Saskatchewan – appeal court endorses other appeal courts’ approach to stay application appeals where arbitration agreement does not apply – #391

In Abbey Resources Corp. v. Andjelic Land Inc., 2020 SKCA 125, Saskatchewan’s Court endorsed the Ontario Court of Appeal’s reasoning in Huras v. Primerica Financial Services Ltd., 2000 CanLII 16892 (ON CA) to determine that, under section 8(6) of its The Arbitration Act, 1992, SS 1992, c A-24.1, the Court of Appel did have jurisdiction to hear an appeal of a decision in first instance which refused a stay if the decision held that that arbitration agreement did not apply.  Identifying that case as the first in a “very solid line of authority” and a “significant body of case law from other provinces”, the Court held that it did have jurisdiction to hear the appeal.  On the merits, the Court held that the trial judge made no error in deciding the issue of the arbitrator’s jurisdiction because the case qualified as an exception to the “methodic referral of matters to arbitration” favoured by competence-competence. “The leases would seem to be standard form contracts, the interpretation of which is of precedential value, and there appears to be no meaningful factual matrix specific to [the parties] that can inform their interpretation”.

Andjelic Land Inc. (“Andjelic Land”) owns land and signed surfaces leases (“Leases”) for twenty-seven (27) parcels with Abbey Resources Corp.  (“Abbey Resources”), a natural resource producer. Governed by Saskatchewan’s The Surface Rights Acquisition and Compensation Act, RSS 1978, c S-65, the Leases allowed Abbey Resources to access oil and gas underground by acquiring rights to use Andjelic Land’s surfaces land in exchange for payment of compensation to Andjelic Land.

Section 8 of the SRAC establishes a Board of Arbitration (“Board”) which, under section 31, can decide disputes between parties unable to agree on surface rights required by one party and the compensation owed to the other.  Section 71 of the SRAC establishes an appeal to the Court of Appeal from a Board order conferring a right of entry or awarding compensation.   Section 77 establishes “[n]otwithstanding any provision with respect to review of compensation in any agreement”, a specific review process conducted before the Board.

To govern periodic review of the annual rental payment, Andjelic Land and Abbey Resources reproduced the essential wording in section 77 into twenty-two (22) of their Leases, reproduced at para. of the Court’s reasons.

Review of Rental … (a)  Notwithstanding anything contained in this Lease, upon the request of either party to this Lease, the amount of annual rental payable in respect of the demised premises shall be subject to review at the end of three (3) years from the date hereof and at the end of each succeeding three (3) year period. Such request shall be in writing and shall be given to the other party within three (3) months before or within three (3) months after the date of commencement of the period in respect of which the review of rent is sought. In case of disagreement as to the amount of rent to be payable or any other matter in connection therewith, the same shall be determined by the Board of Arbitration appointed pursuant to The Surface Rights Acquisition and Compensation Act”.

The remaining five (5) of the Leases provided a summary reference to the review process established by the SRAC. See para. 6 of the reasons.

In March 2018, Abbey Resources reduced payments to Andjelic Land and the latter commenced an action in the Court of Queen’s Bench in October 2018.  Just prior to a hearing on the Andjelic Land’s motion for summary judgment, Abbey Resources applied for a stay under section 8(1) of The Arbitration Act, 1992, SS 1992, c A-24.1.

Section 8(6) stipulates that no appeal lies from the court’s decision “pursuant to this section”.

The trial judge expressed concern about the late filing of the application for a stay.  He ordered that it be removed from the court file.  Despite that order, the trial judge did address whether the parties were required to engage in arbitration to resolve the payment dispute set out in Andjelic Land’s court action. He concluded that the Leases contemplated rent reviews only at the end of three (3) year period and not to raise new issues during the courts of the Leases.

On appeal, the Court of Appeal identified two (2) issues: whether section 8(6) of the Arbitration Act precludes an appeal of the trial judge’s decision; if an appeal lies, whether the trial judge committed a reviewable error in deciding not to stay the court action.  In addition, as a third issue, the Court identified a live issue regarding whether the arbitration in issue was statutory or consensual.

(i) Right of appeal – At paras 18-22, the Court dismissed Andjelic Land’s argument that section 8(6) barred an appeal from the trial judge’s decision in issue. The Court considered that Andjelic Land’s argument “runs directly counter to a significant bod of case law from other provinces”.  Those other cases did not consider Saskatchewan’s section 8(6) but did deal with “the equivalent provision in other arbitration statutes that are based on the same model Act as the Arbitration Act”. 

The Court expressly adopted the reasoning in Ontario’s Huras v. Primerica Financial Services Ltd., 2000 CanLII 16892 (ON CA) and referred to the Ontario Court of Appeal’s recent reiteration of that case’s reasoning in Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, 2020 ONCA 612.   For a recent Arbitration Matters note on the latter case, see “Appeal court reaffirms jurisdiction for appeal of stay decision where decision holds arbitration agreement does not apply” and also “No appeal lies from an order refusing a stay whether order was made or not” on Paulpillai Estate v. Yusuf, 2020 ONCA 655.

