Yaworski v. Gowling Lafleur Henderson LLP, 2012 ABQB 424

Court of Queen ’ s Bench of Alberta Citation: Yaworski v. Gowling Lafleur Henderson LLP, 2012 ABQB 424 Date: 20120629 Docket: 1101 13166 Registry: Calgary Between: Brian Yaworski Plaintiff/Respondent - and - Gowling Lafleur Henderson LLP Defendant/Applicant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Bryan E. Mahoney _______________________________________________________ I. Introduction [ 1 ] This is an application pursuant to the Arbitration Act and the Judicature Act for a stay of proceedings pending a referral of the dispute to private arbitration. II. Facts

[ 2 ] The plaintiff and respondent, Brian Yaworski, Q.C., (“Yaworski”) is a lawyer. The applicant and defendant ("Gowlings") is a large national law firm. The dispute between Gowlings and Yaworski is over Yaworski's financial compensation. [ 3 ] Yaworski, by a Statement of Claim filed September 23, 2011, seeks compensation from Gowlings for professional services provided in 2008 and 2009. [ 4 ] Gowlings seeks an order staying these court proceedings because the matter in dispute is subject to a mandatory arbitration clause incorporated in a letter agreement between Brian A.

Yaworski Professional Corporation (“Yaworski P.C.”) and Gowlings (the "Yaworski Agreement") signed February 20, 2004. [ 5 ] Filed in support of the application was the affidavit evidence of Kenneth Warren, Q.C., (“Warren”) a Gowlings’ partner, and a transcript of the cross-examination of Warren on that affidavit. Also filed in support were affidavits of Anthony Jordan, Q.C., a partner, and Karen Wheaton, a legal assistant, both at Gowlings, and both attaching some documents regarding the Articles of Partnership and some correspondence. Yaworski did not file an affidavit.

He relies on the affidavit and cross-examination evidence filed by the applicant plus his legal authorities. [ 6 ] In the Yaworski Agreement, Yaworski P.C. became a Special Partner of Gowlings for the period April 1, 2004 to December 31, 2005.

Yaworski began practising law at the Gowlings’ Calgary office on approximately April 1, 2004 and continued to do so until the end of February, 2009. [ 7 ] In accordance with the Gowlings’ Partnership Agreement at that time in 2004, a Special Partner was a partner who did not contribute any capital to the firm, was not responsible for losses which may be incurred by the firm and had any income determined by a different process than the process for partners who shared in the equity of the firm ("equity partners").

By an amendment to the partnership agreement effective January 1, 2008, there was a change in nomenclature and Special Partners were then referred to as "Income Partners" and the other partners were referred to as "Equity Partners". [ 8 ] The Yaworski Agreement described a compensation formula for Yaworski P.C. covering the period April 1, 2004 to December 31, 2005 which was a combination of base compensation plus bonus.

The Yaworski Agreement did not provide for compensation after December 31, 2005. [ 9 ] The Yaworski agreement at para 11 stated: If you are not approved for full partnership admission effective January 1 st , 2006, then this agreement will not terminate, subject to renewal terms agreed upon between you and the Executive Committee. [ 10 ] Yaworski P.C. was not approved for an equity partnership at Gowlings but continued to practice at the firm until the end of February 2009. [ 11 ] An agreement was reached in 2008 between Gowlings and Yaworski P.C. regarding Yaworski P.C.’s compensation for the calendar years 2006 and 2007. [ 12 ] Negotiations having failed, no agreement was reached between Gowlings and Yaworski P.C. regarding additional or bonus compensation to be paid to Yaworski P.C. in excess of base compensation for 2008 and 2009. [ 13 ] At the end of February 2009, Yaworski left Gowlings.

[14] In February 2011, Yaworski through his legal counsel sent a claim letter to Gowlings. Negotiations between counsel forGowlings and Yaworski to resolve the dispute were unsuccessful. [15] On September 23, 2011, Yaworski filed the Statement of Claim in this action. [16] Through legal counsel Gowlings attempted to invoke the arbitration provisions of the Partnership Agreement. Yaworski hasrefused to proceed to arbitration and opposes a stay of proceedings invoking the provisions of s. 7 of the Arbitration Act. Yaworskiargues three points.

