Chuckry v. Corey Contractors Ltd., 2012 ABQB 796

Court of Queen ’ s Bench of Alberta Citation: Chuckry v. Corey Contractors Ltd., 2012 ABQB 796 Date: 20121227 Docket: 1201 04088 Registry: Calgary Between: Todd Chuckry and Suzanne Chuckry Applicants / Defendants - and - Corey Contractors Ltd. Respondent / Plaintiff _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice K.D. Yamauchi _______________________________________________________ I. Introduction [ 1 ] This matter came before this Court as a review of an arbitrator’s decision.

The arbitration arose out of a dispute between the Respondent and the Applicants. The Applicants purchased a new home from the Respondents. The agreement between the parties contained an arbitration clause, in which the parties agreed that any disputes between them would be resolved through arbitration. II. Salient Facts [ 2 ] Todd and Suzanne Chuckry (the "Chuckrys") purchased a new home (the “House”) from Corey Contractors Ltd. ("Corey Contractors"). The construction agreement between them is dated February 20, 2006 (the “Agreement”). The Chuckrys took possession

of the House in May of 2006. Title to the House was conveyed to them on May 23, 2006, after they had taken possession. [ 3 ] Corey Contractors built the House. When the Chuckrys took possession of the House, it was not yet fully completed. At the time they moved into the House, the Chuckrys noted a number of defects and deficiencies. They attempted to have Corey Contractors repair the defects and correct the deficiencies. [ 4 ] The Chuckry’s did not feel that Corey Contractors was addressing their complaints satisfactorily or timely, so the Chuckrys sought arbitration pursuant to the Agreement.

The Agreement para 24 says: If any dispute arises between the Parties with respect to any matter in relation to this Agreement, the dispute shall be settled through binding arbitration in accordance with arbitration rules adopted by the Program, provided that, where the dispute is in relation to the Builder Warranty, the dispute shall not be referred to arbitration until it has first been referred to and reported on, under the conciliation procedure provided by the Program. A copy of the arbitration rules adopted by the Program shall be furnished to the Parties for the commencement of arbitration.

It is expressly agreed that the arbitration by a single arbitrator shall be final and binding on the Parties. [ 5 ] Of course, the “Parties” are the Chuckrys and Corey Contractors. The “Program” is the National Home Warranty Programs Ltd.: Agreement para 3. Corey Contractors is not a “Registered Builder Member in good standing” with that program. Whether the parties agreed to abide by the arbitration rules that the “Program” adopted was not indicated to this Court.

Nonetheless, the Chuckrys felt that their best option was to submit this matter to arbitration, in accordance with the Arbitration Act , RSA 2000, c A-43 (the “ Act ”). They issued their notice to arbitrate on May 22, 2008 (the “Notice to Arbitrate”). Corey Contractors submitted to the arbitration. [ 6 ] The parties retained an experienced chartered arbitrator and mediator to conduct the arbitration (the “Arbitrator”). The arbitration before the Arbitrator evolved into a mediation, with the Arbitrator acting as the mediator.

Through this process, the parties entered into a settlement agreement on June 15, 2009, which the parties finalized before the Arbitrator (the “Settlement Agreement”). [ 7 ] When one reviews the Settlement Agreement as against the Notice to Arbitrate, the Settlement Agreement addressed many of the issues that the Chuckrys sought to arbitrate.

There were issues involving the front door, costs and interest that were unresolved, and the parties, through the Settlement Agreement, agreed that the Arbitrator would rule on those issues. [ 8 ] The Settlement Agreement allowed Corey Contractors to complete certain work within a specified period. Settlement Agreement para 16 provides: Any payment made under this agreement shall be made on or before the 31 st day of October, 2009 and in default of which either party may apply to the Arbitrator for the issuance of an award within 60 days.

The Arbitrator[']s authority remains until such time as all obligations under this settlement are complete. [ 9 ] The Chuckrys argue that they accommodated Corey Contractors by not strictly enforcing the time periods set forth in the Settlement Agreement, and that they agreed to pay more for certain items, "just to get the job done." This included a colour change to parts of the House that was required to match a colour change in the replacement hardwood flooring that Corey Contractors had provided. [ 10 ] As part of the colour change, the Chuckrys asked Corey Contractors' painting subcontractor, DAB Painting and Decor ("DAB Painting"), to paint some additional areas of the House.

