645639 Alberta Ltd., Operating As Aurora Transportation v. Don, 2013 ABQB 627

Court of Queen ’ s Bench of Alberta Citation: 645639 Alberta Ltd. (Aurora Transportation) v. Co-Operators General Insurance Company, 2013 ABQB 627 Date: 20131022 Docket: 1103 12098 and 1203 04557 Registry: Edmonton Action No. 1103 12098 Between: 645639 Alberta Ltd., Operating As Aurora Transportation and Don Lapierre Plaintiffs - and - Co-Operators General Insurance Company, Gilles Choquet, Choquet Insurance Group Ltd., Ameritrans by TMC Group, Inc., TMC Group Inc., Daimler Trucks North America LLC Fomerly Known As Freightliner LLC, Detroit Diesel Corporation, Davey Coach Sales, Inc., and Norglass

(2002) Ltd. Defendants And Between: Action No. 1203 04557 645639 Alberta Ltd., Operating As Aurora Student Transportation also known as Aurora Transportation Plaintiffs - and - Ameritrans Bus Company, Inc. TMC Group Inc., operating as Ameritrans also known as Ameritrans Bus, Daimler Trucks North America LLC Fomerly Known As Freightliner LLC, Detroit Diesel Corporation, Davey Coach Sales, Inc., and Norglass

(2002) Ltd. Defendants _ ________________________________________ ______________

Reasons for Judgment of W. S. Schlosser , Master in Chambers _________________________________________ ______________ [ 1 ] This is an application to stay two actions for arbitration. [ 2 ] In 2006, 645639 Alberta Ltd. o/a Aurora Transportation, bought a bus frame and engine from Davey Coach Sales Inc., a company operating out of Sedalia, Colorado. In 2008, Aurora purchased the body of the bus. [ 3 ] The 2008 contract referenced the earlier sale. The 2008 agreement (we do not have a formal 2006 agreement) included the following term: 11. ARBITRATION.

Buyer agrees that in lieu of litigation in any court, all disputes resulting from or arising out of this sale, in contract or in tort, without limitation, shall be submitted to binding arbitration, pursuant to the provisions of the commercial rules of the American Arbitration Assoc. then existing in the county where this sale is made, except that the arbitrator impaneled to arbitrate this matter shall be selected by the parties to this agreement from lists of suitable arbitrators supplied by the American Arbitrators Assoc.

The arbitration filing fees and costs or the proceeding shall be taxed against the losing party. In the event of any action or arbitration arising out of or related to this transaction, Buyer shall pay Seller’s attorney fees and costs. [ 4 ] In March 2010, Aurora hired Norglass to put a new windshield in the bus. The Norglass installer stood on the engine to do it. [ 5 ] Not long afterwards, the bus burned up; taking a second bus with it, and the storage facility. [ 6 ] Now everyone has been sued, including the broker who placed the insurance. There are two actions and there are cross claims.

The Plaintiff says the fire was started by a damaged power cable to the engine grid heater; which, presumably was damaged when the installer stood on the engine. There could also be a design problem, or a problem in the grid heater itself. [ 7 ] Davey says that Aurora has to arbitrate and wants the action at least partially stayed. They also raise a forum conveniens issue. [ 8 ] I would agree with Davey if there were only two parties, but here there are many. [ 9 ] The starting point where there is an arbitration clause is ‘hands off’.

Section 6 of the Arbitration Act is intended to let the arbitration proceed and to limit the ability of the court to intervene. Epcor Power LP v. Petrobank Energy & Resources Ltd. , 2010 ABCA 378 . [ 10 ] The Act provides: Court Intervention Limited 6 No court may intervene in matters governed by the Act, except for the following purposes as provided by this Act (

a) to assist the arbitration process; (

b) to ensure that an arbitration is carried on in accordance with the arbitration agreement; (

c) to prevent manifestly unfair or unequal treatment of a party to an arbitration agreement; (

d) to enforce awards. [ 11 ] Outside of

section 6 it is doubtful that the Court has the power to ‘stay an arbitration’. If an action has been commenced, the action can be stayed in accordance with

section 7 of the Act, which provides: Stay 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 to arbitration under the agreement, the court shall, on the application of another party to the arbitration agreement, stay the proceeding.

(2) The court may refuse to stay the proceeding in only the following cases: (

a) a party entered into the arbitration agreement while under a legal incapacity; (

b) the arbitration agreement is invalid; (

c) the subject-matter of the dispute is not capable of being the subject of arbitration under Alberta law;

(

d) the application to stay the proceedings was brought with undue delay; (

e) the matter in dispute is a proper one for default or

summary judgment.