One, neither he nor Yaworski PC is subject to the arbitration clause in the 2008 Partnership Agreement. Two,Gowlings did not "refer a dispute” to arbitration as it was required to do under the 2008 Partnership Agreement. And, three, the matter isa proper one for

summary judgment which is a situation where the court can refuse a stay of proceedings. III. Issues [17] The issues are: (

a) Jurisdiction; (

b) Is Yaworski or Yaworski PC subject to the arbitration provisions in the 2008 Partnership Agreement? (

c) Did Gowlings adequately refer this dispute to arbitration? (

d) Is this a proper case for

summary judgment? (

e) Should this action be stayed because Yaworski’s dispute with Gowlings is subject to the arbitration clause in the PartnershipAgreement? IV. Discussion 1. Jurisdiction [18] The jurisdiction of the court is provided for in the Arbitration Act, R.S.A. 2000 c. A-43 s. 7(1) which provides: 7(1) If a party to an arbitration agreement commences a proceeding in a court in respect of a matter in dispute to be submitted toarbitration under the agreement, the court shall, on the application of another party to the arbitration agreement, stay the proceedings. [19] In G. v.

G., 2000 ABQB 219, 264 AR 22 Justice Hart reviewed the Arbitration Act and stated at para 22: As the above quoted sections of the Act demonstrate, the clear policy thrust of the legislation is to limit court intervention and promotearbitral autonomy. In McCulloch v. Peat Marwick Thorne et al. (1991), (AB KB), 124 A.R. 267 (Q.B.) at p. 269,Perras J. discussed the underlying philosophy of the Act and quoted with approval from W.H. Hurlburt, Towards a New Arbitration Actfor Alberta, (Edmonton: Institute of Law Research and Reform, 1987):

The general approach which the law has taken in Alberta and in other common law jurisdictions is to recognize arbitration as a validform of dispute resolution. It has made provision for assistance in the process and for enforcement of awards. It has imposed somesupervision of the process by providing for removal of arbitrators and setting aside awards and it may allow an arbitration to bepreempted by a law suit, though the courts lean against preemption.

But in general it has tended to treat arbitration as something whichthe parties have chosen for themselves and to which they should be left in the abscence of strong reason to the contrary. [20] The onus of showing that a case is inappropriate for arbitration is on the party opposing the stay: G. v. G. at para 21. [21] The Alberta Court of Appeal has held that, subject to a shortlist of situations in s. 7(2) of the Arbitration Act, under s. 7(1) ofthe Act the court must stay litigation of a dispute covered by an arbitration agreement when the parties have agreed to resolve theirdisputes by arbitration.

Agruim Inc. v. Babock & Wilcox Canada Ltd., 2005 ABCA 82, 363 AR 103 at paras 7-9. [22] The Judicature Act, RSA 2000, c. J-2 at s. 18 also gives the court jurisdiction to order a stay of an action pending the result ofanother proceeding connected to the one before the court. 2. Is Yaworski or Yaworski PC subject to the arbitration provisions in the 2008 Partnership Agreement? [23] The uncontroverted evidence is that from 2004 to when he left in 2009, Yaworski, through Yaworski PC, took the benefits ofhis partnership at Gowlings.

According to the evidence of Warren, he attended partners' meetings, he sent out communications as apartner and he was described in firm promotional material, like letterhead, business cards and the firm website as a partner of Gowlings.There is no reliable evidence to refute the proposition that Yaworski held himself out as a partner at Gowlings.

At no time did he ever, bywords or conduct, lead Gowlings or the public to question that he had some other relationship than that of a Gowlings’ partner. [24] Therefore I agree with the submission that the principles of estoppel by representation apply to prevent Yaworski fromdenying anything but partnership status while at Gowlings. Having taken the benefits of the Gowlings’ partnership he ought not to beable to escape the burdens.

One such burden being the requirement that Yaworski PC as a Special Partner or Income Partner was subjectto the 2008 Articles of Partnership which requires that disputes be resolved by either negotiations or, if invoked, arbitration. For the lawon estoppel by representation see Scotsburn Co-operative Services Ltd. v. W.T. Goodwin Ltd. (SCC), [1985] 1 SCR 54 atpara 26. [25] I do not agree with Yaworski's submission that a stay of proceedings in favour of arbitration can only be granted where thePlaintiff (Yaworski) is a party to an arbitration agreement.

The gist of this submission is that if the 2004 Yaworski Agreement is betweenYaworski PC and Gowlings then Yaworski personally is not a party to that letter agreement.

Not being a party to the letter agreement, heis not subject to the arbitration clause in the Partnership Agreement. [26] In The Law of ADR in Canada An Introductory Guide, (Glaholt, Duncan and Rotterdam, Markus LexisNexis, Canada 2011) atpage 101 the authors state that: Where third party claims are involved, courts have ordered that litigation with regard to matters within the arbitration agreement andbetween the principal parties be stayed pending arbitration, and, with regard to third party matters not governed by the arbitrationagreement, have ordered a stay of proceedings for the estimated time it would take the principal parties to complete their arbitration.Thus, while a court has no jurisdiction to order third parties to submit to arbitration, the court can stay third party claimspending arbitration when it appears just and equitable to do so. (emphasis added) [27] This principle was discussed in Jardine Lloyd Thompson Canada Inc. v.

