In Agrium, Inc v. Colt Engineering Corporation, 2020 ABQB 807, Madam Justice Nancy Dilts held that unsuccessful applicants could appeal to a justice of the court a Master’s decision refusing a stay under section 7(1) of the Arbitration Act, RSA 2000, c A-43. The legislated right of appeal from a Master’s decision under the Alberta Rules of Court, Alta Reg 124/2010 does not contradict the policy decisions underlying the Arbitration Act. The Court of Queen’s Bench Act, RSA 2000, c C-31 “creates layers of decision making authority” and section 7(6) did not intend to render Master’s decisions on stay applications “unappealable”. Section 7(6) should “not be read in a manner that would be inconsistent with that legislated right”. Having jurisdiction to hear the appeal, Dilts J. held that she retained jurisdiction under section 7(1) to consider waiver and attornment notwithstanding expiry of a limitation period in which to commence arbitration.
Agrium Inc. (“Agrium”) sued Orbis Engineering Field Services Ltd. (“Orbis”) and Elliott Turbomachinery Canada Inc. and Elliot Company (together “Elliott”) before the Court of Queen’s Bench. After two (2) years and some activity in the action, Orbis and Elliott applied for a stay under Alberta’s Arbitration Act, RSA 2000, c A-43 invoking the mandatory provision for arbitration in their agreement with Agrium. The Master dismissed their application to strike the claim against them. See the earlier Arbitration Matters note “Participation in court proceedings prior to stay application waives mandatory arbitration” on the decision in first instance in Agrium, Inc v. Colt Engineering Corporation, 2020 ABQB 53.
The Master held that he had discretion to refuse a stay in favour of mandatory arbitration and could do so on the basis of unfairness to Agrium stemming from Orbis’ and Elliott’s participation in court proceedings. That participation, though minimum, coupled with two (2) years of delay, lead the Master to conclude that it would be unfair to Agrium to Orbis and Elliott to “go back on their choice to participate in this litigation”.
Orbis and Elliott appealed the Master’s decision to the Court of Queen’s Bench. Dilts J. identified two (2) issues: (i) whether section 7(6) of the Arbitration Act precludes an appeal of the Master’s decision; and, (ii) if an appeal exists, should the action be struck under section 7(1) of the Arbitration Act or had Orbis and Elliott waived reliance on the mandatory agreement to arbitrate.
In framing the second issue, Dilts J. noted further that it would require her to decide whether the court retained jurisdiction under section 7(1) of the Arbitration Act to consider waiver and attornment notwithstanding expiry of a limitation period in which to commence arbitration.
Dilts J. noted that the parties all agreed that the matters in dispute in the action fell within the scope of the agreement to arbitrate set out in the purchase orders for the work or services and, at paras 7-11, inventoried the steps taken by or with Orbis and Elliott in the action.
“28(a) […] Any dispute relating to this Order shall be resolved by Arbitration in Calgary, Alberta, Canada pursuant to the UNCITRAL Model Law and Rules. The courts having exclusive supervisory jurisdiction with respect to the matters relating to this Order shall be the courts of the Province of Alberta”.
(i) Section 7(6) of the Arbitration Act
Agrium argued that section 7(6) bars all appeals from a decision made under section 7 of the Arbitration Act, including an appeal from a Master to a justice. Orbis and Elliott gave two (2) reasons in support of an appeal. First, the Master had gone beyond the Arbitration Act to find authority to deny the stay and was therefore not a decision under the Arbitration Act. Second, reliance on the Arbitration Act to remove a justice’s authority to review a Master’s decision and “empower the Master to make a final decision with no right of appeal”, contrary to The Constitution Act, 1867, 30 & 31 Vict, c 3.
Dilts J. held that Orbis and Elliott were entitled as of right to appeal the Master’s decision to her court if the Master’s decision was not taken under the Arbitration Act and notwithstanding section 7(6).
