Alberta – contract and arbitration agreement both valid but inapplicable when parties effectively carry on different relationship – #242

In Trainor v. Fundstream Inc, 2019 ABQB 800, Madam Justice Alice Woolley declined to refer the parties to arbitration, holding that the employment contract was neither void ab initio or invalid but simply did not apply to the resulting legal relationship between the parties.  The employment contract provided for services “within” a province but were actually performed “without”, in another province. As a result, the arbitration agreement did not apply to the termination because the services did not relate to the otherwise valid but unperformed original employment contract.

Based in Québec, Fundstream Inc. (“Fundstream”) operates as a gift card re-seller and markets and fulfills gift card orders from businesses and organizations located across Canada.

Residing in and working from Calgary, Ms. Shauna Trainor (“Trainor”) worked as a sales representative for Fundstream between September 2008 and February 2017.

Trainor signed a Sales Representative Agreement (“Agreement”) when she started with Fundstream.  Fundstream did not sign it but a representative did initial Schedule A to the Agreement.  Woolley J. at para. 7 of her reasons excerpts sections 1 “Appointment”, 10 “Arbitration”, 12 “Governing Law” and 14 “Miscellaneous” from the Agreement.

The Agreement as section 1 purported to confirm Fundstream’s and Trainor’s agreement that Trainor would serve as a sales representative for its program to “Canadian non-profit organisations located within the Province of Quebec (each an ‘NPO’ and collectively, the ‘NPOs’)”.  Section 10 provided that arbitration would be conducted in English under the rules of the Civil Code of Québec, CQLR c CCQ-1991 (“Civil Code”) and that the seat and place of the arbitration would be “the province of Québec”.

Despite amendments over the course of term of Trainor’s employment, no changes were made to section 1.  Fundstream terminated Trainor’s employment by February 24, 2017 letter.

The reasons identify a handful of contradictory interpretations given by different agencies regarding the nature of Trainor’s employment.  During the term of Trainor’s employment, on January 27, 2017, Revenu Québec determined that she was an employee and obliged Fundstream to contribute to the Québec Pension Plan on Trainor’s behalf.  Following termination of her employment, on May 3, 2018 Québec’s Commission des normes, de l’équité, de la santé et de la sécurité du travail (“CNESST”) declined to hear her complaint for termination because it determined Trainor did not perform any of her tasks in Québec and, never being a Québec resident, the Québec legislation did not cover her situation.  On November 27, 2018, Québec’s Tribunal d’administratif du Travail (“TAT”) concluded that the Act respecting labour standards, CQLR c N-1.1 did not apply to Trainor because all her work was done outside of Québec. In coming to that conclusion, the TAT accepted Fundstream’s submissions resisting application of Québec legislation on the basis that Trainor had not worked in Québec.

Trainor filed a February 21, 2018 Statement of Claim in Alberta’s Court of Queen’s Bench disputing the nature of her termination and alleging that, despite the Agreement, she was an employee or dependent contractor entitled to reasonable notice or pay in lieu of notice.  Fundstream responded by a March 13, 2019 application to dismiss Trainor’s action on the basis of lack of jurisdiction or forum non conveniens.

On May 21, 2019, Master Farrington dismissed Fundstream’s application.  He noted that the parties operated as if the Agreement had been signed even if it had not been signed by Fundstream but nothing turned on that fact.  Rather, the unambiguous terms of the Agreement referred to services being performed in Québec but none were.  A key passage of Master Farrington’s reasons (not currently available online) appear at para. 16.

In my view, based on the wording of the agreement that it relates to services provided to entities in Québec and based upon the fact that the services were not actually provided to entities in Québec, that some other relationship define the parties, I conclude there is not an arbitration agreement, and I dismiss the application for a stay, so the matter can proceed here in Alberta.

Fundstream appealed on June 14, 2019.

Woolley J. applied the standard of correctness to the decision.  See Bahcheli v. Yorkton Securities Inc., 2012 ABCA 166, para. 30 and Van Camp v. Chrome Horse Motorcycle Inc., 2012 ABQB 175, paras 29-31 and the nature of the appeal being a trial de novo.

Woolley J. observed that whether or not the Master’s decision was correct turned on whether the Agreement governed the parties’ relationship.  Fundstream argued that resolving that issue required interpretation of the Agreement and this should be left to the arbitrator, relying on Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34 (CanLII), [2007] 2 SCR 801 and a recent application of that principle in 9302-7654 Québec inc. (Team Productions) v. Bieber, 2017 QCCS 1100.

Woolley J. agreed but pointed to the nuance stressed by Rogers Wireless Inc. v. Muroff, 2007 SCC 35 (CanLII), [2007] 2 SCR 921 which allows courts to consider a question of mixed fact and law if doing so entails a superficial examination of the documentary proof.

