In Wilson v. Infracon Construction Inc., 2020 BCSC 2074, Madam Justice Lindsay L. Lyster held that the three-part test for a stay developed under B.C.’s former Arbitration Act, RSBC 1996, c 55 continues to apply under the new Arbitration Act, SBC 2020, c 2. To resist a stay of his wrongful dismissal action, Plaintiff argued that the agreement to arbitrate included in the employment contract was void due to conflict between B.C.’s Arbitration Act, RSBC 1996, c 55 and its Employment Standards Act, RSBC 1996, c 113. Lyster J. disagreed, following A-Teck Appraisals Ltd. v. Constandinou, 2020 BCSC 135 whose reasoning was on “all fours with the present matter”. In doing so, Lyster J. dismissed all four (4) of Plaintiff’s reasons to resist its application: the court had considered binding authorities and statutes; despite being “isolated and relatively recent”, the reasoning remained persuasive; promoting consistency with similar legislation did not justify disregarding the B.C. decision in first instance in favour of an Ontario appellate decision; and, Plaintiff failed to meet the “exceptionally high” standard to demonstrate that the decision was “palpably wrong”.
Employed as CEO by one of the Defendant corporations (“Defendants”) under a written contract of employment, Plaintiff instituted a September 18, 2020 civil action claiming damages for alleged wrongful dismissal. Plaintiff obtained a prejudgment garnishing order on September 22, 2020 which served to garnish $420,265.00. Defendants applied for a stay of a under section 7(1) of Arbitration Act, SBC 2020, c 2.
(1) Test for stay continues to apply – Lyster J. relied on Prince George (City of) v. A.L. Sims & Sons Ltd., 1995 CanLII 2487 (BC CA) para. 22 as the source statement of a three (3) part test for granting a stay under section 15 of the former Arbitration Act, RSBC 1996, c 55.
“(a) the applicant must show that a party to an arbitration agreement has commenced legal proceedings against another party to the agreement;
(b) the legal proceedings must be in respect of a matter agreed to be submitted to arbitration; and
(c) the application must be brought in a timely manner, i.e. before the applicant takes a step in the proceedings”.
Lyster J. then asserted that “[t]hat test continues to be applicable under s. 7 of the current Arbitration Act”. She determined that the litigants were parties to a mandatory agreement to arbitrate which covered Plaintiff’s wrongful dismissal claim and that Defendants ad brought their stay application in a timely manner.
(2) Competing legislation – The parties disputed the interplay of section 7 of the Arbitration Act and section 4 of the Employment Standards Act, RSBC 1996, c 113. Defendants argued that section 7 of the Arbitration Act provided no discretion to withhold a stay unless the agreement to arbitrate was void, inoperative or incapable of being performed. Plaintiff argued that the agreement to arbitrate was void because it contravened section 4 of the ESA.
“Section 4 The requirements of this Act and the regulations are minimum requirements and an agreement to waive any of the requirements, not being an agreement referred to in section 3(2), has no effect”.
In regard to the status of the ESA, Lyster J. acknowledged the “well-known” Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 SCR 986 which determined that the ESA was remedial legislation and that courts should favour an interpretation which encourages employers to comply with its minimum requirements. She further noted Shore v. Ladner Downs, 1998 CanLII 5755 (BC CA) which articulated “the proposition that if a clause in an employment contract carries even the possibility that it will violate a requirement under the ESA, it is void ab initio, regardless of whether the impugned provisions of the ESA were triggered or not”.
(3) Validity of agreement to arbitrate – Following an oral hearing on Defendants’ application, Lyster J. gave the parties additional time to prepare and communicate written submissions on A-Teck Appraisals Ltd. v. Constandinou, 2020 BCSC 135, a decision raised for the first time during that oral hearing. For the earlier Arbitration Matters note on that decision, see “B.C. – court acknowledges but declines to follow reasoning in Heller v. Uber Technologies Inc. – #271”. In that decision, which issued before Uber Technologies Inc. v. Heller, 2020 SCC 16, Madam Justice Mary A. Humphries expressly noted but declined to follow the reasoning in Heller v. Uber Technologies Inc., 2019 ONCA 1. Recognizing the Ontario Court of Appeal as a persuasive authority whose judgments merit respect, Humphries J. held it was “not obvious” that its reasoning applied to B.C. legislation and the unfairness informing that result did not arise on the facts before her. She refused to void an arbitration agreement in an employment contract and, in doing so, granted a stay.
