681210 Alberta Ltd. Plaintiff/Appellant - v. -, 2016 ABQB 407

Court of Queen ’ s Bench of Alberta Citation: 681210 Alberta Ltd v 1335422 Alberta Ltd, 2016 ABQB 407 Date: 20160718 Docket: 1301 05390 Registry: Calgary Between: 681210 Alberta Ltd. Plaintiff/Appellant - and - 1335422 Alberta Ltd. Defendant/Respondent _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice A.G.

Park _______________________________________________________ [ 1 ] The Appellant, 681210 Alberta Ltd. (“681”) appeals a decision issued by a Master in this Court on July 30, 2015 as a result of an application brought by the Defendant, 1335422 Alberta Ltd. (“133”). The Master’s decision stayed this action pursuant to s. 7(1) of the Arbitration Act , R.S.A. 2000, c. A-43. The Master found there was an arbitration agreement between the parties arising out of a dispute relating to the

interpretation or implementation of the provisions of an Asset Purchase Agreement (“the Agreement”). [ 2 ] The Master further determined the Notice to Arbitrate delivered by 681 to 133 on March 18, 2015, was issued beyond the two year limitation period set out in s. 3(1) of the Limitations Act , R.S.A, 2000 c. L-12 The evidence placed before the Master and before me in this appeal consisted of the following:

a. Filed Affidavit of Owen Lloyd on behalf of 681; b. Filed Affidavit of Nathalie Hunter on behalf of 133; c. Filed Supplementary Affidavit of Nathalie Hunter on behalf of 133; d. Transcript of cross-examination of Owen Hunter; and e.

Transcript of cross-examination of Nathalie Hunter. [ 3 ] Placed further before me in this appeal were the transcript of the proceedings before the Master, his written Memorandum of Decision and his subsequent Order. [ 4 ] Both Counsel in this appeal agree the material facts are accurately described in paragraphs 2 to 26 of 133’s written brief filed for the application before the Master; and in paragraphs 5 to 27 of 681’s written brief filed for the application before the Master; and finally as set out in paragraphs 1 to 10 of the Master’s Memorandum of Decision.

For the purposes of this appeal and to add clarity to these reasons, I set out in verbatim the facts as found by the Master in Paragraphs 2 to 10 inclusive of his Memorandum of Decision. 2 The Plaintiff is 681210 Alberta Ltd. ("681") and the Defendant is 1335422 Alberta Ltd. ("133"). Gnumedia Inc. ("Gnumedia"), Daniel Hunter ("Mr. Hunter"), who was the owner of all of the issued shares of Gnumedia, and his former spouse Nathalie Hunter ("Ms.

Hunter") who is the owner of all of the issued shares of 1335422 Alberta Ltd., also have significant roles in the matter. 3 681 is in the movie theatre business in Okotoks, Alberta. In 2003 it commenced an action against Gnumedia and Mr. Hunter seeking damages for breach of fiduciary duty and other matters arising out of what it alleged was a misappropriation of a business opportunity to purchase another cinema. That action was successful and a judgment was granted against Gnumedia and Mr. Hunter for approximately $2.7 million on May 11, 2011. An appeal by Gnumedia and Mr.

Hunter to the Court of Appeal was unsuccessful. The appeal was dismissed on March 14, 2012. 4 On November 25, 2011, which was shortly after the original judgment was granted, 681 commenced an action against Gnumedia, Mr. Hunter, Ms. Hunter and 133 that it framed as a fraudulent preference action which also included a claim for oppression relief pursuant to the Business Corporations Act , R.S.A. 2000, c. B-9. That action alleges that Mr.

Hunter caused Gnumedia to transfer its assets to 133 in order to defeat the claim of the 681 in the series of transactions that follows. 5 During the course of the initial litigation Mr. Hunter and Ms. Hunter were in the midst of matrimonial difficulties. They entered into a Separation, Custody, Support and Property Agreement dated July 12, 2007. The agreement contained the following clauses 78 and 79: 78. The parties acknowledge that there is an existing outstanding lawsuit with Gnumedia Inc. and Dan as Defendants and that this lawsuit is in relation to the Canyon Meadows Cinema business.

The parties agree that this shall be a shared contingent liability of Dan, Nathalie, Gnumedia and 1335422 Alberta Ltd. and, as between these parties, they agree that any liability, judgment, or costs related to the defense of this lawsuit shall be one half the responsibility of Dan and Gnumedia, jointly and severally and one half the responsibility of Nathalie and 1335422 Alberta Ltd. jointly and severally. 79.