(3) An arbitration of the matter in dispute may be commenced or continued while the application is before the Court.

(4) If the court refuses to stay the proceedings, (

a) no arbitration of the matter in dispute shall be commenced, and (

b) an arbitration that has been commenced shall not be continued, and anything done in connection with the arbitration before thecourt’s refusal is without effect

(5) The court may stay the proceeding with respect to the matters in dispute dealt with in the arbitration agreement and allow theproceeding to continue with respect to other matters if it finds that (

a) the agreement deals with only some of the matters in dispute in respect of which the proceeding was commenced, and (

b) it is reasonable to separate the matters in dispute dealt with in the agreement from the other matters.

(6) There is no appeal from the court’s decision under this section. Legislation [12] The legislative history was reviewed by the Court of Appeal in New Era Nutrition Inc. v. Balance Bar Company, 2004ABCA 280, per Conrad, J.A. writing for the Court. [13] Our Arbitration Act was revised in 1991. In general terms, the purpose of

section 7 of the Act was to discourage multipleproceedings. [14] Before 1991, the court had a wide power (under the old Act) to refuse to stay litigation. The philosophy seems to have beenthat the courts were the preferred venue. [15] In 1988, the ALRI, in Report No. 51: ‘Proposals for a New Alberta Arbitration Act,’ recommended that the Court’s power torefuse to stay litigation should be much circumscribed. However, the resulting legislation did not go as far as the Law Reform Instituterecommended.

Sections 6 and 7 of the present Act were passed into law. [16] The decided cases tell us that arbitration is given primacy where there are only two parties involved. But there seems to be areluctance to interfere in the litigation process where there are more. [17] The Alberta Law Reform Institute invited further consideration of the court’s power to stay multi-party litigation where thereis an arbitration clause (ALRI Report for Discussion No. 24, 2012). The argument is that the purpose of the Arbitration Act may bedefeated if priority is given to litigation.

However, the problem is multi-dimensional when there are overlapping issues and partiesinvolved that are outside the arbitration agreement. [18] The decided cases begin with the legislative intent that parallel litigation should be stayed except for the circumstancesspecified in 7(2) or 7(5) of the Act: Agrium v. Babcock and Wilcox Canada, 2005 ABCA 82, Epcor (above). The onus of establishingthat the circumstances in section 7(2) apply is on the person seeking the stay: Yaworski v. Gowling LeFleur Henderson LLP, 2012,ABQB 424; and G. v.

G., 2000 ABQB 219. [19] The crucial point is that section 7(2) appears to be qualified by section 7(5), and the Act has been interpreted widely, with theresult being that primacy is given to litigation where there are multiple parties, multiple issues and an arbitration agreement that onlydeals with some of them. [20] The law was comprehensively reviewed by A. D. McLeod, J. (at first instance) in Lamb v. Alan Ridge Homes Ltd., 2009ABQB 170. The Court of Appeal affirmed the result and observed that

section 7 was not a model of clarity: Lamb v Alan Ridge HomesLtd. 2009 ABCA 343. [21] If we distill the principles from the decided cases it appears that the relevant considerations are:

(1) Are there multiple parties not all of whom are privy to the arbitration agreement? (Lamb, New Era, and Crystal Rose HomesLimited v. Alberta New Home Warranty Program (1994) (AB KB), 163 AR 96 (per Funduk, M. at para. 111);

(2) Are the issues (arbitratable and non-arbitratable) inextricably linked, or can they be conveniently separated? Olymel S.E.C. v.Premium Brands Inc., 2005 ABQB 312, per Erb, J.

(3) Would it be ‘just and equitable’ to order a partial stay of the action to allow the arbitration to proceed. Kaverit Steel and CraneLimited v. Kone Corp. (1992), 1992 ABCA 7 , 85 Alta. L.R.(2d) 287, Kaverit Steel and Crane Limited v. Kone Corp., [1992] 2S.C.R. vii; (though that case interpreted the International Act and not the Alberta Act), Frambordeaux Developments Inc. v. RomandaleFarms Ltd. [2007] OJ No. 4917 Ont. SCJ, per Thorbourn, J. and Radewych v. Brookfield Homes (Ontario) Ltd., 2007 ONCA 721(Ontario C.A.).

(4) Would staying the action and allowing the arbitration to proceed create a risk of delaying resolution, duplicate resources andpermit potentially inconsistent findings? Radewych v. Brookfield Homes(Ontario) Ltd., 2007 Carswell Ont. 4027 per Gray, J.)