At paras 22-23, Dilts J. identified the relevant provisions of the Interpretation Act, RSA 2000, c I-8, the Court of Queen’s Bench Act, RSA 2000, c C-31 and the Alberta Rules of Court, Alta Reg 124/2010 (“Rules of Court”) issuing pursuant to the Judicature Act, RSA 2000, c J-2.
“[23] Section 12 of the Court of Queen’s Bench Act creates layers of decision making authority within the Court of Queen’s Bench by providing that an appeal of a decision of a Master in Chambers lies to a Justice of this court. That legislated right of appeal is recorded in Rule 6.14 of the Rules of Court made under the Judicature Act, RSA 2000, c. J-2. The legislature did not intend that a decision of a Master was “unappealable” and I do not accept that the language of s. 7(6) makes it so. Given s. 12 of the Court of Queen’s Bench Act and Rule 6.14, the legislature has provided for the appeal of decisions of the Master to a Justice of this court. Absent express language, I am satisfied that s. 7(6) should not be read in a manner that would be inconsistent with that legislated right”.
At paras 26-27, Dilts J. distinguished other decisions, from both Alberta and Ontario, which dealt with appeals from a decision of a justice. For those from Alberta, she considered them as limited to the scope or nature of the questions that can be appealed. See A.G. Clark Holdings Ltd. v. HOOPP Realty Inc., 2013 ABCA 101 and HOOPP Realty Inc. v. A.G. Clark Holdings Ltd., 2014 ABCA 20. For the decision from Ontario, Eggiman v. Martin, 2019 ONCA 974, Dilts J. underlined that it did not speak to the issue of appealing a Master’s decision.
Dilts J. expressly dismissed Agrium’s argument that Orbis and Elliott would be granted “a second chance to argue their position”, stating “that is a right to which they are entitled by statute and by our Rules of Court”. Despite concerns courts might have with “protracted litigation”, a legislated right of appeal from a Master’s decision does not contradict the policy decisions underlying the Arbitration Act.
Dilts J. closed her analysis by adding that a Master’s decision made beyond section 7 of the Arbitration Act relied on “some residual discretion inherent in the court” and Elliott and Orbis are entitled “to access all the court processes, including appellate review”.
(ii) Section 7(1) of the Arbitration Act
Where the appeal from the Master raises a question of law, Dilts J. stated that the standard of review is correctness, referring to McGowan v. Lang, 2015 ABCA 217.
As part of her introduction to her analysis, she noted that “if the limitation period to commence arbitration has expired, the court has no further authority to consider the statutory exceptions under s. 7(2) of the Arbitration Act”, referring to Agrium Inc. v. Babcock, 2005 ABCA 82.
“[11] B & W also argues that s. 7 of the Arbitration Act does not apply because Agrium did not apply to stay the litigation under s. 7, but instead applied to strike or dismiss it under R. 129 and R. 159 of the Alberta Rules of Court. This is not a valid distinction because a motion to strike a pleading or dismiss an action is based on applicable law, in this case s.7 of the Arbitration Act. An application under R. 129 or R. 159 is appropriate here because the underlying right to arbitrate is statute-barred. Usually, parties whose lawsuits deal with arbitrable issues would have their actions stayed under s. 7(1) and the arbitration would proceed. The lawsuit would not be dismissed outright because the court retains supervisory jurisdiction under s. 6 and could, for example, enforce an award. In the instant case a stay is not appropriate because the right to arbitrate is extinguished through the expiration of the limitations period and, accordingly, there is no further supervisory or enforcement jurisdiction for the court to exercise”.
She set out Orbis’ and Elliott’s position at paras 38-41 and Agrium’s at 42-43.
Regarding the role of the limitation period, the parties took opposite positions. Orbis and Elliott argued that a court cannot rely on waiver and attornment to regain supervisory authority to refuse to stay litigation.
