Tag: Supreme Court of Canada

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Supreme Court – Peace River v Petrowest Part 2: no conflict between arbitration, bankruptcy law – #687

In Peace River Hydro Partners v Petrowest, 2022 SCC 41, the central issue was whether a receiver/trustee in bankruptcy may disclaim the arbitration clause in a contract and sue in the courts when it seeks to enforce the debtor’s contractual rights against third parties. The case concerned the tension between the court’s supervisory power over all proceedings brought by a receiver/trustee under the Bankruptcy and Insolvency Act (BIA) RSC 1985, c. B-3, and party autonomy to contract out of the courts. Section 15 of the British Columbia (former) Arbitration Act, RSBC 1996 c. 55 required a stay of proceedings where a party to an arbitration agreement has commenced a court proceeding in respect of a matter to be submitted to arbitration, unless the arbitration agreement is “void, inoperative, or incapable of being performed”. The Supreme Court of Canada dismissed the stay application of the defendant sued by the receiver/trustee, but split 5-4 on the reasons. The majority found that the arbitration clauses at issue were “inoperative” because enforcing them would compromise the orderly and efficient resolution of the receivership. This authority arises from the statutory jurisdiction conferred on provincial superior courts under ss. 243(1) and 183(1) of the BIA. It found that this interpretation of the stay provision ensures that provincial arbitration legislation and federal bankruptcy legislation are not in conflict. The minority found that the specific language of the “template” Receivership Order authorized the Receiver/Trustee to disclaim the arbitration agreements, rendering them inoperative.

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Supreme Court – Peace River v Petrowest Part 1: Separability Clarified? – #682

Most of the commentary about the Supreme Court of Canada’s decision of Peace River Hydro Partners v Petrowest, 2022 SCC 41, is about the interplay between arbitration law and bankruptcy/insolvency law – and my next Case Note will address that issue. However, perhaps a more important issue for arbitration law was the Court’s consideration of the doctrine of separability (although it was not relevant to the outcome). The scope of its application in Canada was uncertain following the 2020 decisions of the British Columbia Court of Appeal under appeal, Petrowest Corporation v Peace River Hydro Partners, 2020 BCCA 339, and the Supreme Court of Canada in Uber Technologies Inc. v Heller, 2020 SCC 16 (“Uber”). 

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Supreme Court – for those SCC justices willing to consider it, Vavilov applies to private commercial arbitration where legislation provides for appeal – #420

Canada’s Supreme Court in Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7 offered to clarify a contracting party’s duty to exercise in good faith a discretion granted to it by contract and recognized in Bhasin v. Hrynew, 2014 SCC 71.  In dismissing the appeal from Greater Vancouver Sewerage and Drainage District v. Wastech Services Ltd., 2019 BCCA 66, the Supreme Court upheld a decision in first instance to set aside a private, commercial arbitration award.  The appeal presented an opportunity for the Supreme Court to consider the effect, if any, of Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 on the standard of review principles applicable to appeals of commercial arbitration awards set out in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 and Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32.

Regarding that opportunity, six justices preferred to “leave [it] to another day” while the other three chose to embrace it, considering that to “leave this undecided is to invite conflict and confusion”.  The six reasoned that they did not have the benefit of submissions on that question or the assistance of reasons on point from the courts below and that, in any event, the appeal’s outcome did not depend on identifying whether the proper standard of review was correctness or reasonableness.

Three justices acknowledged “important differences between commercial arbitration and administrative decision‑making” but declared that such differences do not affect the standard of review where legislation provides for a right of appeal. Drawing on Vavilov which explained that “a legislative choice to enact a statutory right of appeal signals an intention to ascribe an appellate role to reviewing courts”, the three held that Vavilov had “displaced” the reasoning in Sattva and Teal Cedar. “Concluding otherwise would undermine the coherence of Vavilov and the principles expressed therein”. The three limited the scope of their determination. “Our conclusion on this point is limited to the specific statutory provision at issue. In every case, the question is one of legislative intention, as reflected in the language of the statute”.

Independent of the above, the six justices also expressly agreed with B.C.’s Attorney General that, when granting leave to appeal, courts should “simply and precisely” state questions of law upon which they grant leave in order to prosecute appeals efficiently.  The six observed that the “complicated formulation of the first question of law” made it difficult for the courts below to provide a direct and effective answer.

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Supreme Court – courts should not refer jurisdiction challenge to arbitrator if real prospect that challenge might never be resolved – #344

In Uber Technologies Inc. v. Heller, 2020 SCC 16, the Supreme Court of Canada introduced a third exception to its general rule that jurisdiction challenges should be referred first to the arbitrator. The exception contemplates scenarios in which validity of the arbitration agreement might not be determined if arbitration is too costly or inaccessible due to costs, distance or even a choice of law clause circumventing mandatory local policy.  Staying an action in favour of arbitration would deny relief for claims made under the agreement and insulate disputes from resolution.  The Court also asserted that unconscionability involves both inequality and improvidence but does not require intention.  The Court further confirmed that employment disputes are not “commercial” for the purpose of the International Commercial Arbitration Act, RSO 1990, c I.9.

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Supreme Court – litigation funding agreement approved in insolvency proceedings without need to submit to creditors – #265

The Supreme Court of Canada in 9354-9186 Québec inc. v. Callidus Capital Corp., 2020 CanLII 5612 reinstated a decision in first instance which authorized third-party litigation funding in court-monitored insolvency proceedings and granted the funders a super priority charge and security.  The decision was announced with reasons to follow.

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Supreme Court – guidance for preserving assets in anticipation of execution of award upheld – #246

In the briefest of reasons, a 6:1 majority of the Supreme Court of Canada in International Air Transport Association v. Instrubel, N.V., 2019 SCC 61 dismissed the appeal from the Québec Court of Appeal decision in Instrubel v. Republic of Iraq, 2019 QCCA 78. In doing so, it upheld a successful arbitral claimant’s attempt to garnish funds owed by a third party to respondent pending an application to recognize and enforce its award. For more on the issues, see the earlier Arbitration Matters note “Québec – successful arbitral party seizes assets in hands of third party pending homologation of award”.

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Supreme Court – distinctions for service and notice to banks offers guidance for arbitral practice – #210

In 1068754 Alberta Ltd. v. Québec (Agence du revenu), 2019 SCC 37, on appeal from Québec, the Supreme Court of Canada distinguished between two (2) provisions of the Bank Act, SC 1991, c 46 which stipulate how to effectively serve banks with legal proceedings and provide notice.

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Supreme Court – cumbersome task of sorting of consumer/non-consumer claimants does not authorize courts to re-cast arbitral legislation – #185

Canada’s Supreme Court in TELUS Communications Inc. v. Wellman, 2019 SCC 19 held that section 7(5) of Ontario’s Arbitration Act, 1991, SO 1991, c 17 does not give courts discretion to refuse to stay claims dealt with by an otherwise valid arbitration agreement.  Though Ontario’s Consumer Protection Act, 2002, SO 2002, c 30, Sch A invalidates arbitration agreements to the extent they prevent consumers from pursuing claims in court, that policy choice does not extend to non-consumers who remain bound by their agreements to arbitrate.  Courts are to interpret legislation and not re-write it.

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