Any decisions in relation to the defense or settlement of the lawsuit shall be joint and any disputes between the parties shall be referred to further arbitration by Patricia Blocksom, Q.C. 6 Shortly thereafter, Ms. Hunter's corporation 133 also entered into an Asset Purchase Agreement in which 133 acquired all of the business assets of Gnumedia. It contained the following clauses 4.2 and 7.1: 4.2 Court Action The Vendor is currently involved in litigation related to the Business in the Court of Queen's Bench of Alberta with 681210 Alberta Ltd. (Action No. 0301-12049).

The Purchaser and the Vendor expressly acknowledge and agree that, notwithstanding anything in this Agreement to the contrary, any liability arising from said action shall be a joint liability of the Vendor and the Purchaser. 7.1 Arbitration If any dispute or controversy shall occur between the parties relating to the

interpretation or implementation of any of the provisions of this Agreement which is not addressed elsewhere in this Agreement, such dispute shall be resolved by arbitration. Such arbitration shall be conducted by a single arbitrator who shall be appointed by agreement between the parties or, in default of agreement, such arbitrator shall be appointed by Patricia L. Blocksom, Q.C. ("Blocksom").

In the event Blocksom is unwilling or unable to appoint an arbitrator, such arbitrator shall be appointed by a Judge of the Court of Queen's Bench upon the application of any of the said parties and a Judge of the Court of Queen's Bench shall be entitled to act as such arbitrator, if he or she so desires. Any such arbitration shall be held in the City of Calgary, Province of Alberta. The procedure to be followed shall be agreed by the parties or, in default of agreement, determined by the arbitrator.

The arbitrator shall have the power to proceed with the arbitration and to deliver his or her award notwithstanding the default by any party in respect of any procedural order made by the arbitrator. The arbitration shall proceed in accordance with the provisions of the Arbitration Act (Alberta) or any replacement legislation. It is further agreed that such arbitration shall be a condition precedent to the commencement of any action at law. The decision arrived at by the arbitrator shall be final and binding and no appeal shall lie therefrom.

Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. 7 The Separation, Custody, Support and Property Agreement contemplated by reference that there would be a separate Asset Purchase Agreement. Both Mr. Hunter and Ms. Hunter had independent legal advice in the context of the matrimonial proceedings. Clause 78 of the Separation, Custody, Support and Property Agreement and clause 4.2 of the Asset Purchase Agreement were drafted with different wording.

8 The Asset Purchase Agreement also contemplated that some payments would flow to Gnumedia for the purchase price as defined in the Asset Purchase Agreement as a percentage of future sales. There was no indication during argument as to whether all of those payments have been made. 681 and at least some of its representatives learned of the existence of the Asset Purchase Agreement by at least October, 2010. 9 After its success at trial in the breach of fiduciary duty action, 681 attempted some enforcement steps on its judgment. $20,903.88 was collected by way of two small instalments on garnishee proceedings.

Seizure proceedings of Mr. Hunter's shares in Gnumedia ended quickly when Mr. Hunter made a personal assignment in bankruptcy on March 16, 2012. 10 More than a year later, on March 26, 2013, 681 filed an application for a bankruptcy order against Gnumedia and that order was granted on April 9, 2013. On May 2, 2013 the named trustee Hudson & Company Insolvency Trustees Inc. filed the initial Statement of Claim in this action in its own name against 133 seeking payment under clause 4.2 of the Asset Purchase Agreement. On January 7, 2014 Registrar Mason granted an order pursuant to

section 38 of the Bankruptcy and Insolvency Act RSC 1985, c. B-3 permitting assignment of this action and the underlying documentation to 681. 681 now carries on this action in its own name, and for its own benefit, subject to the provisions of the Bankruptcy and Insolvency Act . [ 5 ] In addition to the Master’s fact findings, I believe it is necessary to set out some additional relevant facts which I derived from the evidence. 1.

All of Daniel Hunter’s shares in his company, Gnumedia, were seized by 681 on September 16, 2011 under the May 11, 2011 trial judgment in favour of 681 and the subsequent Writ of Execution filed by 681. 2. Daniel Hunter filed a Notice of Objection to the seizure of his Gnumedia shares on September 29, 2011. 3. In his Notice of Objection, Daniel Hunter advised his lawyer in the litigation between 681 and Gnumedia, and Daniel Hunter filed a Stay of Enforcement on the Judgment obtained by 681. 4.

