In IBI Group Architects (Canada) Inc. v Edmonton (City), 2022 CarswellAlta 1805, the applicants, IBI Group Architects (Canada) Inc. and a related party (“IBI”), applied to stay an arbitration commenced by the City of Edmonton in favour of court proceedings. Although there is no express power to stay arbitrations under the Alberta Arbitration Act, RSA 2000, c A-43(“the Act”), the application was brought under subsection 6(c) which provides “[n]o court may intervene in matters governed by this Act, except for the following purposes as provided by this Act…(c) to prevent manifestly unfair or unequal treatment of a party to an arbitration agreement”. Previously, the Alberta Court of Appeal held in New Era Nutrition Inc. v Balance Bar Company, 2004 ABCA 280 (“New Era”), that courts could use subsection 6(c) to provide a remedy to cure unfairness arising from matters not covered by the specific language of the Act and that it could be used to allow “a party, faced with both a statement of claim and a notice to arbitrate, to apply to stay the arbitration on the basis that the matters in the two proceedings overlap and cannot be reasonably separated” in order to avoid unfairness (para. 43). IBI argued, among other things, that it needed the full participation and evidence of non-parties to the arbitration clause to defend itself and so if it were forced to arbitrate it would be unable to meet the case against it, which was manifestly unfair and so the arbitration should be stayed. Justice Dunlop, delivering his decision from the bench, refused the application to stay the arbitration as he determined that he had no jurisdiction to do so under the Act. He concluded that New Era “was no longer good law” in Alberta as the case had been considered and expressly overruled by the Supreme Court of Canada in TELUS Communications Inc. v. Wellman, 2019 SCC 19 (CanLII), [2019] 2 SCR 144 (“Telus v Wellman”).
The facts were these. The City of Edmonton and IBI entered into a contract for the design of a police station which contained an arbitration clause. After the police station was built, the roof leaked. The City first sued IBI, IBI’s subcontractors, the builder, and the builder’s subcontractors and the City’s consultants. IBI commenced a separate action for unpaid invoices under the contract against the City. The City then served a notice to arbitrate on IBI alone which overlapped with matters covered by the City’s action. IBI applied to stay the arbitration and the City applied to stay the IBI action for unpaid invoices. The applications were heard together by Justice Dunlop. The application to say the invoice action was allowed with brief reasons that are not of interest to practitioners.
As to the application to stay the arbitration, Justice Dunlop began by referring to the Alberta Court of Appeal decision in New Era and its discussion of subsection 6(c) and subsections 7(4) and 7(5) of the Act. Dealing with subsections 7(4) and 7(5) of the Act the Court of Appeal said:
“First, subsection 7(4) indicates that the effect of a refusal to stay the action is to prohibit an arbitration from commencing or continuing, and renders anything already done in connection with the arbitration without effect. Second, subsection 7(5) deals with a stay of litigation in the situation where not all of the matters in dispute are covered by the arbitration agreement. It allows the court to stay those parts of an action, covered by an arbitration agreement, provided the matters can be reasonably separated. If the matters in dispute cannot be reasonably separated, then the litigation continues and the arbitration is stayed by virtue of section 7(4).”
Some Courts, like those in Ontario and Manitoba, found that subsection 7(5) should be interpreted to provide the Court with the discretion to stay none of the court proceeding if there were overlapping matters and it was reasonable not to separate them. The effect of that, by operation of subsection 7(4), was to stay the arbitration.
The Court of Appeal of Alberta in New Era took a different approach and instead relied on subsection 6(c) of the Act to find courts have the power to stay arbitrations that overlap with court proceedings. It concluded at paragraph 43 of New Era that:
“… the Legislature intended that the courts use subsection 6(c) to provide a remedy to cure unfairness arising from matters not covered by the specific language of the legislation. In my view, it would be manifestly unfair to deny the remedy contemplated by section 7 which is designed to protect against the dangers inherent in duplicitous proceedings…I am satisfied that subsection 6(c) allows a party, faced with both a statement of claim and a notice to arbitrate, to apply to stay the arbitration on the basis that the matters in the two proceedings overlap and cannot be reasonably separated.”