Western Oil Sands Inc., 2006 ABQB 933; 406 AR 23;where Wittmann ACJ (now CJ) wrote: [14] ...in Kaverit Steel and Crane Ltd. v. Kone Corp., 1992 ABCA 7 , [1992] A.J. No. 40 (C.A.)...the plaintiff distributorbrought an action in this Court against the defendant manufacturer for breach of an exclusive distribution agreement. That agreementcontained an arbitration clause. The chambers judge denied the application for a stay of proceedings on the basis that the entire disputecould not conveniently be resolved by arbitration. Kerans J.A. noted that the action added parties, both plaintiffs and defendants, who

were not parties to the agreement containing the arbitration clause, and that the claim by the distributor contained allegations beyondbreach of the contract.

He suggested, however, that there was a more flexible alternative available to denying the motion for a stayaltogether (at paras.13-14): ...I agree with the learned chambers judge that he has no authority to order these other plaintiffs to submit their claims to arbitration. (Ido observe that he can stay claims pending arbitration if indeed they are derivative and must await the arbitration decision.) Similarly, I agree with the learned Queen's Bench judge that he cannot send the distributor's claims against the licensor's subsidiaries toarbitration in the absence of consent by all the parties.

Again, Counsel for the licensor accepted this point during argument. (Again I notethat a judge might stay a suit against them if the arbitration will effectively resolve the claim against them.) Shortly thereafter, Kerans J.A. emphasized the point, at para. 21: I agree with the learned Queen's Bench judge that he cannot refer any of the claims of any of the "extra' parties to arbitration.

I add onlythat he might nevertheless stay claims pending arbitration when it would appear just and equitable to do so. [15] In the result, Kerans J.A. held that all of the issues between the parties to the arbitration clause that relied upon the existence of thecontract be stayed. He remitted to Queen's Bench any issues about "consequent temporary stays of other aspects of the proceedings”. [16] Kaverit was cited with approval by the Federal Court of Appeal in Nanisivik Mines Ltd. v. F.C.R.S. Shipping Ltd., (FCA), [1994] F.C.J.

No.171 (C.A.). [28] As well, under s. 17(1) of the Arbitration Act, the arbitrator has jurisdiction to rule on the validity of the arbitrationagreement. Section 17(1) states: 17(1) An arbitral tribunal may rule on its own jurisdiction to conduct the arbitration and may in that connection rule on objections withrespect to the existence or validity of the arbitration agreement. [29] In G. v.

G. this court reviewed s. 17 of the Arbitration Act and found at paras 28 and 29 that the arbitrator has jurisdiction torule on the validity of the arbitration agreement. [30] Yaworski agrees he signed the 2004 Yaworski Agreement on behalf of his professional corporation but argues that the 2008Articles of Partnership do not apply to his professional corporation because it did not sign that partnership agreement or any partnershipagreement after signing the 2004 Yaworski Agreement. [31] Paragraph 11 of the original 2004 Yaworski Agreement states that: 11.

If you are not approved for full partnership admission effective January 1st, 2006, then this agreement will not terminate, subject torenewal terms agreed upon between you and the Executive Committee. [32] Paragraph 16 of the Yaworski Agreement further states that: 16. This document and the Partnership Agreement, to the extent that it applies to Special Partners, contain the entire understanding andagreement between Gowlings and you.

Gowlings and you agree that no amendment or variation of any of the provision of this agreementshall be valid unless made in writing and signed by you and the Firm or Office Managing Partner on behalf of the Firm.

[ 33 ] On behalf of Gowlings, Warren stated in his affidavit and repeated under cross-examination that although Yaworski PC did not sign the 2008 Partnership Agreement or any earlier partnership agreements between 2004 and 2008, Yaworski PC was still bound by the 2008 Partnership Agreement. Yaworski PC was bound, according to Warren because of the terms of the 2004 Yaworski Agreement particularly clauses 11 and 16 reprinted above.

Clause 11 provided for the Yaworski Agreement to continue past 2006 and clause 16 incorporated the then partnership agreement and any subsequent ones, whether or not Yaworski or Yaworski PC signed them. [ 34 ] Whether this is the case and Yaworski PC is bound by the 2008 Articles of Partnership including the arbitration clause is something that the arbitrator has jurisdiction to rule on. 3.