Corey Contractors had hired DAB Painting to do the remedial work outlined in the Settlement Agreement. The Chuckrys argue that the Settlement Agreement allowed them to hire DAB Painting to do this additional work and that it would be their obligation to pay DAB Painting directly. Settlement Agreement subpara 7(

h) says: The Homeowner may request the paint subcontractor ... to perform work which is not on the list in subparagraph (d), which work would be performed on the Homeowners['] time and at the Homeowners['] sole expense.

[ 11 ] Settlement Agreement subpara 7(

d) says: The Homeowners, Corey, and two painters, and the Arbitrator shall conduct a review of paint work and millwork and shall prepare a specific list of millwork and paintwork by agreement, or lacking agreement as decided by the Arbitrator. [ 12 ] The Chuckrys argue that Corey Contractors still has not corrected the original deficiencies.

In particular, they argue that the painting was not being completed to a “reasonable standard,” or in a timely way. [ 13 ] Thus, in August 2011, the Chuckrys used Corey Contractors' breach of the time frames articulated in the Settlement Agreement as a basis for referring these matters to the Arbitrator. They expected that the Arbitrator would direct that Corey Contractors' pay the Chuckrys the financial penalties that the Settlement Agreement sets out for its timely failure to cure the deficiencies.

The Chuckrys would then deal with DAB Painting directly in relation to a dispute over the quality of the additional work that they had asked DAB Painting to perform. [ 14 ] At the hearing before the Arbitrator, the Arbitrator heard the parties' representations, heard their witnesses, and received the parties' written submissions. One of the witnesses at the hearing was Daniel Bowles of DAB Painting ("Bowles").

The Chuckrys argue that, as a result, the Arbitrator heard about not only the painting issues that involved Corey Contractors under the Settlement Agreement, but also about the painting issues relating to the additional work that they had requested DAB Painting to perform. [ 15 ] The Arbitrator ruled on all outstanding issues between the Chuckrys and Corey Contractors (the "Award"). The Chuckrys expected that they would receive a decision that dealt with whether Corey Contractors had timely discharged its obligations under the Settlement Agreement.

Instead, they argue, they received the Award that, in part, attempted to resolve a contractual dispute that they had with DAB Painting. [ 16 ] Following the issuance of the Award, and after the Chuckrys had brought this appeal by way of originating application (Action No. 1201-04088), Corey Contractors issued a statement of claim in this court (Action No. 1201-06158), in which it seeks to recover the amount that Corey Contractors has paid DAB Painting, along with a debt that the Chuckrys owe DAB Painting.

DAB Painting had assigned that debt to Corey Contractors. [ 17 ] For its part, Corey Contractors argues that many of the delays in correcting the deficiencies resulted from certain decisions that the Chuckrys made. These included materials that would be used and the procedures that Corey Contractors had to follow while correcting the deficiencies. As well, the Chuckrys continued to reside in the House while Corey Contractors and its trades were attempting to complete the tasks set forth in the Settlement Agreement.

Thus, it argues: The time limits set out in the Settlement Agreement were not triggered and were waived by both parties in agreeing to have work continue in the [House], despite it being apparent that specified completion dates set out in the Settlement Agreement had not and would not be met. [ 18 ] Corey Contractors also argues that DAB Painting is its subcontractor. The Chuckrys wanted to change the colours in the entire House and Corey Contractors quoted the additional work and the work outlined in the Settlement Agreement as one job.

DAB Painting did not provide a quotation to the Chuckrys, and it never invoiced the Chuckrys. [ 19 ] Corey Contractors further argues that at the beginning of the arbitration hearing, the Chuckrys advised the Arbitrator that they were making no claims with respect to stucco, stone, decking, deck railing, roofing, hardwood floors and electrical work. The Arbitrator had to deal, however, with the issues that were not part of the Settlement Agreement and painting issues. [ 20 ] Corey Contractors called Bowles as its witness. He was examined in chief and the Chuckrys cross-examined him.

[ 21 ] At no time did either party question the Arbitrator’s jurisdiction to hear this matter. [ 22 ] Corey Contractors argues that it filed its statement of claim (Action No. 1201-06158) to meet limitation dates for recovering the funds it paid to DAB Painting. It advised the Chuckrys that it required no defence or response until this Court heard and ruled on the Award and decided the jurisdiction issue. Corey Contractors, by filing its statement of claim, had no intention to re-litigate the matters that were before the Arbitrator.

