Coastal Contacts Inc. v. Elastic Path Software Inc.

Coastal Contacts Inc. v. Elastic Path Software Inc.

The court held that the arbitrator committed errors of law by applying a merits/balance of probabilities analysis and weighing extrinsic evidence beyond what Monenco permits instead of applying the 'mere possibility' test to the pleadings to determine the duty to defend; further, the arbitrator erred in denying...

Source-derived case information.

Citation
2013 BCSC 133
Parties
Petitioner: Coastal Contacts Inc.; Respondent: Elastic Path Software Inc.
Court
Supreme Court of British Columbia
Jurisdiction
Canada
Judgment Date
30 January 2013
Procedural Posture
Application for Leave to Appeal Arbitration Award Under Commercial Arbitration Act / Leave Application and Determination on Appeal Merits
Outcome
Leave to appeal granted; appeal allowed on issues of duty to defend and relief from forfeiture; arbitrator's analysis on these points set aside and Coastal entitled to indemnity for reasonable settlement and defence costs; arbitration award of costs related to Coastal's breach of the arbitration clause (third‑party...
Legal Topics
Duty to Defend, Indemnity, Relief From Forfeiture, Notice Requirement, Arbitration Leave, Standard of Review, Clean Hands Doctrine, Use of Extrinsic Evidence
Source Language
english
Contract Law Arbitration Commercial Law Patent Law Equity Duty to Defend Indemnity Relief From Forfeiture +5 more

Source-derived case record

Summary, issues, holding and outcome

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Parties

Coastal Contacts Inc.

Petitioner

Elastic Path Software Inc.

Respondent

Procedural Posture

Application for Leave to Appeal Arbitration Award Under Commercial Arbitration Act / Leave Application and Determination on Appeal Merits

Legal Issues

  1. 1 Whether the arbitrator applied the correct legal test for the duty to defend (mere possibility vs. merits/balance of probabilities)
  2. 2 Whether the arbitrator improperly relied on extrinsic evidence and conducted a merits analysis rather than confining inquiry to the pleadings
  3. 3 Whether Coastal is entitled to relief from forfeiture for late notice of claim

Ratio Decidendi

The court held that the arbitrator committed errors of law by applying a merits/balance of probabilities analysis and weighing extrinsic evidence beyond what Monenco permits instead of applying the 'mere possibility' test to the pleadings to determine the duty to defend; further, the arbitrator erred in denying relief from forfeiture based on lack of clean hands where no actual prejudice from late notice was established and where the third‑party proceedings were not sufficiently connected to the late notice. Accordingly leave to appeal was granted, the arbitrator's methodology on duty to defend and on relief from forfeiture was set aside, Coastal was found entitled to indemnity for...

Court Disposition

Leave to appeal granted; appeal allowed on issues of duty to defend and relief from forfeiture; arbitrator's analysis on these points set aside and Coastal entitled to indemnity for reasonable settlement and defence costs; arbitration award of costs related to Coastal's breach of the arbitration clause (third‑party...

Orders

  • Leave to appeal granted under s.31 of the Commercial Arbitration Act
  • Arbitrator's Award dated August 25, 2011 set aside insofar as it denied Coastal indemnity for defence and settlement costs arising from the Hill action