Did Gowlings adequately refer this dispute to arbitration? [ 35 ] Yaworski submits that for the arbitration to be mandatory and the court proceedings to be stayed, a party, according to the 2008 Articles of Partnership (s. 12.01), must “refer the dispute or disagreement” to arbitration. Gowlings’ legal counsel, Perry Mack, Q.C., on 6 October 2011, wrote to Yaworski’s legal counsel, Christian Popowich, a letter which opened with the statement “Please consider this letter to be notice that my client invokes the arbitration provisions of

section 12.01 of the Articles of Partnership of Gowling Lafleur Henderson, LLP respecting the matters alleged in the Statement of Claim.” The letter went on to discuss the choice of an arbitrator and Gowlings intention to apply for a stay of proceedings. [ 36 ] Yaworski argues that the notice of arbitration did not follow the Articles of Partnership with the precision and the particulars necessary to be a proper notice. [ 37 ] The concept of notice of legal proceedings to the individual affected is critical to the integrity of the justice system.

Due process requires that legal action cannot be taken against anyone unless the requirements of adequate notice are observed. [ 38 ] In examining the letter of 6 October 2011, to Yaworski’s legal counsel from Gowlings’ legal counsel, together with the chronology of events set out in the Warren affidavit, I am satisfied that Yaworski was sufficiently apprised of Gowling’s intention to invoke the arbitration clause. I find that Gowlings adequately referred the dispute to arbitration. 4. Is this a proper case for

summary judgment? [ 39 ] Yaworski submits that pursuant to s. 7(2) (

e) of the Arbitration Act this court should refuse the stay of proceedings as the matter in dispute is a proper one for

summary judgment. [ 40 ] Section 7(2) (

e) of the Arbitration Act provides that where the matter in dispute is a proper one for

summary judgment, a stay of proceedings may be refused. Further, the Alberta Rules of Court provide for the following at Rule 7.3(1): 7.3(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds: (

a) there is no defence to a claim or part of it; (

b) there is no merit to a claim or part of it; (

c) the only real issue is the amount to be awarded.

[ 41 ] Yaworski argues that Gowlings has not pled nor deposed in its affidavit evidence that it has no liability to him. Therefore, according to Yaworski, the only question to be decided is the amount of compensation owed to him for the year 2008. This, argues Yaworski, would make the application for

summary judgment a proper one. [ 42 ] Gowlings submits that the question of Yaworski’s 2008 compensation is not something that can be resolved by an application for a

summary judgment because there is a significant dispute on the pleadings and a dispute as to who is the proper plaintiff. [ 43 ] The test for

summary judgment is well established. There must be no genuine issue for trial: Pioneer Exploration Inc. (Trustee of) v. Euro-Am Pacific Enterprises Ltd. , 2003 ABCA 298 , 339 AR 165. Where relevant facts are contested, then normally a trial is ordered. [ 44 ] The test under s. 7(2) (

e) of the Arbitration Act is whether, based on the evidence before the court, would a

summary judgment motion be successful, if brought? Balancing Pool v. TransAlta Utilities Corporation, 2009 ABQB 631 , 492 AR 344 at para 47 . [ 45 ] Yaworski has not met his burden of showing that there is no genuine issue to be tried. On the evidence placed before me there is a dispute over the

interpretation of the Yaworski Agreement which agreement would form the basis of his or Yaworski PC’s compensation. Overlapping here is the dispute as to the relationship Yaworski or Yaworski PC or both had with Gowlings. I find that these are genuine issues and that

summary judgment is not appropriate. 5. Should this action be stayed? [ 46 ] I have found that, while a court has no jurisdiction to order Yaworski to submit to arbitration, the court can stay his claim pending arbitration of the Yaworski PC and Gowlings dispute because given the nature of this action it is just and equitable to do so. [ 47 ] I have found that Yaworski was sufficiently apprised of Gowlings’ intention to invoke the arbitration clause and that Gowlings adequately referred the dispute with Yaworski PC to arbitration. [ 48 ] I have also found that there are genuine issues to be tried and that

summary judgment would not be granted to Yaworski. [ 49 ] There will be a stay of this action pursuant to s. 7 of the Arbitration Act and s. 18 of the Judicature Act . [ 50 ] The applicant, Gowlings, are entitled to their costs of this application in any event of the cause, payable upon the disposition of the action. Heard on the 5 th day of April, 2012. Dated at the City of Calgary, Alberta this 29 th day of June, 2012.

Bryan E. Mahoney J.C.Q.B.A. Appearances: Christian J. Popowich, Code Hunter LLP for the Plaintiff/Respondent Perry R. Mack, Q.C., Mack Meagher LLP for the Defendant/Applicant