Alberta – court denies injunction where ongoing performance not stipulated during arbitration – #051

Alberta’s Court of Queen’s Bench in Graham Infrastructure LP v. Whitefish Lake First Nation #459, 2018 ABQB 66 gave insights for drafting commercial contracts containing arbitration clauses.  Contracts which expressly provide for continued performance of the obligations might justify or at least facilitate consideration of mandatory injunctions while the parties undertake arbitration.   Such clauses would clarify the parties’ expectations of whether a court might grant of provisional measures in advance of or during their arbitration.

Graham Infrastructure LP (“Graham”) as contractor entered into an August 16, 2016 agreement with Whitefish Lake First Nation #450 (“Whitefish”) as owner for the construction by March 31, 2018 of a water treatment plant on Whitefish land.  At the time of the hearing on Graham’s application for a mandatory injunction, residents of Whitefish First Nation continued to live under a boil water advisory.

Their contract contained a dispute resolution in clause 8.2.6.:

8.2.6  If Notice in Writing is given to the other party and the Consultant as set out in paragraph 8.2.2, the Owner, in its sole discretion, may refer the dispute to binding arbitration to be conducted in accordance with the Arbitration Act (Alberta). If the Owner elects not to proceed with arbitration, the dispute shall be resolved by the courts or any other form of dispute resolution agreed to by the affected parties.

The contract provided Whitefish the right to terminate the contract but not for Graham.

Disagreements arose over the course of the performance of the contract resulting in Whitefish issuing an August 23, 2017 and a September 26, 2017 notice of termination, each of which Graham contested.

Graham initiated litigation before Alberta’s Court of Queen’s Bench seeking only injunctive relief with no claim for damages.  The injunction sought an order enjoining Whitefish from terminating Graham’s involvement in the construction.

Mr. Justice R. Paul Belzil heard the application and dismissed it. He determined that Graham’s application did not meet the tripartite test set out in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 SCR 311, 1994 CanLII 117 namely, is there a serious issue to be tried, will irrevocable harm be caused if the injunction is not granted and does the balance of convenience favour granting the injunction?

The case is of interest in commercial arbitration for the reasoning included by Belzil J. regarding the wording in litigants’ contracts in which arbitration is also provided.

[26] Graham acknowledges that pursuant to para 8.2.6 the owner may elect to arbitrate the dispute or resolve it through the courts. Having elected not to proceed to arbitration, it is Graham’s position that Whitefish must now await the outcome of the litigation, even if that means that the residents of the Whitefish First Nation must continue to live under a boil water advisory for a number of years in the future.

Graham submitted two cases from Ontario regarding which Belzil J. noted : “To date, these decisions, which are not binding on me, have not been applied in any reported Alberta decision.”  Despite not being bound by them, Belzil J. was open to their reasoning.

In both those cases, the parties’ contracts contained express provisions stipulating that performance of their contracts must continue during the dispute resolution process agreed to by the parties.  In International Steel Services Inc. v Dynatec Madagasgar S.A., 2016 ONSC 2810, the parties had agreed to mandatory arbitration.  In Bombardier Transportation Canada Inc. v Metrolinx, 2017 ONSC 2372,  the parties had agreed to a multi-step dispute resolution process.

Belzil J. distinguished both those cases from Graham’s on the same basis: both were between parties who accepted in advance that their contracts would be performed even if and when disputes were being resolved.  Graham’s contract with Whitefish did not provide for such ongoing performance.

Belzil J. was no doubt influenced by the impact of the parties’ dispute on the water quality imposed on residents waiting to be served by the water treatment plant.  As reproduced above in the excerpt of para. 26 from the reasons, Belzil J. was alert to the risk of those residents having to live under a boil water advisory while litigation took ‘a number of years’ to deliver an outcome.

The reasoning offers some insights for drafting commercial contracts which contain arbitration clause.  Parties may wish to anticipate the need, if any, to expressly provide for ongoing performance of their contract notwithstanding one or either party triggering the arbitration process.