In 1775773 Alberta Ltd. v Hill, 2026 ABKB 511, the Application Judge considered the limits of the Court’s jurisdiction to determine the scope of an arbitration. The case arose in circumstances where the parties had agreed that all but one of the issues between them would be arbitrated but had not entered into a written arbitration submission agreement or otherwise consented to the Court determining whether the remaining issue should be referred to arbitration. The Application Judge refused to refer any of the issues to arbitration, finding that there was no “meeting of the minds” on the submission agreement and that an arbitration agreement could not be implied from the parties’ Unanimous Shareholders Agreement (the “USA”). He also found that he lacked authority to refer the disputed issue to arbitration because the parties had not consented to the Court determining whether it should be arbitrated.
For background, Jason Hill, Tyler Hill (Jason’s first cousin), and 1775773 Alberta Ltd. (“177”) were the parties to the USA. 177 was a holding company that owned a majority interest in Formations Inc. Jason was the minority shareholder of 177, while 2377799 Alberta Ltd. (“237”) was the majority shareholder. Tyler was also a director of Formations Inc., the sole director of 177, and the sole director and shareholder of 237.
The dispute arose in the context of the alleged termination of Jason Hill’s employment with Formations Inc. After Jason’s employment ended, the parties to the USA were unable to agree on the valuation of his shares or the proper mechanism for his exit from the USA. The USA had no arbitration clause, but the parties attempted to negotiate a submission to arbitration agreement.
When no agreement was reached, 177 and 237 filed a Statement of Claim with the Court seeking to have the valuation question directed to arbitration or, alternatively, to have the Court adjudicate it. Jason responded with a counterclaim claiming oppression and commenced an independent action also claiming oppression. Jason then brought this application for “advice and directions” seeking to have the Court order the Parties to arbitrate the issue of whether 177 was required to redeem Jason’s shares under the USA
By the time the court application was heard, the Parties were agreed (although that agreement was not reduced to a signed agreement) that the Court should order several issues to be arbitrated but remained divided over whether the arbitrator should also determine whether mandatory redemption of Jason’s shares was required under the USA.
The Application Judge began with the basic principle that, absent the agreement of the parties or statutory authority, a court does not have jurisdiction to order parties to submit their disputes to arbitration, citing SSG v SKG, 2022 ABCA 379 and Stuve v Stuve, 2020 ABCA 467 (“Stuve”).
He then considered whether the mandatory redemption issue was included in the issues the Parties agreed that the Court should order to be referred to arbitration. Jason argued this unwritten agreement included the mandatory redemption issue by implication, while 177 and 237 maintained it did not.
The Application Judge approached the issue by first considering whether there was any submission agreement at all between the parties. He considered what constitutes an arbitration agreement and noted that the Arbitration Act, RSA 2000, c A-43 defines “arbitration agreement” at section 1(1)(a) as “an agreement or part of an agreement by which 2 or more persons agree to submit a matter in dispute to arbitration”. Section 5 states that “an arbitration agreement need not be in writing”.
He then relied on a passage from Professor Tamar Meshel’s text, Arbitration Law: Statutes, Cases and Commentary (Toronto: LexisNexis Canada, 2026) at p. 55, which states, in part: “To be effective, an arbitration agreement should be ‘mandatory’ and ‘clearly and precisely confer exclusive jurisdiction’ on the arbitrator, and there must be ‘a meeting of minds between the parties’ concerning the submission to arbitration.”
Based on the evidence, the Application Judge found there was no “meeting of the minds” as to the content of the submission agreement and, therefore, no agreement to arbitrate (whether written or oral) in the first place. This conclusion was based primarily on Jason’s affidavit evidence that any agreement to arbitrate, on his part, had been always contingent on the inclusion of the mandatory redemption issue. Because of this, the Application Judge concluded that Jason’s agreement to the proposed arbitration was “conditional” and had never been “final” (para. 47), even though the parties’ submitted to him that they did have an agreement.
The Application Judge next considered whether the USA implied an arbitration agreement. He concluded it did not. He stated, “…it cannot be said from the language of the USA that the parties intended to funnel their disputes arising from the USA exclusively to arbitration. Nor is mandatory arbitration required in order to give efficacy to the USA”. He noted that Jason was seeking an oppression remedy and the Alberta Business Corporations Act, RSA 2000, c B-9, “constitutes the Court as the default venue for resolution of shareholder disputes based on oppression unless by agreement, in a USA or another agreement, the Court’s jurisdiction is ousted and substituted with arbitration” which was not the case here (para. 33).