The Court also referred to appellate courts in Alberta, Manitoba and New Brunswick following the same approach: Lafarge Canada Inc. v Edmonton (City), 2013 ABCA 376 para. 4; Hnatiuk et al. v. Court et al., 2010 MBCA 20 paras 26-35; and, SNC-SNAM, G.P., a partnership between SNC-Lavalin Inc. and Snamprogetti Canada Inc., and Snamprogetti Canada Inc. v. Opron Maritimes Construction Ltd et al., 2011 NBCA 60 paras 35-40.

The Court was clear.

[22] I see no reason to depart from this very solid line of authority. The trial judge concluded that the arbitration clauses in the leases between Abbey and Andjelic did not apply in the circumstances at hand. As a result, he did not make a “decision pursuant to this section” as per s. 8(6) of the Arbitration Act. Abbey is therefore not barred from pursuing this appeal”.

(ii) Did trial judge err in refusing to stay action – At paras 23-35, the Court turned to address whether the trial judge erred in not having the jurisdictional challenged decided first by the arbitrator.  It acknowledged that “the law favours giving effect to arbitration agreements” and underlined the term “shall” in section 8(1) of the Arbitration Act regarding the court’s jurisdiction to decide whether to stay a proceeding.  Subject to the exceptions in section 8(2), “[a] stay is mandatory”.

Referencing Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34 (CanLII), [2007] 2 SCR 801, and excerpting paras 84-85, the Court determined that the case fell within the exception of the “methodic referral of matters to arbitration”.

[27] In my view, the trial judge did not err by proceeding as he did. There was no dispute about the facts in the proceedings before him. The issue was the interpretation of the arbitration clauses in the Group A and Group B Leases and, more particularly, the issue was whether those clauses provide for the arbitration of disputes on an ongoing basis or only on what might be called three-year cycles. The leases would seem to be standard form contracts, the interpretation of which is of precedential value, and there appears to be no meaningful factual matrix specific to Abbey and Andjelic that can inform their interpretation. As such, the issue before the trial judge can be seen as being a question of law. See: Ledcor Construction Ltd. v Northbridge Indemnity Insurance Co., 2016 SCC 37 at para 24, [2016] 2 SCR 23. At a minimum, and as per the language used in Dell Computer, the trial judge faced a question of mixed fact and law where it was necessary to give no more than superficial consideration to the evidence in order to resolve the question of whether Andjelic’s claim should be arbitrated. In short, it was appropriate for the trial judge to decide whether the arbitration clauses applied in the circumstances before him”.

At para. 29, the Court undertook a close reading of the terms of the Leases.  “In my respectful view, there is simply no way to interpret that clause as providing for some sort of ongoing resort to arbitration. It says what it says”. Based on its reading of the Leases, the Court held that the trial judge’s reading of the relevant terms “was self-evidently correct”.

(iii) Statutory or consensual arbitration – The Court flagged and stepped around the issue of whether the arbitration in issue was statutory or consensual.

[33] There is an issue here about whether an arbitration conducted pursuant to a statutory authority like the Act, as opposed to an agreement between two or more persons, can attract the application of the Arbitration Act. That point was not addressed by Abbey and Andjelic and, because its resolution is not necessary to decide this appeal, I will do no more than flag it”.

The Court concluded that the trial judge made no error in declining a stay in favour of arbitration. “The arbitration clauses on which Abbey relies were not applicable to the dispute between it and Andjelic”.

urbitral notes – First, at para. 33, determining whether the arbitration was statutory or consensual would, in cases where the Board’s award/decision was subject to appeal to the Court of Queen’s Bench in first instance, would potentially attract application of Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65.

Second, see the Arbitration Matters note “Arbitration imposed by statute remains consensual if opportunity available to renounce” regarding a distinction drawn in the courts of Québec regarding whether arbitration, created by statue, remains consensual if one party has the option not to prevail itself of the arbitral opportunity made available. That reasoning stems from the earlier Québec Court of Appeal decision in Conseil d’arbitrage des comptes des avocats du Barreau du Québec v. Marquis, 2011 QCCA 133.

In Boisvert v. Selvaggi, 2019 QCCS 1673, Mr. Justice Kirkland Casgrain dismissed an attempt at judicial review of an award issuing from arbitration imposed by statute.  Relying on the reasoning and result in Conseil d’arbitrage des comptes des avocats du Barreau du Québec v. Marquis, Casgrain J. held that such arbitrations remain consensual if the legislation allows opportunity to renounce to its application.  Being consensual, such arbitrations were subject not to judicial review but to annulment proceedings based on limited grounds familiar to practitioners practising international commercial arbitration.