Justice Dunlop then reviewed the Supreme Court of Canada decision in Telus v Wellman. It concerned the Ontario Arbitration Act, 1991, SO 1991, c. 1 but the relevant provisions of the Ontario Act are almost identical to those under the Alberta Act. In Telus v Wellman, a stay of proceedings was sought based on New Era and the cases from Ontario and Manitoba. It was argued, among other things, that subsection 7(5) offered a choice between staying some of the matters (i.e., ordering a partial stay) and staying none of the matters (i.e., refusing to order any stay of the court proceedings). Justice Dunlop referenced paragraph 73 of Telus v Wellman where the Supreme Court summarized the argument and rejected it. The Supreme Court stated that what was being argued was:
“…s. 7(5) must be read as meaning “may stay, [or may refuse to stay,] the proceeding with respect to the matters dealt with in the arbitration agreement and allow it to continue with respect to other matters”, and s. 7(5)(b) must be understood as authorizing this refusal where “it is [not] reasonable to separate the matters dealt with in the agreement from the other matters”. Respectfully, I cannot accede to this submission. Mr. Wellman’s interpretation reads language into s. 7(5) that simply is not there. Not only that, it reads language into s. 7(5) that is contained elsewhere in the statute — namely, in s. 7(2), which provides that “the court may refuse to stay the proceeding in any of the following cases”. Section 7(2) thus demonstrates that where the legislature intended to authorize the court to refuse a stay, it did so through the words ‘may refuse to stay’.“
As to the argument that subsection 6(c) permits the Court to intervene to prevent unequal or unfair treatment of parties to arbitration agreements, the Supreme Court stated that subsection 6 provides that a Court can intervene but “only in accordance with the Act” which means that subsection 6(c) cannot be used override or change the meanings of the other provisions in the Act, like 7(5), which is the only provision that allows for a partial stay of court proceedings. The Supreme Court said that where the application of the Act, properly interpreted, leads to a multiplicity of proceedings the court must give effect to the will of the Legislature.
Justice Dunlop concluded that “the Alberta Court of Appeal approach in New Era was considered and expressly rejected by the Supreme Court of Canada in Telus v. Wellman. I find that New Era is no longer good law.” The application to stay the arbitration was, therefore, dismissed.
Contributor’s Notes:
This case appears to be the first in Alberta to find that New Era was explicitly overruled by Telus v. Wellman. Similar authority in Ontario (Griffin v. Dell Canada Inc., 2010 ONCA 29, 98 O.R. (3d) 481) based on subsection 7(5) was acknowledged to have been overruled by Telus v Wellman in the Ontario Court of Appeal decision Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, 2020 ONCA 612 (Ontario – appeal court reaffirms jurisdiction for appeal of stay decision where decision holds arbitration agreement does not apply – #385). Likewise in Manitoba, see: Wardrop v. Ericsson Canada Inc., 2021 MBQB 183 (Manitoba – Broad arbitration clause in one agreement required stay of action based on related employment contract – #535) and its comments on Briones v. National Money, 2013 MBQB 168 (CanLII), aff’d 2014 MBCA 57.
As a result, practitioners should exercise caution when dealing with cases concerning the interpretation of subsections 7(5) and/or 6(c) of the Alberta Act and similar provisions from other provinces that pre-date the 2019 decision in Telus v Wellman. See, for example: Canadian Natural Resources Limited v Flatiron Constructors Canada Limited, 2018 ABQB 613.
It should be noted that not all provinces with similar legislation adopted a similar interpretation to that of the Alberta Court of Appeal in New Era. In Saskatchewan Power Corporation v Alberici Western Constructors, Ltd., 2016 SKCA 46 the Saskatchewan Court of Appeal stated at paragraph 49:
“…in my respectful view, New Era over-reads the relevant provisions of the Arbitration Act. As explained by the Chambers judge in the Court below, provisions like s. 7(c) [the equivalent to Alberta’s s. 6(c)] must be understood in light of the underlying theme of the Act which is that, when parties freely contract to resolve disputes by arbitration, courts should give effect to those commitments. See: Seidel v TELUS Communications Inc., 2011 SCC 15 at para 2, [2011] 1 SCR 531. As explained above, on its face s. 7(c) is aimed at ensuring the internal integrity of arbitration proceedings, not at displacing such proceedings in favour of litigation.”