On March 15, 2012, one day after the Alberta Court of Appeal dismissed Gnumedia’s appeal of the trial judgment, the bailiff retained under the share seizure by 681, executed a sole shareholder’s resolution of Gnumedia removing Daniel Hunter as the sole director of Gnumedia. Gord Winter was elected the sole director of Gnumedia in the stead of Daniel Hunter. 5. Upon Daniel Hunter making a personal assignment in bankruptcy on March 16, 2012, the seizure of his shares in Gnumedia was rendered of no force and effect as they vested in his trustee in bankruptcy. 6.

The Bankruptcy Order of April 9, 2013 in this Court referenced that Gnumedia had committed

an act of bankruptcy within the 6 months preceding the March 26, 2013 filing of 681’s Application for the Bankruptcy Order. 7. On April 30, 2014, Hudson & Company Insolvency Trustees Inc., in its capacity as Trustee in Bankruptcy of Gnumedia, (“the Trustee”) obtained an ex parte Order from Master Prowse in this Court granting it a 3 month extension to serve the Statement of Claim it filed on May 2, 2013 in this action. 8. On July 25, 2014, current Counsel for 681 filed an Amended Statement of Claim in this action. 9. On July 28, 2014, 133 was served with the Amended Statement of Claim. 10.

On August 11, 2014, 133 filed an application in this Court to set aside the ex parte Order granting the 3 month extension to serve the Statement of Claim. 11. On January 7, 2015, the application of 133 to set aside the extension Order was dismissed. 12. On January 19, 2015, 133 filed its Statement of Defence to the Amended Statement of Claim. Standard o f Review [ 6 ] I agree with the submissions of both parties the standard of review on an appeal from a Master to a Justice, on all issues, is correctness.

See Bahcheli v Yorkton Securities Inc and Orion Securities Inc. , 2012 ABCA 166 at para. 30 . [ 7 ] Further, it is common ground this appeal is de novo with no deference owed to the Master’s decision. Reasons [ 8 ] 133 sought an Order to dismiss or stay this action pursuant to the provisions of s. 7 of the Arbitration Act . Those provisions state: 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 proceeding 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 proceeding, (

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 the court'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 the proceeding 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. [ 9 ] The Amended Statement of Claim refers to the Agreement executed by Gnumedia and 133 on August 1, 2007. Under the Agreement, 133 purchased all of Gnumedia’s assets. The Amended Statement of Claim set out Clause 4.2 of the Agreement. The Plaintiff, 681, pleaded pursuant to Clause 4.2 that such joint liability of Gnumedia and 133 is an indebtedness or an indemnity. 681 claimed an indemnity for the indebtedness from 133 pursuant to Clause 4.2.

Accordingly, 681 sought judgment from 133 in the total sum of $3,534,061.36. [ 10 ] In its Statement of Defence, 133 admitted the wording of Clause 4.2 of the Agreement, but stated a drafting error caused the Agreement to not reflect the true mutual intent of Gnumedia and 133.

Rather, 133 alleged the true mutual intent was to strike an agreement wherein 133 would be severally liable to Gnumedia for a maximum of one half of Gnumedia’s legal costs in defending the litigation. 133 further stated Clause 4.2 is subject to the doctrine of rectification to reflect the true mutual understanding and agreement of the parties. [ 11 ] The Statement of Defence indicated if 681 wished to enforce Clause 4.2 of the Agreement, it would be required to proceed to arbitration under Clause 7.1 of the Agreement.

The Statement of Defence noted neither Gnumedia nor 681 commenced any arbitration proceedings to enforce the alleged indemnity obligation prior to the issuance of the Amended Statement of Claim. [ 12 ] In essence, the Statement of Defence plead an arbitration is required to determine its allegation Clause 4.2 was drafted in error and resulted in the Agreement made by 133 and Gnumedia being based on mistake and without consideration. [ 13 ] In this Application 133 submitted that Clause 4.2 must be interpreted through an arbitration before it can be enforced.

It is the position of 133 that Clause 4.2 is unclear in that it is not a guarantee of the indebtedness of Gnumedia, nor an agreement to indemnify Gnumedia, nor an obligation assumed directly to 681 (in the absence of privity of contract or consideration from 681). [ 14 ] In

summary, 133 submitted the Agreement clearly requires the dispute over Clause 4.2 to be conducted by an arbitrator respecting the

interpretation or implementation of Clause 4.2. [ 15 ] 133 next submitted Clause 7.1 of the Agreement compels a mandatory arbitration before the commencement of any judicial action. As a result, 133 argued such a mandatory arbitration required this Court, under s 7(1) of the Arbitration Act to stay the court proceedings. [ 16 ] In response, Counsel for 681 submitted the Application of 133 must be dismissed because the Arbitration Clause in the Agreement (Clause 7.1) is not applicable in that the nature of the dispute or controversy between the parties does not relate to the implementation or

