Judicial Interpretation of the Uniform Arbitration Act 1995

APPENDIX I - JURISPRUDENCE RE: STAYS

JURISPRUDENCE

Alberta Jurisprudence

McCulloch v. Peat Marwick Thorne (1991) 124 A.R. 267

Case involves a dispute concerning a partnership agreement. The plaintiff filed a statement of claim for breach of agreement, conspiracy by defendants to unlawfully remove the plaintiff from the partnership, removal without cause, an accounting and loss of reputation. The defendants requested a stay of proceedings based on section 7 of the Arbitration Act. Perras, J. refused to grant the stay on the basis that the plaintiff's claim fell outside the arbitration clause in the agreement. The arbitration clause read as follows:

"...any dispute...relating to the construction, meaning or effect of anything in this agreement or the rights or liabilities of any party pursuant to this agreement...shall be referred to and settled by arbitration..."

Perras, J. found that while the arbitration clause was "relatively encompassing", it was concerned solely with disputes relating to the "construction, meaning or effect" of the agreement or rights and liabilities pursuant to the agreement. Perras, J. found that the allegations of tortious conspiracy and loss of reputation fell outside the arbitration clause, therefore under s.7(2)(c) was not capable of being the subject of arbitration under Alberta law. Perras, J. appears to rely heavily on the case of Heyman v. Darwin (1942) A.C. 356, which defines a set of criteria to consider when defining an application to stay proceedings:

1)    the precise nature of the dispute which has arisen;

2)    does the dispute fall within the terms of the arbitration clause;

3)    is the arbitration clause still effective;

4)    is there any sufficient reason why the matter in dispute should not be referred to arbitration.

Perras, J. believes the criteria above are reflected in s.7 of the Arbitration Act (ie. criteria 3 is s.7(2)(b) and criteria 2 and 4 are in s.7(2)(c). Perras, J. concludes by finding that even if the criteria from Heyman v. Darwin do not apply, the application of s.7(2)(c) operates to deny the stay.

The case is unfortunate for two reasons:

(1)    it confuses a finding that the dispute was not covered by the reference with the question of whether a referred dispute should be stayed;

(2)    it uses a summary of the stay rules from a decision long before the new legislation significantly revamped those rules (implying that the old discretion remains).

Kaverit Steel and Crane Ltd v. Kone Corp. (1991) 119 A.R. 194 (Q.B.), 87 D.L.R. (4th) 129 (C.A.)

Commercial agreement which fell under the jurisdiction of the International Commercial Arbitration Act, R.S.A. 1980, c.I-6.6 (ICAA) rather than the Alberta legislation. The Queen's Bench decision refused to grant a stay of proceedings on the basis that parties to the action who were not subject to the arbitration clause raised legitimate causes which all should be decided in the same proceedings. Kerans, J.A. in the Court of Appeal allowed the appeal, stayed the proceedings and referred certain issues (ie. breach of contract and conspiracy) raised in the statement of claim to arbitration. Kerans, J.A. found that the ICAA included tort claims such as conspiracy as long as it was related to a commercial undertaking. Kerans, J.A. also found that while referring the additional issues to arbitration might be inconvenient, it would not be inoperative as contemplated by s.3 of the ICAA.

Borowski v. Heinrich Fiedler Perforiertechnik [1994] A.J. No. 617 (QL) (Court of Queen's Bench)

Murray, J. upholds s.7(2) and stays the plaintiff's claim for damages under a contract until the dispute for damages is dealt with in arbitration. Murray, J. discusses the underlying philosophy of the Arbitration Act and the concept of parties staying with the arbitration process if both agree to it.

Crystal Rose Homes Ltd. v. Alberta New Home Warranty Program (1994) A.J. No. 897 (QL) (Court of Queen's Bench)

Master Funduk grants a stay of proceedings based on s.7(1) of the Arbitration Act and determines that the issue of reasonable notice is one that flows from the contract relationship and therefore is arbitrable under the arbitration clause of the contract. He quotes Borowski (supra) with favour.

Saskatchewan Jurisprudence

Producers Pipelines Inc. v. Bridges Energy Inc. [1993] S.J. No. 551 (QL) (Court of Queen's Bench)

Gerein J. found that the former Arbitration Act applied to the dispute, but he offered his opinion on the new legislation, stating that s.8 (equivalent to s.7 in the Uniform Act) has restricted the court's discretion to refuse a stay and that it is now mandatory for a stay to be granted unless a party can come within one of the situations outlined in s.8(2). Gerein J. also noted that if he was wrong and the new Arbitration Act applied, that the stay would be denied because of s.8(2)(d), that is, that there was undue delay in bringing the motion.

Pulvermacher v. Pulvermacher [1994] S.J. No. 595 (QL) (Court of Queen's Bench)

This case concerned a dispute between shareholders in a small, family-owned company. The plaintiff filed a claim alleging a conspiracy by the other shareholders which was preventing him from receiving the full value of his shares. The defendants to the action applied for a stay pursuant to s.8 of the Arbitration Act. The plaintiff in the case argued that the stay should not be granted based on s.8(2)(c) of the Arbitration Act ie. "the subject-matter of the dispute is not capable of being the subject of arbitration under Saskatchewan law". MacLean, J. considered McCulloch v. Peat Marwick Thorne (supra) and determined that it had no application to the case. MacLean, J. said that although the plaintiff had characterized his claim as a conspiracy, in reality the issue to be resolved was whether the plaintiff should receive fair market value for his shares. That issue was one that fell under the arbitration clause therefore the stay was granted.