At paras 17-31, Lyster J. summarized the key reasoning in A-Teck Appraisals Ltd. v. Constandinou as well as its place in the timeline between the January 2, 2019 Ontario Court of Appeal and the June 26, 2020 Supreme Court of Canada decisions in Uber Technologies Inc. v. Heller, 2020 SCC 16. For the earlier Arbitration Matters notes on the Court of Appeal and the Supreme Court of Canada decisions, see “Ontario – determination of exceptions to mandatory stay are for court to make and not arbitrator – #148” and “Supreme Court – courts should not refer jurisdiction challenge to arbitrator if real prospect that challenge might never be resolved – #344”.
Lyster J. also noted that Supreme Court declined to engage in the validity of an agreement to arbitrate which has the purported effect of contracting out of the mandatory protections of the ESA.
“[25] The Plaintiff made no attempt to distinguish the decision in A-Teck from the application before me. This was sensible, as A-Teck is on all fours with the present matter. Rather, he submitted that I was not bound to follow it for four reasons. First, the court failed to consider binding authorities and statutes, specifically Shore and the relevant provisions of the ESA. Further, in respect of [Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986], the court only considered it on a narrow point but did not apply the special interpretive principles it lays down. Second, he submits that A-Teck is isolated and relatively recent, with the result that there is no “course of judicial decision” to be departed from: Chief Mountain v. British Columbia (Attorney General), 2011 BCSC 1394 at paras. 79, 94 [Chief Mountain]. Third, following A-Teck would not promote consistency as similar legislation should be interpreted similarly in different jurisdictions. Fourth, the Plaintiff submits that A-Teck contained a number of fatal errors”.
Lyster J. declined to depart from the reasoning in A-Teck Appraisals Ltd. v. Constandinou, addressing each of Plaintiff’s four (4) grounds in turn at paras 26-30.
First, Lyster J. did not accept that that Humphries J. failed to consider relevant authorities and legislation.
Second, despite being an “isolated and relatively recent” decision untested by appellate consideration, Lyster J. observed that Plaintiff “has not provided clear and cogent reasons for me to depart from the reasoning”.
“Employment agreements are entered into by employers and employees for a variety of reasons. One of them is to achieve certainty about the terms and conditions that will govern the employment relationship. Certainty for employers and employees in British Columbia would not be furthered by there being two divergent decisions from this Court on precisely the same legal issue”.
Third, she was “not persuaded that there is a requirement for consistency across jurisdictions” which mandated her to follow the appellate reasoning in Ontario rather than a decision in first instance in her own jurisdiction. Lyster J. accepted Humphries J.’s distinction between the two (2) legislations as “persuasive”.
“I agree with Humphries J. that the British Columbia language “cannot easily be read to include a complaint/investigative procedure used to enforce those minimum requirements as itself a ‘minimum requirement’”: A-Teck at para. 40. While the interpretive principles laid down in cases like [Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 SCR 986] have universal application, each provincial statute must be interpreted according to its individual terms”.
Fourth, Lyster J. rejected Plaintiff’s argument that A-Teck Appraisals Ltd. v. Constandinou was “palpably wrong”. Referring to Chief Mountain v. British Columbia (Attorney General), 2011 BCSC 1394, she held that Plaintiff fell far short of the standard. “The palpably wrong standard is an exceptionally high one, which would require that there was a fundamental flaw in the reasoning, “clear to the mind or plain to see”: [Chief Mountain v. British Columbia (Attorney General), 2011 BCSC 1394] at para. 103”.