interpretation of the provisions of the Agreement. [ 17 ] The Master found the Arbitration Clause to be clear, unambiguous and applicable to the subject matter of what is at issue in this action. He noted this action is very much a dispute relating to the

interpretation or implementation of Clause 4.2 of the Agreement. Save for those express findings, he provided no further explanation or reasons for arriving at his final determination. [ 18 ] However, it is my view the Master was not correct in his finding that the Arbitration Clause does apply to this action. I find he erred in that finding as the nature of this litigation does not relate to the “interpretation or implementation” of any of the provisions of the Agreement. [ 19 ] In its Statement of Defence, 133 admitted the wording contained in Clause 4.2 of the Agreement. As a result of this admission, it must be taken that 133 does not take issue with the

interpretation or implementation of Clause 4.2 as it is presently worded in the Agreement. [ 20 ] Rather, 133, in its Statement of Defence, alleged a drafting error resulted in Clause 4.2 not encompassing the true mutual intent of 133 and Gnumedia. Nathalie Hunter, the director and corporate representative of 133, provided an Affidavit in support of 133’s Application for a stay of proceedings in this litigation. She swore she believed she and Daniel Hunter shared a common mistake regarding the

interpretation and approval of Clause 4.2 of the Agreement. In order to remedy this mistake, the Statement of Defence plead the doctrine of rectification to vary the terms of Clause 4.2 of the Agreement to bring it into harmony with the true mutual

understanding and agreement between Gnumedia and 133 in order to limit the several liability of 133 to a maximum of one half ofGnumedia’s legal costs for defending the litigation. [21] A successful rectification will have the court alter the document, in accordance with the evidence and then enforce thedocument as changed. The party pleading rectification bears a heavy onus of proof. It must be supported by evidence which is strong andindisputable.

It involves proof to a high degree of conviction with no fair and reasonable doubt left in the mind of the trier of fact as towhether the impeached agreement in evidence does not embody the final intentions of the parties. See Scotia Centre Ltd. v. EBJInvestments Ltd. (1994), (AB KB), 22 Alta. L.R. (3d) 80 at 85 (Alta.

Q.B.) per McMahon, J. [22] Rectification overturns the apparent agreement of the parties and replaces it with a different bargain reached between theparties. [23] The remedy of rectification was explained by Brooke, J.A. for the Ontario Court of Appeal [reversed by the Supreme Court ofCanada on other grounds] in H.F. Clarke Ltd. v. Thermidaire Corporation (1973), (ON CA), 33 D.L.R. (3d) 13 at 20-21.He stated: “When may the Court exercise its jurisdiction to grant rectification?

In order for a party to succeed on a plea of rectification, he mustsatisfy the Court that the parties, all of them, were in complete agreement as to the terms of their contract but wrote them downincorrectly. It is not a question of the Court being asked to speculate about the parties’ intention, but rather to make an inquiry todetermine whether the written agreement properly records the intention of the parties as revealed in their prior agreement.

The Court willnot write a contract for businessmen or others but rather through the exercise of its jurisdiction to grant rectification in appropriatecircumstances, it will reproduce their contract in harmony with the intention clearly manifested by them, and so defeat claims or defenceswhich would otherwise unfairly succeed to the end that business may be fairly and ethically done.” [24] It is accepted that rectification is ordered only upon evidence of a clear and unambiguous mutual mistake. It is not granted ifone party is negligent respecting the contents of the agreement.

A unilateral mistake will not provide a foundation for the granting ofrectification unless the mistake would result in the non-mistaken party taking advantage of the document so that the result would beequivalent to a fraud or to an unfair practice. [25] It is my opinion any rectification of the alleged mistake would result in an entirely new foundation for 133’s allegedindemnification of liability to Gnumedia. [26] Such a new foundation, if granted, does not require an

interpretation of the present wording of Clause 4.2 or animplementation respecting the present wording of Clause 4.2. A successful plea of rectification will do away with the present wording ofClause 4.2. It will alter the present wording of Clause 4.2 and replace the present wording with new wording to reflect the true mutualunderstanding and agreement between Gnumedia and 133 to limit the liability of 133. There will be no need to interpret or implement thepresent wording of Clause 4.2.