“[38] Elliott says that based on Babcock and HOOPP, the Master had no discretion to refuse to stay or strike the Action. It argues that where the limitation period to commence arbitration has expired, the court cannot engage in a review of the defendant’s conduct under the principles of waiver and attornment. Elliott says the court has no remaining supervisory authority to refuse to stay or strike the litigation. It says this is so regardless of the extent of the defendant’s participation in the litigation and reflects the legislative policy embedded in the Arbitration Act affirming the importance of extending deference to the parties’ decision to arbitrate. Elliott says the Master’s only authority to refuse to stay the litigation was under the limited exceptions in s. 7(2) of the Arbitration Act and those statutory exceptions were not available because Agrium did not commence arbitration proceedings within the limitation period”.
Agrium countered. “It says any decision not to strike an action based on waiver is not breathing life into an expired limitation period governing an arbitration process, but is permitting validly constituted litigation to continue”.
In addition, the parties each disputed the effect of the steps taken so far by Orbis and Elliott in the action.
Dilts J. held that the court did have jurisdiction to consider waiver and attornment after a limitation period had expired to commence arbitration and that the jurisdiction was not limited to controlling abuses of process.
“[44] I am satisfied that the court has jurisdiction to consider the question of waiver and attornment after the limitation period has expired to commence arbitration. To conclude otherwise would be inconsistent with both the [Hnatiuk v. Assured Developments Ltd., 2012 ABCA 97] and [Lafarge Canada Inc. v. Edmonton (City), 2013 ABCA 376] decisions. It also would permit the mischief that the Master identified where a defendant could participate in an action to any degree, allow the limitation period to expire, and then raise the mandatory arbitration provision to defeat the claim. I do not agree that this is an extension of the party autonomy principle that underlies the Arbitration Act.
[45] Nor do I find any authority in the case law to support Orbis’ position that the court’s authority rests within its power to prevent an abuse of process. I am satisfied that the court retains a supervisory function to consider the issue of waiver and attornment even where the limitation period to arbitrate has expired. In reaching this conclusion, I rely on Hnatiuk and Lafarge CA, as followed by this court in [Edmonton (City) v Lafarge Canada Inc, 2015 ABQB 56] and Fernandes v Jennings Capital Inc., 2016 ABQB 594”.
Her review of Hnatiuk v. Assured Developments Ltd., 2012 ABCA 97 and to the Lafarge Canada Inc. v. Edmonton (City), 2013 ABCA 376 and Edmonton (City) v Lafarge Canada Inc, 2015 ABQB 56, referred to respectively as Lafarge CA and Lafarge QB in her reasons, lead her to determine that “regardless of whether the limitation period to arbitrate has expired, the court may consider whether the mandatory arbitration provision has been waived or repudiated, and the defendant has attorned to the court”.
Dilts J. then examined the chronology in the action and concluded that Orbis and Elliott had not waived reliance or attorned. To do so, she underscored the expectation that defendants in actions “act without delay to assert their resistance to litigation” and can do so by signalling in their pleadings their intention to rely on the mandatory arbitration provisions.
“Orbis signalled in its pleadings from the outset that it intended to rely on the mandatory arbitration provision in its agreement with Agrium. After that, its actions were largely defensive, to prevent default by filing a Statement of Defence, and to prevent a misallocation of fault by asserting claims against the other contractors and suppliers to the project. By our Rules of Court, those actions must be taken within prescribed time limits. In these circumstances where the Arbitration Act was plead, the fact that the defendant defended and advanced claims for contribution or indemnity are of little value in determining whether the defendant has signalled an agreement to litigate”.
She did acknowledge that Elliott’s situation differed somewhat from Orbis, “impacted by its failure to plead the mandatory arbitration provision in its initial Statement of Defence”.
