented MDA from disputing the escrow termination.

[36] MDA has provided no explanation for why it did not seek relief without delay under s. 20 of the Act, other than to assert in argument, late in the day, that such an application to the Court would have been premature absent the arbitrator's decision that a time bar existed. This assertion does not take into account the clear meaning of the legislation and MDA's insistence that the proceedings before Lowry J. were improper as in the wrong forum.

[37] There is no evidence that MDA was labouring under a mistake or a mistaken belief with respect to the terms of the letter agreement. In fact, MDA asserted at arbitration that it was not relying on mistake and it objected to the scrutiny of evidence of the subjective views or intentions of the parties and refused to waive solicitor-client privilege. It is noteworthy that at all times both parties were represented by experienced legal counsel from reputable law firms.

[38] Seemingly it was a deliberate tactic on the part of MDA not to apply to the court for relief from the time bar in light of the timing of this application after it lost in the arbitration proceedings. MDA chose to fight the dispute in arbitration proceedings. It did so at its peril. Having been unsuccessful in the arbitration process it now attempts to reverse its tactics and achieve success through an arena available to it from the outset.

[39] Bygo would be prejudiced if MDA's application were successful. Bygo asserts it stands to lose a cause of action if MDA's application is permitted. Bygo has incurred substantial unrecoverable legal expenses in the arbitration process. Bygo is a company without a source of revenue and complains it cannot withstand the relentless legal attacks mounted by MDA, a company with substantial revenue and resources.

[40] While MDA says the extension it seeks is only for a few days, in reality any extension would be in the range of 10 to 17 months and arbitration is to resume in May 2002. MDA filed no affidavit evidence of undue hardship. The parties agreed to the time bar; MDA failed to adhere to it. Any hardship suffered by MDA is not undue, but is due to the failure of MDA to take appropriate steps to apply for relief in a timely manner. An extension of time granted a year or more later would render meaningless the parties' agreement and Bygo would be seriously prejudiced. There is no way to adequately redress Bygo's prejudice.

[41] A court should be reluctant to interfere with the agreement of contracting parties, particularly where legal counsel was available to provide advice throughout. There was no conduct on the part of Bygo that would make it unjust to hold MDA to the contractual term to which it willingly agreed with the benefit of consultation of legal counsel. It cannot be said that the consequences of any hardship to MDA is out of proportion to MDA's fault in failing to take timely and appropriate action to apply for relief from the time bar.

[42] The arbitrator refused MDA's application for an interim stay of the award for repayment of the Oracle Funds. MDA applied to the court for a stay. Ross J. refused the application on November 13, 2001. MDA invited Bygo to bring an application to enforce the award, with the intention of applying for a stay; Bygo refused. MDA has refused to repay the Oracle Funds. Despite Bygo characterizing this as "contemptuous of the Award", no preliminary objection was taken by Bygo to this court hearing MDA's petition in light of MDA's failure to comply with orders of the arbitrator and of the Court. However, Bygo asserts this as a factor that militates against providing MDA with discretionary relief.

[43] Certainly the equities do not favour the exercise of the court's discretion in favour of MDA in the face of it ignoring its obligation to refund the Oracle Funds in accordance with the directions of the arbitrator and the Court. To provide equitable relief would countenance MDA's wilful disregard of its obligations and would set a dangerous precedent.

[44] While s. 20(c) of the Commercial Arbitration Act provides the court discretion to relieve against the loss of a claim where the failure to take a procedural step within a contractually mandated time results in undue hardship, MDA's dispute was not delivered "immediately", as required by the parties' agreement. Section 20 creates a discretionary power to interfere with vested contractual rights which should not be exercised where a party has provided no explanation for a lengthy delay in applying for an extension of time, where that party has not been misled, and where the resulting prejudice to the other party cannot be adequately redressed. The granting of an extension in this case is inconsistent with the agreement of the parties and with the purpose of s. 20 of the Act. It would not be appropriate for this court to exercise its discretion in favor of MDA to extend the contractual time limit.

[45] MDA's application for an order extending the time to January 15, 2001 to deliver notice to Bygo, disputing Bygo's purported termination of an escrow agreement on December 19, 2000, is dismissed.

[46] There is no merit to MDA's application seeking leave to appeal the arbitrator's determination that he does not have jurisdiction to consider an extension of time and to remit the matter to the arbitrator for determination of whether an extension should be granted.

[47] The petition is dismissed.

[48] Bygo is entitled to costs. Counsel for Bygo indicated he would seek special costs on behalf of Bygo. If the parties cannot reach agreement on costs, they may provide written submissions within 30 days from the date of this judgment.

"S.S. Stromberg-Stein, J."
The Honourable Madam Justice S.S. Stromberg-Stein