If successful, rectification will cause an alteration of Clause 4.2 and a changing of the wording to reflectthe alleged mistake. Rectification, if granted, will produce an entirely new agreement under the provisions of Clause 4.2 betweenGnumedia and 133 as to the nature and extent of 133’s liability to Gnumedia respecting 681’s successful judgment against Gnumedia.Rectification involves 133 attempting to establish different terms for Clause 4.2 of the Agreement. A successful establishment ofdifferent terms does not involve an

interpretation or implementation of the present wording of the provisions of Clause 4.2. If 133 issuccessful in its defence, the present wording will be replaced by new wording reflecting the correction of the common mistake. [27] Establishing the nature and extent of Clause 4.2 as plead by 133 in its Statement of Defence and as set out by its supportingAffidavit evidence in this Application requires 133 to prove the common mistake of Gnumedia and 133 and be granted relief by thedoctrine of rectification. It is not an

interpretation of the present wording of Clause 4.2, nor does it relate to the implementation of Clause4.2. Rectification does not fall within the ambit of the Arbitration Clause as an issue which qualifies as a dispute or controversy arisingout of the

interpretation or implementation of the present Clause 4.2. [28] 133, by virtue of its pleadings, calling for Clause 4.2 to be rectified on the allegation of a mutual mistake is a unilateralattempt to change the terms of Clause 4.2. In my view Clause 7.1, the Arbitration Clause was not intended to apply to foundationalchanges through rectification of the terms of Clause 4.2. [29] The Master did not reference in his Memorandum the 1996 decision of the British Columbia Court of Appeal, RegionalDistrict of Central Okanagan v.

Westbank Indian Band and R. in Right of Canada as Represented by Minister of Indian Affairs andNorthern Development 1996 Carswell BC 370.

In both Applications 681 cited it as an authority for its submission that when a partyattempts to renegotiate a term of a contract, the court can refuse to grant a stay of the action. 681 further submitted the decision stands forthe principle that in the event there is a clear clause in a contract setting out a sum to be paid, a matter does not proceed to arbitration.Williams, J.A. stated the following in paras 28, 29, 31, 32 and 33 of that decision. 28 The District says that both parties must have been aware of the provisions of the Municipal Act and must have contemplated that,throughout the life of the agreement, there would be changes in the cost provisions under

article 2 of the agreement so as to ensurecompliance with the Municipal Act. If, as the District maintains, that was the intent of the parties, it would have been a very simplematter to include such a provision in the agreement. Surely the District is sophisticated enough to understand that changes to contractualprovisions can only take place either by mutual agreement of the parties or if a specified enabling provision appears in the agreement. 29

Article 2.2 of the agreement makes provision for increasing the cost of services in order to account for inflation.

Article 5provides that, in the event the Band becomes eligible to receive government grants for the provision of services, the method ofcalculation of payment shall be renegotiated and

article 2.2 will no longer apply. The agreement makes no such provision for change onany other basis. It is hard to understand how a District, having made such careful provision for these events as a reason for increasing itscharges under the agreement, could not say that a right to increase should be implied to cover some municipal obligation. There is nobasis for unilaterally amending an important term in its contract with the Band. ...

31 No specific provision was contained in the agreement for it to be amended to increase the cost of services, in accordance with theargument advanced by the District. In my view

article 17 cannot be so construed. 32 What the District is requesting here is neither an

interpretation of the agreement nor the resolution of a bona fide disagreementarising under the agreement, but, rather, a right to renegotiate one of the terms of the agreement. 33 With great deference to the chambers judge, this is not, in my view, an issue which comes within the ambit of the arbitrationclause at all. [30] In this Application on this point, Counsel for 133 argued the issue of rectification of any provision in the Agreement isproperly the subject matter of the arbitration clause. He referenced the decision of the Nova Scotia Court of Appeal in Bolands Ltd.

V.Ivan Smith Holdings Ltd., 2002 NSCA 146 at paras. 17-19. In that decision, Cromwell, J.A. for the unanimous court stated as follows: 17 The arbitrator decided that, if it were necessary to do so, he could rectify the

Section by deleting the words “in the name of and”so that it would reflect the actual agreement between the parties. However, he said that he did not “...see this as an issue of rectificationbut one of

interpretation of the intent of the parties.” There is no dispute he was entitled to interpret the lease in the course of settlingdisagreements between the parties in regard to its provisions. 18 In light of the arbitrator’s conclusion that the issue was one of

interpretation rather than rectification, I have reservations as towhether it is necessary to address the rectification issue. However, as the matter was fully argued both here and before Hood, J., I wouldsay that the judge was right to conclude that the arbitrator had authority to rectify a provision of the lease as part of his mandate from theparties to settle “... any disagreement between [them] in regard to any clause or provision ... ”of the lease. A dispute about whether one ofthe Sections of the lease reflects the true agreement of the parties seems to me to be such a disagreement.