Apparently, the Chuckrys have filed a statement of defence and counterclaim, which include all of the issues that the parties placed before the Arbitrator, as well as those claims for which the Chuckrys advised the Arbitrator at the beginning of the arbitration hearing that they were not advancing. [ 23 ] Corey Contractors also advised this Court that the Chuckrys have issued a third party claim against DAB Painting and seeks to pursue DAB Painting for those matters which were heard and determined by the Arbitrator. Again, Corey Contractors argues that DAB Painting was its subcontractor throughout. III.

Issues [ 24 ] There are two issues before this Court, being: A. whether the Arbitrator exceeded his jurisdiction, or otherwise erred with respect to the Award, in relation to the painting of the House; and B. whether Corey Contractors and DAB Painting attorned to this Court’s jurisdiction to deal with all matters arising out of the Settlement Agreement by issuing the statement of claim (Action 1201-06158). IV. Standard of Review [ 25 ] The Act says that parties cannot vary or exclude certain provisions of the Act .

Included in those provisions are those set forth in Act s. 45, the relevant portions of which provide: 45(1) On a party’s application, the court may set aside an award on any of the following grounds: ... (

c) the award deals with a matter in dispute that the arbitration agreement does not cover or contains a decision on a matter in dispute that is beyond the scope of the agreement; ... (

f) the applicant was treated manifestly unfairly and unequally, was not given an opportunity to present a case or to respond to another party’s case, or was not given proper notice of the arbitration or of the appointment of an arbitrator; (

g) the procedures followed in the arbitration did not comply with this Act or the arbitration agreement; ... [ 26 ] Act ss. 17 and 19 are also important for the purposes of this Court’s review of the Arbitrator’s decision. They say:

17(1) An arbitral tribunal may rule on its own jurisdiction to conduct the arbitration and may in that connection rule on objections with respect to the existence or validity of the arbitration agreement.

(2) The arbitral tribunal may determine any question of law that arises during the arbitration. 19(1) An arbitral tribunal shall treat the parties equally and fairly.

(2) Each party shall be given an opportunity to present a case and to respond to the other parties’ cases. [ 27 ] The parties agreed to have the Arbitrator rule on the issues they presented to him. Inasmuch as the Arbitrator was not exercising “public powers,” the standards of review that apply in a judicial review do not apply in this instance. Any remedy and review must therefore abide by the Act : Mericle v. Basement Systems (Calgary) Inc. , 2010 ABQB 137 at para 17 , following Knox v. Conservative Party of Canada , 2007 ABCA 295 , 422 AR 29.

In Knox the Alberta Court of Appeal found that judicial review (a public law remedy) was not available in that case because the parties had selected their own private law dispute resolution mechanism (arbitration) and that the private law resolution was final and binding. That is the same situation which is before this Court. [ 28 ] The remedies available to the court under Act s. 45 are as follows:

(2) If subsection (1)(

c) applies and it is reasonable to separate the decisions on matters covered by the arbitration agreement from the impugned ones, the court shall set aside the impugned decisions and allow the others to stand.

(3) The court shall not set aside an award on grounds referred to in subsection (1)(

c) if the applicant has agreed to the inclusion of the matter in dispute, waived the right to object to its inclusion or agreed that the arbitral tribunal has power to decide what matters in dispute have been referred to it. ...

(5) The court shall not set aside an award on a ground to which the applicant is deemed under

section 4 to have waived the right to object.

(6) If the ground alleged for setting aside the award could have been raised as an objection to the arbitral tribunal’s jurisdiction to conduct the arbitration, the court may set the award aside on that ground if it considers the applicant’s failure to make an objection in accordance with

section 17 justified. ...

(8) Instead of setting aside an award, the court may remit it to the arbitral tribunal and give directions about the conduct of the arbitration. V. Analysis [ 29 ] The only substantive issue before this Court is whether the Arbitrator exceeded his jurisdiction by making a ruling in relation to the painting in the House.

Specifically, the Chuckrys argue that the Arbitrator exceeded his jurisdiction or otherwise erred when he combined as part of the Award, the "extra work" that DAB Painting performed beyond the sub-standard painting that the Chuckrys, Corey Contractors, the Arbitrator and two painters identified: Settlement Agreement para 7.d. This Court will refer to the latter as the "7.d Work."