For both Orbis and Elliott, Dilts J. concluded that none of their steps taken in the action amounted to waiver or attornment. In regard to Elliott which had waited much longer to raise the arbitration provision, she added that her conclusion was all the more applicable “particularly when to so find would result in the loss of a limitation defence”.
urbitral notes – First, see the earlier Arbitration Matters note “Even after limitation period expires to initiate arbitration, court applies exceptions to deny stay” regarding. Fath v. Quadrant Construction Ltd, 2019 ABQB 151. In that case, defendant petitioned to stay litigation against it only after the limitation period expired in which plaintiff could initiate mandatory arbitration. Master W.S. Schlosser noted that a court lost its supervisory jurisdiction to stay if arbitration was no longer viable because its jurisdiction was over the arbitration and not the lawsuit. Acknowledging that granting a stay effectively barred plaintiff’s claim against defendant and faced with a divided approach in the case law, Master Schlosser opted to consider the exceptions to stay set in Section 7(2) of the Arbitration Act, RSA 2000, c A-43. As an alternative, he also considered defendant’s waiver and attornment as further sources of the court’s jurisdiction to preserve the litigation.
Second, see “Decision maker’s position in judicial hierarchy justifies no reason for different review standard” regarding ATS Automation Tooling Systems Inc. v. Chubb Insurance Co., 2019 ONSC 5073. In that decision, Madam Justice Sandra Nishikawa upheld a Master’s decision to dismiss plaintiffs’ motion to stay their own litigation. The facts did not confirm that the arbitration was active and, as of the date of the appeal hearing, arbitration had not been formalized and the limitation period in which to do so had expired. Nishikawa J. agreed with earlier case law there was “no compelling reason for adopting differing standards of review on appeal depending solely on the place in the judicial hierarchy occupied by the decision maker whose decision is under appeal”.
Third, see “Expired limitation period pre-empts need to decide stay application” regarding Glen Schnarr & Associates Inc. v. Vector (Georgetown) Limited, 2019 ONCA 1012. In that decision, Ontario’s Court of Appeal asserted jurisdiction to decide a claim’s viability rather than defer the decision to an arbitrator as mandated by section 7(1) of the Arbitration Act, 1991, SO 1991, c 17 and Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34 (CanLII), [2007] 2 SCR 801. A court may pre-empt an arbitrator’s competence-competence to determine jurisdiction if it can decide that an applicable limitation period has expired. This approach is presented as a second exception, independent to the “superficial consideration of the documentary evidence in the record” for questions of law or mixed fact and law. The approach addresses viability of claims and not the interplay of the arbitration agreement and the dispute.
Fourth, see “Court of Appeal upholds arbitrator’s decision to “blue pencil” mediation clause having impact on limitation period”. Ontario’s Court of Appeal in PQ Licensing S.A. v. LPQ Central Canada Inc., 2018 ONCA 331 upheld an arbitrator’s decision on a preliminary issue involving the application of a limitation period. The Court of Appeal agreed with the Superior Court which had held that it was reasonable for the arbitrator to sever the mention of “in Delaware” in a mediation clause because that stipulation violated remedial legislation applicable to franchising. The balance of the mediation clause remained valid. Completing the mediation was a condition precedent to triggering the date at which one of the parties could “discover” its claim and delayed triggering the two-year limitation period in Ontario’s Limitations Act, 2002, SO 2002, c 24, Sch B. (“Limitations Act”).
Fifth, see “Uncertainty over which claims covered by arbitration does not delay commencement of limitation period”. In Weir-Jones Technical Services Incorporated v. Purolator Courier Ltd, 2019 ABCA 49, Alberta’s Court of Appeal held that an arbitral party’s uncertainty about which claims were covered by arbitration did not delay commencement of the applicable limitation period. A party’s reliance on the potential success of other procedures amounts at most to an error of law is irrelevant to calculating the start of a limitation period. “Discovery relates to the facts, not the applicable law or any assurance of success.” In a lengthy footnote to concurring reasons, Mr. Justice Thomas W. Wakeling also commented on how the cost of litigation drove litigants towards other procedural solutions such as summary judgment and arbitration.