(5) Has there been delay in applying for the stay?– Millennial Construction Ltd. v. 1021120 Alberta Ltd ., 2005 ABQB 533 per Romaine, J. at para. 15 and Eiffel Developments Ltd. v. Paskuski , 2010 ABQB 619 per Mason, M. at paras. 25, 26 – in that case a delay of more than two years (and see Section 7(2)(e), above). [ 22 ] There is some parallel in the decided cases with the principles that apply to splitting issues, or splitting liability and quantum where the concept of judicial economy is an overriding consideration: Gallant v.

Farries , 2012, ABCA 98 . ‘Hands off’ to ‘Hands up’ [ 23 ] I note that if the matter were to proceed to arbitration between Davey and Aurora, the arbitrator’s decision would not bind the Court. Furthermore, the arbitrator’s decision would only deal with the issues as between two of these eleven parties. The others have not agreed to participate voluntarily. I my view, it would not be satisfactory to allow the arbitration clause between two of the parties to a multi-party lawsuit to hold the action hostage.

Allowing a partial stay would have the same effect, indirectly. [ 24 ] If the considerations noted above are applied to the facts of this case, they overwhelmingly favour allowing the litigation to proceed. Forum [ 25 ] The Applicant also raises an issue about the Plaintiff’s choice of forum. [ 26 ] Davey argues that Alberta is not the appropriate or convenient forum for a dispute between Davey and the Plaintiff to be dealt with. As I understand it this goes to the arbitration argument and not to whether service of the Statement of Claim should be set aside.

Davey has filed an Amended Statement of Defence, in Action #1103 12098, which normally would be a bar to setting aside service under Rule 11.31. (The Statement of Defence purports to challenge the forum without acceding to the jurisdiction). [ 27 ] Although the contract containing the arbitration clause references the previous sale of the motor and chassis, it appears that there a two contracts. There is no evidence of a written contract for the first sale. It appears that Mr. Lapierre, on behalf of Aurora, negotiated the first purchase from Alberta.

An invoice followed, which was paid. [ 28 ] A contract is formed when the offeree communicates acceptance to the offeror. (Note Greenbuilt Group of Companies Ltd. v. RDM Engineering Inc. , 2013 ABQB 297 at para. 108 , and the cases there.). [ 29 ] The place of the contract appears to be the location of the offeror when the contact is accepted. (Again, Greenbuilt (above) at para. 108) Mr. Lapierre, on behalf of Aurora is the offeror. Davey, the offeree, communicated its acceptance to the offeror in Alberta.

The location of the offeror when the offer is accepted is the proper law of the contract, which would be Alberta. [ 30 ] The arbitration agreement speaks of the rules of the American Arbitration Association ‘existing in the county where the sale is made’. This application is itself brought under the Alberta Arbitration Act. [ 31 ] There is not enough evidence to conclude that the foreign law (even if it applied) would have any different result in interpreting the arbitration clause or determining whether there should be a partial stay.

Therefore, the jurisdictional argument does not favour the Applicant and the Plaintiff’s choice of forum is not a decisive factor in deciding whether the Alberta actions should be stayed in favour of arbitration in Colorado. Conclusion [ 32 ] It is not my place to question the wisdom of a party who would not avail themselves of an opportunity to visit Colorado, especially during the winter ski-season, but, in my view, the circumstances of this case weigh against staying the action in favour of arbitration, even partially. [ 33 ] Davey has leave to file a substantive Defence in both actions.

Heard on the 21 st day of August, 2013. Dated at the City of Edmonton, Alberta this 22 nd day of October, 2013.

W. S. Schlosser M.C.C.Q.B.A. Appearances: C. Greschner Bryan & Company for the Plaintiffs in file 1103-12098 Brian Thompson Chomicki Baril Mah LLP for the Plaintiffs in file 1203-04557 Lorena Harris Dentons for the Defendant, Daimler Trucks North America LLC K. Kawanami Emery Jamieson for the Defendant, Davey Coach Sales, Inc. Peter Gibson Field LLP for the Defendant, Norglass

(2002) Ltd. D. Chronopoulos Chatwin LLP for the Defendant, Co-operators General Insurance Co. B. Smith McLennan Ross for the Defendant, Ameritrans by TMC Group Inc.and TMC Group Inc. Brian Kapusianyk, Q.C. Gowling Lafleur Henderson LLP

for the Defendants, Choquet Insurance Group Ltd. and Gilles Choquet