I rely on the decisions in Onexv. Ball Corp., (ON SC), [1994] O.J. No. 98 (Quicklaw) (Ont. Ct. Gen. Div.), Canadian National Railway Co. v LovatTunnel Equipment Inc., (1999), (ON CA), 174 D.L.R. (4th) 385; [1999] O.J. No 2498 (Quicklaw) (Ont. C.A.) andP.S.A.C. v NAV Canada (2002), (ON CA), 212 D.L.R. (4th) 68; [2002] O.J. No 1435 (Quicklaw) (Ont.

C.A.) InOnex, for example, it was held that the issue of rectification fell within the terms of an arbitration clause providing for arbitral resolutionof disputes “in relation to the construction” of the document in issue here: at para 25. 19 I would conclude that the judge was correct to find that the arbitrator could consider the insurance issues and apply the doctrineof rectification. [31] However, I distinguish that case due to the wording of its Arbitration Clause compared to the wording of the ArbitrationClause in the case at bar.

In Bolands, the Arbitration Clause stated: “In case of any [my underlining] disagreement between the landlord and the tenant in regard to any clause or provision hereof, the sameshall be settled by arbitration ...” [32] Cromwell, J.A. for the Nova Scotia Court of Appeal held that the arbitrator had authority to rectify a provision of the lease aspart of the mandate to settle “any disagreement between them in regard to any clause of the lease.” [33] In the case at bar, the Arbitration Clause has a narrower scope. The Bolands clause did not have the limiting language foundin this case.

The Clause in this case states: “If any dispute or controversy shall occur between the parties relating to the

interpretation or implementation of any of the provisions ofthis agreement which is not addressed elsewhere in this Agreement, such dispute shall be resolved by arbitration.” [34] In this case the dispute is limited to the

interpretation or implementation of the provisions of the Agreement which is notaddressed elsewhere in the Agreement. A plain reading of these limiting words signifies it is not as wide an agreement as in the Bolandsdecision where the words “any disagreement” are employed. In effect in Bolands, arbitration is employed to resolve any dispute (myunderlining) between the parties, but in the case at bar arbitration is limited to situations involving the

interpretation or implementation ofany of the provisions in the Agreement which is not addressed elsewhere in the Agreement. It is clear the arbitration in Bolands coversany dispute, which encompasses the total range of disputes, while the arbitration in the case at bar is restricted to disputes limited to onesarising only from the

interpretation or implementation of the provisions of the Agreement. In addition, the Bolands decision onlyinvolved a simple rectification by a deletion of the words, “in the name of and”. It did not involve a foundational reconstruction of thewording of the clause based on the doctrines of common mistake and intent. [35] Counsel for 133 further submitted authority for the proper construction and meaning to be placed on the words “relating to theinterpretation or implementation”.

Counsel noted the words “relating to” cover a “wide compass” and should be “widely construed”where they appear in an arbitration clause. See MacEwan & Herbst, Commercial Arbitration in Canada, Release No. 11 August 2014,pg. 2-35 and 2-36. The authors referenced the Ontario Court of Appeal decision of Woolcock v. Bushert (2004), (ON CA), 246 D.L.R. (4th) 139 which considered an arbitration clause which set out that “any dispute or controversy between the partieshereto relating to the

interpretation or implementation of any provisions of this Agreement shall be resolved by arbitration.” [36] Again, I note and distinguish these authorities on the basis the Arbitration Clause in the case at bar is more limiting andnarrower, as set out in my analysis in the preceding paragraphs. [37] Further, as noted earlier, 133 is alleging a common mistake between Gnumedia and 133. If a common mistake is to be found,it will not be based solely on an

interpretation or implementation of the present wording of Clause 4.2. Rather, it calls for a fact findingdecision on the allegations of the common mistake and the true mutual intent of Gnumedia and 133 based on an evidential foundation. Inessence, the Statement of Defence alleges the present underlying provisions of Clause 4.2 is in total dispute. It is not a matter of a simpleinterpretation or implementation of the present wording of Clause 4.2. [38] In the case at bar, 133, through rectification, is attempting to renegotiate a term of a contract, namely Clause 4.2.