[ 30 ] Does the arbitration agreement cover the issue involving the "extra work"? The Notice to Arbitrate, which started the arbitration proceedings, identified "[d]efects and deficiencies in ... interior painting in numerous rooms throughout the residence..." In the Notice to Arbitrate, the Chuckrys identified many instances in which they engaged contractors to remedy other defects and deficiencies in the House.

They did not, in the Notice to Arbitrate, identify any contractors that they hired to remedy the painting defects and deficiencies. [ 31 ] The Settlement Agreement is the result of the mediation that the parties undertook with the Arbitrator. It sets forth a procedure for the parties to follow in an attempt to resolve the painting defects and deficiencies. This Court has already articulated the provisions that will help it determine whether the Arbitrator exceeded his jurisdiction or erred.

There is one other important provision contained in the Settlement Agreement para 7, which is the paragraph that deals with the millwork and painting issues. Settlement Agreement subpara 7.j. says: Corey shall arrange for a paint subcontractor to perform the work described at Corey's expense. The Settlement Agreement is not clear in its drafting. Is Corey Contractors to arrange for a subcontractor for all the work described in Settlement Agreement para 7? Or is Corey Contractors to arrange for the subcontractor with respect only to the work which is described to be at Corey Contractor's expense (the 7.d Work)?

Was this the same subcontractor described in Settlement Agreement subpara 7.h? Or would the Chuckrys have to retain their own subcontractor? [ 32 ] In the end, DAB Painting did all of the painting in the House, until the Chuckrys discharged DAB Painting. [ 33 ] The Arbitrator separated the "extra work" from the 7.d work. He said: The Job Estimate DAB [Painting] provided for this work totalled $97,062.50.

Larry Stadnick of Corey [Contractors] testified that Corey [Contractors] was responsible for $53,000 of the work and the Chuckrys for the balance of $44,062.50 representing the extra cost of the colour change: Award at 3. [ 34 ] The Arbitrator referred throughout the Award to the testimony of Mr. Bowles. The Arbitrator described the work that DAB Painting had completed and said: Remaining was the laundry room on the main floor and the many and varied touch-up issues that accompany a large painting project. Mr.

Bowles estimated that it would take about two weeks to do the "clean-ups" throughout the Home: Award at 3. The Chuckrys discharged DAB Painting before he could complete those "touch-ups": Award at 4. [ 35 ] In the end, the Arbitrator found that the "extra work" cost $84,145.63, which was $31,145.63 beyond the $53,000 that was contained in the job estimate that DAB Painting had provided to Corey Contractors. As well, Corey Contractors still owed DAB Painting an additional $8,063.77. Corey Contractors was seeking that amount, as it had paid almost all of that amount to DAB Painting.

The Arbitrator ordered the Chuckrys to pay DAB Painting those amounts: Award at 5. [ 36 ] The primary complaint that the Chuckrys have is that the Arbitrator should not have dealt with the "extra work" component. That was not what the arbitration was all about. They argue that DAB Painting was not part of the arbitration and, accordingly, the Arbitrator had no jurisdiction to determine the rights as between DAB Painting and the Chuckrys. They further argue that the Award is beyond the scope of the arbitration agreement which is the foundation of an Arbitrator's jurisdiction. They cite MJS Recycling Inc. v.

Shane Homes Limited , 2011 ABCA 221 , paras 29-31 , 33 in support of their argument. In that case, the parties entered into an arbitration agreement. Here, there was no such agreement, other than what one might glean from the Notice to Arbitrate and the Settlement Agreement, the latter of which states only that "[t]he Arbitrator[']s authority remains until such time as all obligations under this settlement are complete": Settlement Agreement para 16.

[ 37 ] The Notice to Arbitrate is vague as to the issues on which the Arbitrator was to rule. As mentioned earlier, the Settlement Agreement was equally vague. The Chuckrys questioned the Arbitrator concerning his jurisdiction to rule on an issue involving a party who was not a party to the arbitration, viz. , DAB Painting.

The Arbitrator's response was that, "[t]he Award contains no award 'in favour of DAB Painting.' The only award is to Corey [Contractors]." [ 38 ] If there was an agreement between the Chuckrys and DAB Painting, that agreement was not articulated in the Settlement Agreement or in the parties' practical manner of proceeding. Corey Contractors received the job estimate from DAB Painting and the Chuckrys allowed DAB Painting to work on the House for 5 months, without asking for a separate agreement or separate invoices.