Woolley J. held that, on the record, the facts were either evident on the face of the documents or undisputed by Fundstream and Trainor and the “main thing to be decided” is a question of law.

[23] The issue before me turns largely on the interpretation and application of the law. The relevant facts – that the agreement was entered into, when it was entered into, what it says, that Ms. Trainor provided services to Fundstream from 2008 through 2019 in Calgary to clients in western Canada – are either evident on the face of the documents or undisputed by the parties. The main thing that needs to be decided, namely the applicability of arbitration provisions in a contract that the parties intended to have govern their legal relationship, but that was written so as to preclude its doing so, largely turns on the law. It is one, therefore, that I must decide in order to decide Fundstream’s appeal of Master Farrington’s decision denying its application to strike or stay Ms. Trainor’s Claim.

Though Woolley J. had determined that the appeal turned on her consideration of the law, there was no support in the record regarding the application and interpretation of the laws of Québec, other than access to the text of the Civil Code provisions.

Despite the application of the Civil Code, Fundstream provided no expert evidence to the application or interpretation of the Civil Code. It argued that the laws were “not so complex as to require expert opinion to be applied”.  Woolley J. disagreed.

[25] I am less convinced than Fundstream of this point. The legal issues raised by this case are complex even within the common law system within which this Court operates, and resolving them through a wholly unfamiliar legal system creates a meaningful risk of error. Had the law provided to me by Fundstream persuaded me that it ought to succeed, I might nonetheless have been hesitant to grant the relief requested given the absence of expert evidence or a more fulsome exploration by counsel of the applicable Québec law. Since, however, the law as provided does not persuade me to grant Fundstream its requested relief I can consider the issues on the basis it has requested.

Woolley J. identified a dozen articles from the Civil Code at para. 26 of her reasons and considered the necessity or not of accepting parole evidence should the Agreement be ambiguous or require interpretation.  She decided that doing so was not necessary nor was contra non proferentum.

Woolley J. recognized that the arbitration agreement was separate from the main contract.  See her comments at para. 32.  She also referred to Cecrop Co. v. Kinetic Sciences Inc., 2001 BCSC 532, paras 22-23.  Though not reproduced in her reasons, the paras in the latter case are worth excerpting here given Woolley’s later comment, at para. 35 of her reasons, of not being persuaded by the “extreme approach” set out in Cecrop Co. v. Kinetic Sciences Inc.

[22] The court concluded that the arbitration clause should be considered separately from the overall agreement.  There was, however, further evidence in that case that the parties intended the arbitration clause to survive the termination of the agreement.  One of the arbitration clauses related specifically to disputes relating to the deposit, a matter that could not arise unless the transaction failed to complete.

[23] In Roy v. Boyce (1991), 57 B.C.L.R. (2d) 187 (S.C.), the arbitration clause was held to be valid despite the possible absence of a condition precedent to the continuing existence of the contract.

Woolley J. concluded that the parties had entered into a binding Agreement but that the Agreement did not govern their ensuing relationship. The Agreement’s language “clearly and unambiguously defines and constrains its scope”.  Trainor had been retained to provide services to non-profit organizations located within the province of Québec.  She determined that, to apply the Agreement to Trainor’s subsequent services would be to effectively rewrite the Agreement to replace “within” to “without”.

The Agreement being written that way may have been an error or oversight. But it is not ambiguous. The only way for the Agreement to be made to apply to the legal relationship between Ms. Trainor and Fundstream, in which she provided services to non-profits in western Canada, would be to rewrite the terms entirely, to substitute “non-profit organizations located outside the province of Quebec” for “non-profit organizations located within the province of Quebec”. The ordinary principles of contract interpretation as set out in the Civil Code and by the Supreme Court of Canada in Uniprix do not permit that sort of judicial rewriting.

Having thus interpreted the Agreement, Woolley J. held that she could not now interpret the Agreement as precluding Trainor from instituting litigation in the Court of Queen’s Bench.  Eschewing the “extreme approach” of Cedrop Co Ltd v Kinetic Sciences Inc., Woolley J. held that arbitration agreement simply did not apply.

The Agreement is not void ab initio. Nor is it illegal or otherwise void or invalid. It simply does not apply to the legal relationship that existed between Ms. Trainor and Fundstream, since the services it retains Ms. Trainor to provide were definitionally distinct from the ones she in fact provided.

urbitral note – In light of the prior characterizations given to Trainor’s employment by Québec agencies and by Fundstream, the result supports a close reading of the Agreement and rewards Trainor’s attempts to engage somewhere in dispute resolution.  The case may be of narrow application in other cases as it neither voids the main employment contract nor determines that the arbitration agreement does not apply to that main contract’s disputes.  Rather, in the circumstances, both the main contract and the arbitration are valid though never performed and were not applicable to the resulting relationship and dispute.