[ 39 ] I agree with the principles set out in the Central Okanagan decision, supra. [ 40 ] Issues of common mistake, drafting errors by legal counsel and rectification are not issues which fall under the ambit of

interpretation or implementation of the Agreement. [ 41 ] Rather, if successful, those issues will alter and re-write the terms of Clause 4.2. Such alteration invites a renegotiation of Clause 4.2 by a trial judge and not an arbitrator under the Agreement. [ 42 ] I agree with the submission of 681 that the Agreement is a contract between Gnumedia and 133 for the purchase and sale of a cinema. In that regard, examples of issues suitable for arbitration under Clause 7.1 of the Agreement could include disputes relating to such things as the allocation of intellectual property rights, assets mistakenly not included in

Schedule “A” of the Agreement or disputes respecting which inventory was “obsolete and slow moving” under Clause 2.2. Such issues are ones which are not addressed elsewhere, as referenced in the wording of the Arbitration Clause and do not involve the employment of the doctrine of rectification by the Arbitrator. [ 43 ] Accordingly, I find the Arbitration Clause as set out in Clause 7.1 of the Agreement does not apply to this action because this litigation, as defined in the pleadings, is not about interpreting or implementing the present provisions of Clause 4.2 of the Agreement.

Rather, the Statement of Defence sets out issues of common mistake, true mutual intent of 133 and Gnumedia and rectification. The Agreement does not provide an arbitrator with jurisdiction to conduct arbitration under Clause 7.1. [ 44 ] 681 further argued an arbitration agreement becomes inoperative if a party to the agreement is bankrupt or insolvent and under court protection. I agree with the Master’s finding such an argument is not applicable to the case at bar because it is 681, standing in the shoes of Gnumedia, which wishes to take legal proceedings in this action.

That position is the opposite situation to the case authorities cited by 681 supporting that argument. The Master correctly found that bankruptcy trustees routinely commence litigation on behalf of bankrupt estates in certain instances. Such legal actions by a bankruptcy trustee are not stayed. [ 45 ] The Master found s. 7 of the Arbitration Act applied, but he concluded the facts as found by him did not fall within the exceptions set out in s. 7(2) of the Arbitration Act . 681 submitted before him that grounds existed for the s. 7(2) enumerated exceptions of delay, attornment and

summary judgment. I agree with the Master’s finding that the facts in this application do not fall within the exceptions under s. 7(2) of the Arbitration Act . There was no undue delay by 133 in bringing this application to stay. Neither was there any attornment by 133 to the jurisdiction of this Court when it initially brought an application to set aside the successful ex-parte application of 681 to obtain an order for a 3 month extension to serve the Amended Statement of Claim.

Further, I agree with the Master that 133 did not attorn to the jurisdiction of this court by subsequently filing a Statement of Defence in this action. 133 always reserved its right to argue the arbitration issue. [ 46 ] Finally, I agree with the Master’s finding that this case is not suitable or proper for

summary judgment. The issue of rectification alone presents a genuine issue for a trial. [ 47 ] In finding s. 7(1) of the Arbitration Act applied and there were no exceptions present under s. 7(2) of that Act , the Master stayed this action. However, for the reasons given by me that Clause 7(1) of the Agreement does not apply to this action, I do not stay this action, and 681 is entitled to proceed with its litigation.

The arbitration which was commenced by 681 issuing a Notice to Arbitrate shall not be continued. [ 48 ] Although I found the action is not to be stayed, I will go on to decide whether the Master erred in dismissing the action based on his finding the Arbitration Notice was issued beyond the limitation period. [ 49 ] In that connection, it is agreed by the parties that 681, on a without prejudice basis, issued the Arbitration Notice on March 18, 2015. [ 50 ] Section 3(1) of the Limitations Act , R.S.A. 2000. C. L-12 is applicable. It states: 3(1) Subject to subsections (1.1) and (1.2) and

section 11, if a claimant does not seek a remedial order within (a) 2 years after the date on which the claimant first knew, or in the circumstances ought to have known, (

i) that the injury for which the claimant seeks a remedial order had occurred, (ii) that the injury was attributable to the conduct of the defendant, and (iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding, or (b) 10 years after the claim arose, whichever period expires first, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim. [ 51 ] It is common ground that s. 51 of the Arbitration Act applies the provisions of the Limitations Act to arbitration proceedings. [ 52 ] The Master found that by October of 2010, 681 was aware of Clause 4.2 of the Agreement.

He observed 681 was free to move to collect on the judgment after the trial decision was issued on May 11, 2011 against Gnumedia and Hunter. He further noted the Court of Appeal on March 14, 2012, dismissed the appeal of Gnumedia and Hunter. [ 53 ] The Master found that 681 knew, or ought to have known, of the circumstances giving rise to the claim in the within action by

at least March 14, 2012, being the date of the Court of Appeal decision. He determined 681 knew immediately after March 14, 2012 that collection would be an issue and it acted accordingly. In that connection the Master pointed to 681 immediately installing one of its representatives as the sole director of Gnumedia on March 15, 2012.