The painting of the House was a very important part of the Notice to Arbitrate and the Settlement Agreement, which, together, constitute the arbitration agreement. This Court finds that it was within the Arbitrator's jurisdiction to rule on all issues involving the painting in the House, including the "extra work" and the 7.d Work. The parties agreed that "Corey [Contractors] shall arrange for a paint subcontractor to perform the work described at Corey [Contractor]'s expense." The Chuckrys could have arranged for their own paint subcontractor.

They did not. [ 39 ] The Chuckrys also argue that they were denied a fair hearing, as between them and DAB Painting, which would be a breach of the Act ss. 45(1)(f), 45(1)(

g) and 19. The Arbitrator allowed the Chuckrys to present their case and respond to Corey Contractor's case. Of importance is that Bowles, on behalf of DAB Painting, was a witness in the arbitration proceedings and was examined in chief and cross-examined with respect to the breadth of the House project, the time he actually spent on the project, how he approached the project, including how he would deal with the "touch-ups" and the alleged shortcomings of his work.

The Arbitrator, in approaching the arbitration proceedings as he did, did not fail to comply with those provisions of the Act . [ 40 ] The Chuckrys argue that by commencing its action, Corey Contractors has attorned to this Court's jurisdiction, such that this Court can now re-open all the issues that the parties took before the Arbitrator. In other words, the Arbitrator's decision would be of no force and this Court can start afresh. More specifically, the Chuckrys argue that they: ... are willing to proceed with the action commenced by Corey Homes, and which involved DAB Painting as a party.

In fact, these parties have by their conduct attorned to the jurisdiction of this court in the subject matter of the pleadings in the action. This creates an overlap between the Arbitration between Corey Homes and the Chuckrys, and Action 1201-06158 between all three parties. The Chuckrys submit that it is appropriate to stay the arbitration in favour of the action so as to prevent a multiplicity of actions: Chuckrys' Brief, 10 November 2012 at para 28. In support of their argument, the Chuckrys cite, Imagis Technologies Inc. v. Red Herring Communications Inc. , 2003 BCSC 366 at para 10 ; TG v.

JB , 1999 ABQB 847 at para 45 . [ 41 ] Corey Contractors argue that it filed its statement of claim in Action no. 1201-06158 to preserve a limitation period. The statement of claim relates only to the "extra work" and not the para 7.d Work. Because the Chuckrys commenced the application that is now before this Court, Corey Contractors told the Chuckrys' counsel that he need not file a statement of defence, until the matter before this Court was complete. The Chuckrys' lawyer chose to file a statement of defence and counterclaim and a separate third party claim against DAB Painting.

Corey Contractors' statement of claim does not mention DAB Painting, other than as Corey Contractors' subcontractor. [ 42 ] Corey Contractors has stated that it will discontinue its action if this Court rules that the Arbitrator had jurisdiction to deal with the painting issues. [ 43 ] There can be no doubt that the action that Corey Contractors commenced and the Award involve matters that overlap. As well, the Chuckrys have brought DAB Painting into the Corey Contractors' action through their third party claim.

Thus, the parties to the arbitration do not consist of all of the parties to the court action. [ 44 ] While this Court has the power to prevent a multiplicity of actions and stay the arbitration in favour of the action pursuant to the Judicature Act , RSA 2000, c J-2, s 5(3)(f), it will not do so in this case. The Award deals with the matters that are contained in the Corey Contractors' statement of claim. This Court accepts Corey Contractors' counsel's representation to this Court that the statement of claim was filed to preserve a limitation period.

Corey Contractors' counsel is, after all, an officer of this Court. As well, it was not Corey

Contractors that brought DAB Painting into the action. That was done by the Chuckrys. They cannot bootstrap themselves through their own actions. VI. Conclusion [ 45 ] As a result of the foregoing, this Court will not interfere with the Award. The Arbitrator had the jurisdiction to deal with the matters before him. He did not err in the procedure that he undertook in making the Award. Heard on the 28 th day of November, 2012. Dated at the City of Calgary, Alberta this 27th day of December, 2012. K.D. Yamauchi J.C.Q.B.A. Appearances: Clarence J. Hookenson Clarence J.

Hookenson Professional Corporation for the Plaintiff (Respondent) Desmond J. MacMillan Knight Litigation for the Defendants (Applicants)