Finally, the Application Judge considered whether the Parties had consented to the Court making the decision as to whether the mandatory redemption issue should be referred to arbitration. It appears that the Application Judge raised this issue of his own accord at the hearing, where he expressed the view that the Court, “could only settle the arbitration questions if the parties agreed that the Court could settle the arbitration questions” (para. 42). He noted, “[t]he scope of Court intervention in arbitration matters is quite limited (s 6 of the Arbitration Act). The Court’s power to “assist the arbitration process” presupposes there is an existing arbitration agreement or statutory arbitration in place. It does not allow me, as I noted above, to create an arbitration process where none exists” (para. 41).
In response, at the hearing, 177 and 237 took the position they had not conferred jurisdiction upon the Court, by consent, to decide whether the mandatory redemption issue should be referred to arbitration and in fact objected to the Court doing so. Counsel for Jason argued there was nothing in the 177/237 brief to indicate their non-consent and since this non-consent was coming up so late in the proceeding, they should not be allowed to assert it at this point.
The Application Judge stated:
“If both sides had come to me saying “You decide which questions should be referred to the arbitrator and we will live with whatever decision you make,” that would be one thing. That is not, as it turns out, what happened. Jason consents to the Court making the decision, but 177 and 237 do not” (para.44).
In considering whether it was too late for 177 and 237 to change their position at the hearing the Court continued:
“If I were to say that 177 and 237 cannot raise absence of consent as an argument because of timing, I would then be doing the exact thing for which I do not have jurisdiction, deciding the question of referral of mandatory redemption to arbitration without consent. Since there is no discussion of consent in either brief, I cannot say there was reversal of position at the hearing (para. 45).”
As a result, the Application Judge dismissed the application to direct the parties to arbitration on the issue of whether 177 was required to redeem Jason’s shares under the USA, on the basis that the Court lacked authority to do so. He also declined to refer any of the questions agreed to by the parties to arbitration because, as noted above, Jason’s agreement to arbitrate was conditional rather than final, and there was no implied arbitration clause in the USA.
He ended by stating, “of course, the parties also remain free to arbitrate whatever questions they wish concerning Jason’s shares if they agree to the issues to be arbitrated in a signed arbitration agreement” (para. 49).
Commentary:
This case seems problematic in a few ways.
1. Contract Formation
Unlike the typical case involving the interpretation of a pre-existing arbitration clause, this case concerns the formation of a post-dispute submission agreement. The Application Judge treated the parties’ disagreement over the inclusion of one issue as preventing the formation of any arbitration agreement, despite the parties’ apparent and more recent consensus that the other issues should be submitted to arbitration.
This finding that the parties did not reach an arbitration agreement is difficult to reconcile with paragraph 15 of the decision, where the Application Judge set out the parties’ agreement as it stood at the time of the application hearing and acknowledged that the agreement had evolved up until the time of the hearing.
Although surprising, is the result justifiable based on Jason’s evidence that his agreement was contingent, or because this was a submission agreement such that any disagreement as to scope goes to contract formation? Even if Jason’s evidence was that his agreement was always conditional, how can that negate the parties’ agreed position as it stood before the Court at the time of the hearing?
2. Court Jurisdiction by Consent
As to the issue raised by the Application Judge concerning whether the parties consented to the Court determining which issues should be referred to arbitration, is it even possible for the parties to confer jurisdiction on the Court by consent?
The Application Judge cited paragraph 50 of Stuve in support of the proposition that they could:
“We conclude that the Rules of Court, in particular rule 4.16, do not empower a Court of Queen’s Bench judge to order private arbitration of disputes without consent of the parties or an agreement to that effect.”
It is arguable that this conclusion was reached in the context of interpreting the scope of a specific statutory authority to order arbitration under the Alberta Rules of Court, rather than as a more general statement that parties can confer jurisdiction on the Court by consent outside that context.
3. Competence-competence
Because this matter came before the Court as an application for advice and directions, the process appears to have confused the analysis by focusing the Court on its own jurisdiction to refer matters to arbitration, rather than on the arbitrator’s jurisdiction to determine his or her own jurisdiction in the first instance.
The competence-competence principle tells us that, as a general rule, in cases involving an arbitration agreement (including cases concerning the agreement’s validity or scope) questions of the arbitrator’s jurisdiction should be decided by the arbitrator in the first instance. The relevant exceptions to this principle arise where the issue is solely one of law or is an issue of mixed fact and law that can be determined on only a superficial review of the facts: Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34.
Here, the existence of a binding arbitration agreement was determined by the Court on a factual basis. This arguably means that the issue was one for the arbitrator, rather than the Court, to determine in the first instance.
That said, there is a line of cases standing for the proposition that the competence-competence principle does not apply where the dispute concerns the very existence of an arbitration agreement, as opposed to the validity or scope of an existing arbitration agreement. The scope, if any, of this “pre-condition” to the application of competence-competence is unclear. See discussion in previous Arbitration Matters case note: Court finds pre-condition to competence-competence – #895.