Ontario Jurisprudence

Scotia Realty Ltd. v. Olympia and York [1992] O.J. No. 811 (QL) Ontario Court (General Division).

Commercial lease between two companies which allowed audits to determine the calculation of participation rent. The lease required any dispute about the audits to be arbitrated. The lease also included a "Scott v. Avery" clause which makes arbitration a condition precedent to any action. The plaintiffs brought a court action for a determination of its rights under the lease. The defendants then applied for a stay of the court proceedings under s.7 of the Arbitration Act. The plaintiff argued that the agreement it was seeking to resolve was separate and apart from the lease, therefore the arbitration clause would not apply. Lane, J. granted the stay on the basis that the agreement was an amendment to the lease, therefore it was subject to the arbitration.

Ontario Hydro v. Denison Mines Ltd. [1992] O.J. No. 2948 (QL) Ontario Court (General Division)

Ontario Hydro and Denison Mines entered into an agreement for the supply of uranium concentrates. Ontario Hydro terminated the agreement legally and adispute arose regarding the price to be paid for uranium during the winding down period of the agreement. Denison argued the matter should be settled by arbitration, as per the agreement (which includes a broad arbitration clause). Ontario Hydro argued that the dispute involves rectification of the agreement and therefore was not arbitrable. Ontario Hydro commenced an action requesting rectification and declaratory relief. Denison countered with a request to stay Ontario Hydro's action under s.7(1) of the Arbitration Act. Blair, J. granted the stay for Denison. Blair, J. found that the rectification request was proper matter for arbitration due to three factors:

(a)    the expanded and extended powers given to arbitrators under the Arbitration Act;

(b)    the broad language of the agreement itself which was to resort to arbitration techniques; and

(c)    the broad language of the arbitration clause itself (ie. all disputes in connection with the agreement).

Blair acknowledged that the Arbitration Act created a statutory presumption in favour of granting stays with a narrow list of exceptions.

Deluce Holdings Inc. v. Air Canada [1992] O.J. No. 2382 (QL) Ontario Court (General Division), 12 O.R. (3d) 131.

Air Canada terminated employment of two members of Deluce Holdings in order to gain 100% control of the shares. Arbitration clause existed in agreement to determine the valuation of shares. Deluce Holdings argues that Air Canada did this to avoid the constraints of the minority shareholders under the unanimous shareholder agreement. Action brought by minority shareholder (Deluce) for oppression remedy under s. 241 of the Canada Business Corporations Act, R.S.C. 1985, c. C-44 as well as an action to stay the arbitration for valuation of the shares. Air Canada countered with a request for a stay under s.7 of the Arbitration Act. Blair, J. denied the request for a stay and allowed the oppression action to commence. Blair, J. denied Air Canada's request for a stay as he felt the triggering of the arbitration mechanism was done solely to effect the wrongful objective of the majority over the minority. This action, in Blair's opinion, destroys the "very underpinning of the arbitration structure, thus taking the subject of the dispute out of the 'matters to be submitted to arbitration under the agreement'." (QL decision, p.15) Blair reasons that the oppression remedy under s.241 of the CBCA gives broad discretion to find a remedy appropriate to the situation at hand. In this situation, he finds that the purpose for which the arbitration mechanism is being used brings it outside the subject matter which the parties agreed to submit to arbitration. In short, Blair is applying an equitable remedy to the situation. Blair also notes that the arbitration clause is not a broad, blanket clause (ie. all matters arising from this agreement) but rather a very narrow one (valuation of shares only). This, Blair contends, means that the parties never intended to send such an issue to arbitration.

New Brunswick Jurisprudence

Condor Construction Ltd. v. Bathurst (City) [1994] N.B.J. No. 425 (QL) (Court of Queen's Bench)

Plaintiff (Condor) commenced an action against the City and an engineering consultant (RC Ltd.) involved on a sewer line project. Both the City and RC requested a stay of proceedings under s.7 of the Arbitration Act. Deschenes, J. granted the stay requested by the City as the City and Condor had agreed to submit all disputes arising from the agreement to arbitration. Deschenes refused to grant a stay for RC however as they were not a party to that agreement.

AREAS OF CONCERN

Alberta

McCulloch v. Peat Marwick Thorne (supra)

The Court seemed to go into unnecessary territory in this decision by determining that the subject matter under s.7(2)(c) is not arbitrable under Alberta law, when in reality they are saying that the dispute falls outside the arbitration clause.3

Ontario

Deluce Holdings Inc. v. Air Canada (supra)

The Court ignores the presumption in legislation for granting stays. Essentially, this case comes down to a conflict between two pieces of legislation and the CBCA wins out. The judge wants equity to prevail and refuses to grant the stay. This is done to prevent the majority from bringing about an injustice to the minority shareholders through the Arbitration Act.

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