Having considered reasons to do so, Lyster J. concluded that the reasoning in A-Teck Appraisals Ltd. v. Constandinou remained compelling and that the agreement to arbitrate contained in the employment contract was not void.
Based on her analysis, Lyster J. dismissed Plaintiff’s argument that the agreement to arbitrate was void.
“[32] I therefore conclude that the arbitration clause in the employment contract between the Plaintiff and the Defendants is not void. As a result, the Plaintiff’s action must be stayed in order to allow the arbitration to proceed in Alberta as agreed to between the parties in the employment agreement”.
(4) Validity of garnishing order – Defendants argued unsuccessfully that, as a result of the stay, the court’s garnishing order should either be set aside or the funds paid into court now released.
The parties’ employment contract stipulated that it is governed by and construed in accordance with the laws of Alberta and that the arbitration “is to happen” in Edmonton. Alberta’s Arbitration Act, RSA 2000, c A-43 does not grant an Alberta court authority to issue prejudgment garnishment orders. Defendants therefore argued that the B.C. court must apply the law that governs the employment contract and, in doing so, cannot issue prejudgment garnishing orders.
Lyster J. disagreed. She referred to R.(S.M.) v. B(R.S.), 2003 BCCA 412 as precedent for allowing for a prejudgment garnishing order under section 45 of the former Arbitration Act despite a stay. The earlier decision invoked the court’s jurisdiction to issue a prejudgment garnishing order as an interim protective measure as interpreted in Trade Fortune Inc. v. Amalgamated Mill Supplies Ltd., 1994 CanLII 845 (BC SC).
“[38] It is clear from the passage just quoted that the British Columbia Supreme Court has jurisdiction to make a prejudgment garnishing order as an interim protective measure, and that a stay of proceedings in this Court in favour of arbitration proceedings in another jurisdiction does not automatically vacate or set aside such an order”.
Lyster J. referred to section 45 of B.C. current Arbitration Act, SBC 2020, c 2, in effect as of September 1, 2020.
“Section 45(1) A court has the same powers to issue an interim measure in relation to arbitral proceedings as that court has in relation to court proceedings.
(2) When requested to grant an interim measure, a court may, if it considers it proper, refer the request to an arbitral tribunal.
(3) It is not incompatible with an arbitration agreement for a party to request from a court, before or during arbitral proceedings, an interim measure of protection and for a court to grant that measure”.
Lyster J. relied on sections 2(1) and 2(4) of B.C.’s Arbitration Act to hold that a stay does not automatically vacate or set aside a garnishing order issued prior to the stay. Though section 2(1) limited its application to those arbitrations which took place in B.C., section 2(4) identifies a number of other sections in the Arbitration Act which apply regardless of where the arbitration takes place. Section 2(4)(g) specifically lists section 45, court-ordered interim measures which applies regardless of where the arbitration occurs.
“[41] There may be grounds upon which a court could, on application, grant an order setting aside the garnishing order. Any determination of that question would require a consideration of relevant evidence, and the parties agreed to restrict their arguments before me to those that did not require the consideration of any disputed facts. I therefore decline to order that the garnishing order be set aside. This order does not affect the Defendants’ right to pursue their application to set aside the garnishing order on the basis of a full evidentiary record and arguments”.
urbitral notes – First, in R.(S.M.) v. B(R.S.), 2003 BCCA 412, the Court of Appeal noted that “the agreement was executed in British Columbia and it contains a choice of forum clause. However, both parties have left British Columbia with the husband moving to Alberta and the wife, to Toronto”.
Second, in R.(S.M.) v. B(R.S.), 2003 BCCA 412, the Court of Appeal at para. 26 referred to Trade Fortune Inc. v. Amalgamated Mill Supplies Ltd., 1994 CanLII 845 (BC SC) which dealt with the issuance of interim measures under the International Commercial Arbitration Act, S.B.C. 1986 c. 14 (now International Commercial Arbitration Act, RSBC 1996, c 233).