In Melcor Reit Limited Partnership (Melcor Reit GP Inc) v. TDL Group Corp (Tim Hortons), 2021 ABQB 379, Master W. Scott Schlosser stayed a proceeding because plaintiff’s reliance on the summary judgment exemption in section 7(2)(e) of Alberta’s Arbitration Act, RSA 2000, c A-43 was “at the very least premature”. Master Schlosser held that a party resisting referral to arbitration under section 7(2)(e) must have first filed a summary judgment application and, until doing so, the exemption was not in issue. Master Schlosser also contrasted the state of summary judgment principles applicable when the Arbitration Act was first introduced and the current status of those principles following Hryniak v. Mauldin, 2014 SCC 7 (CanLII), [2014] 1 SCR 87. He noted that “[s]omething now suitable for Summary Judgment is quite different from what might have been suitable when Section 7(2)(e) of the Arbitration Act was passed into law” and “[a]n expansive reading of summary disposition is likely much wider than what was originally intended by the Act”.
The TDL Group Corp. (“TDL”) operated a restaurant franchise out of premises leased from Melcor Reit Limited Partnership (“Melcor”) for a ten (10) year term (“Lease”).
The Lease provided a right to terminate upon prior written ninety (90) day notice if, without TDL’s fault “the operation on the Leased Premises of a usual Tim Hortons shop or the use of the Leased Premises therefore is prevented, or substantially limited or impaired by any act or omission of any government authority, or becomes illegal and such condition continues for a period of thirty (30) days”.
Master Schlosser listed a pair of Alberta Chief Medical Officer of Health notices, issued on March 27, 2020 and on June 12, 2020 respectively. The first mandated a fifteen (15) person indoor group limitation and ordered that “no dine-in services were permitted at restaurants, cafes, coffee shops and other food-serving facilities” but that restaurants “could provide take-out, drive-thru and food delivery services only”. The second allowed table service to resume at fifty (50) percent capacity.
TDL issued a May 25, 2020 notice of termination and vacated following which Melcor initiated court litigation. Melcor sought an injunction to enjoin TDL from terminating the Lease, a declaration that TDL’s notice of termination was invalid and damages.
The Lease contained an agreement to arbitrate, reproduced at para. 8 of Master Schlosser’s reasons. TDL did not defend that action and applied for a stay under section 7 of Alberta’s Arbitration Act, RSA 2000, c A-43 which Master Schlosser reproduced at para. 18 of his reasons. He readily determined that section “is plainly wide enough to catch the dispute about this lease termination”. That said, he observed that the “more vexing question is the applicability of 7(2)(e), which permits the court to refuse to stay the proceeding if the matter in dispute is suitable for Summary Judgment”.
Section 7(2)(e) stipulates that the court may refuse to stay the proceeding where “the matter in dispute is a proper one for default or summary judgment”.
Master Schlosser contrasted sections 7(1) and 7(2), noting that the first was mandatory and the second “permissive and discretionary”. He then contrasted the state of summary judgment principles applicable when the Arbitration Act was first introduced and the current status of those principles following Hryniak v. Mauldin, 2014 SCC 7 (CanLII), [2014] 1 SCR 87. Master Schlosser commented on the impact that decision had.
“This breathed new life into a somewhat moribund old remedy, and necessarily so: the old system failed to deal with civil disputes in an efficient and cost-effective way. Now Summary Judgment applications are decided on the balance of probabilities. This remedy now embraces a much wider range of disputes”.
As a result, Master Schlosser concluded that “[s]omething now suitable for Summary Judgment is quite different from what might have been suitable when Section 7(2)(e) of the Arbitration Act was passed into law”. He added that “[a]n expansive reading of summary disposition is likely much wider than what was originally intended by the Act”. He sought to identify the scope of the summary judgment process compatible with the Arbitration Act and at para. 25 listed a variety of dispositive processes short of a full trial.
“[25] An expansive reading of summary disposition is likely much wider than what was originally intended by the Act. A better view is that Summary Judgment in 7(2)(e) of the Arbitration Act means disposition under Rule 7.2 (Admissions) and 7.3 (No Merit); or Division 2 of Part 7 of the Rules. The other procedures included in Part 7 of the Rules, while they may fall short of a full trial, are one step removed from the operation of Rules 7.2 and 7.3 which, due to developments in the law, are themselves somewhat removed from a pre-Hryniak understanding of Summary Judgment. These latter procedures are efficient and cost-effective ways to determine a dispute but are probably not speedier than arbitration and, as such, beyond the scope and intention of section 7(2)(e) of the Arbitration Act”.
Having set out the above, Master Schlosser then turned to determine whether Rules 7.2 and 7.3 of the Alberta Rules of Court, Alta Reg 124/2010 “as they are now understood and applied” allowed him to conclude that summary judgment was suitable for the matter before him. He referred to Medicine Shoppe Canada Inc. v. Devchand, 2012 ABQB 375 paras 24-25 regarding the “principles governing contractual arbitration clauses and the Summary Judgment Exemption”.
Though he noted that the summary judgment exemption was now “more inclusive”, the principles listed in the 2012 decision still applied. Master Schlosser observed that Melcor had the burden to demonstrate that the exemption applied and the “default is to uphold the contractual agreement and stay the action”. He then added a reference to Medicine Shoppe Canada Inc. v. Devchand para. 28 regarding the consequences of having no motion for summary judgment.
“[28] In my view, if a plaintiff wishes to contend on an application for a stay pending arbitration that the Summary Judgment Exemption applies, the plaintiff must first have filed a summary judgment application together with the supporting affidavit. Until that time, the Summary Judgment Exemption is not in issue. Devchand has not done so. Accordingly, the questions posed of McKay are neither material nor relevant to the Stay Application”.
Because Melcor had not yet filed a motion for summary judgment, Master Schlosser found the statement in para. 28 “of direct application”.
At paras 30-33, Master Schlosser did explore whether the dispute may qualify for summary judgment and outlined remarks for and against its suitability. He noted that the “central issue” involved the government’s health orders and interpretation of contract, the parties did not dispute the terms and circumstances and he saw no apparent credibility issues. He balanced those against his observation that the dispute also raised a breach of duty of good faith argument which was “something of a wild card” and might justify a fuller hearing.
He determined that an application to stay based on section 7(2)(e) was “at the very least premature”.
“[33] Accordingly, even if I were to go beyond the requirement in Medicine Shoppe case that a Summary Judgment application (with supporting affidavit) actually be before the court for the exception in 7(2)(e) to apply, and even if I were to adopt an expansive meaning of the subsection, it is doubtful that I can now conclude with any confidence that this is a proper matter for Summary Judgment. All in all it is too early to tell”.
urbitral notes – First, for a contrasting result when presented with no application to stay, see the recent Arbitration Matters note “Nova Scotia – absent summary judgment motion, stay declined if there is arguable case for summary judgment – #480” regarding VistaCare Communications Services of Canada Inc. v. Verge Technologies Inc., 2021 NSSC 161. Despite the absence of a motion for summary judgment,t Madam Justice Mona Lynch declined a stay under section 9(2)(e) of the Commercial Arbitration Act, SNS 1999, c 5 because the party resisting the stay “has satisfied me that there is an arguable case for summary judgment”. Lynch J. determined that whether a matter is a proper one for summary judgment (i) “does not mean deciding whether summary judgment would be granted as doing so would be too high a bar to meet” or (ii) “cannot be only whether summary judgment will be sought as that bar is too low”. Lynch J. held that “[w]here there is no summary judgment motion with the stay motion, the proper test should be whether there is an arguable case for summary judgment”.