He noted one day later, on March 16, 2012, that Hunter quickly entered into a personal assignment in bankruptcy. [ 54 ] He observed 681 was the driving force behind the entire process which led to Gnumedia’s bankruptcy and the eventual assignment of the within action from Gnumedia to 681. He found that bankruptcy plan of 681 could have been instituted immediately after March 14, 2012.

Further, the Master pointed to the knowledge of 681 respecting the liability of 133 under Clause 4.2 of the Agreement when 681 plead that liability in a separate Statement of Claim issued by it on November 25, 2011 against the two Hunters, Gnumedia and 133. [ 55 ] Because he found 681 was the directing creditor from the date of the Court of Appeal decision and knew, or ought to have known, of the circumstances giving rise to the claim in the within action since the date of March 14, 2012, he found the limitation period as against 133 would have expired on March 14, 2014.

He determined the issuance of the Arbitration Notice by 681 on March 18, 2015 was beyond the limitation date. Accordingly the Master dismissed this action with costs to 133. [ 56 ] I am unable to agree with the Master`s decision to dismiss this action due to the Arbitration Notice being issued beyond the limitation period. For the reasons which follow, I determine the limitation period to have ended on March 26, 2015. [ 57 ] When the Court of Appeal upheld the trial judgment, Clause 4.2 of the Agreement became effective.

It provided 133 was jointly liable with Gnumedia for the amount of the judgment and attendant costs. Prior to the Court of Appeal decision, the trial liability had not been upheld against Gnumedia. 681 had no cause of action on the date of the Court of Appeal decision against 133. [ 58 ] 681 could not seek a remedial order in accordance with the Limitations Act against 133 under Clause 4.2 on the date of the Court of Appeal decision.

At that date, it was only Gnumedia which had the right to seek a sharing of its liability from 133. [ 59 ] 681 could not have launched any cause of action against 133 at the time of the Court of Appeal decision because it had no agreement or contract with 133. [ 60 ] The Asset Purchase Agreement at no time created any rights in favour of 681 as against Gnumedia, Daniel Hunter, Nathalie Hunter and 133.

As a matter of note, 133 plead at para 13 in its Statement of Defence in Court of Queen`s Bench Action Number 1101 16171, wherein 681 sued Gnumedia, Daniel Hunter, Nathalie Hunter and 133, that the Asset Purchase Agreement at no time created any rights in favour of 681 as against Gnumedia, Daniel Hunter, Nathalie Hunter and 133. [ 61 ] Only after March 14, 2012 did 133 become potentially liable to Gnumedia due to the following events. [ 62 ] On March 15, 2012, a day after the Court of Appeal decision, Daniel Hunter was replaced as the sole director of Gnumedia by Gord Winter of 681.

The following day, March 16, 2012, Daniel Hunter made a personal assignment in bankruptcy. The bankruptcy caused all proceedings to collect the judgment against Daniel Hunter to be stayed. [ 63 ] Earlier, on September 16, 2011, 681, through a Civil Enforcement Agency, had seized all the issued and outstanding shares of Daniel Hunter in Gnumedia pursuant to s. 57 of the Civil Enforcement Act , R.S.A. 2000, c. C-15.

On September 29, 2011, Daniel Hunter filed a Notice of Objection which referenced a Stay of Enforcement of the judgment of 681 against him and Gnumedia due to the judgment being appealed to the Alberta Court of Appeal. [ 64 ] After the assignment into bankruptcy of Daniel Hunter, the share seizure by 681 was rendered ineffective by the Stay of Proceedings in the Hunter bankruptcy. The shares vested in Hunter`s trustee in bankruptcy. [ 65 ] On March 18, 2013, 681 prepared an Application for a Bankruptcy Order to place Gnumedia into bankruptcy. It was filed in this Court on March 26, 2013.

The Application referenced that 681 and the Trustee in the Hunter Bankruptcy had discussions in relation to a potential sales process for Hunter`s shares in Gnumedia. The purpose of those discussions was to determine whether 681, through the share purchase, could obtain full control of Gnumedia in order to pursue 133 pursuant to Clause 4.2 of the Agreement. No sale of the shares occurred. [ 66 ] A Bankruptcy Order was granted against Gnumedia in this Court on April 9, 2013. A Trustee, Hudson & Company, Insolvency Trustees Inc. was appointed as Trustee of the estate of the bankrupt.

The Order was granted based on the Application for a Bankruptcy Order filed on March 26, 2013. [ 67 ] On May 2, 2013, the Trustee in Bankruptcy of Gnumedia filed a Statement of Claim against 133. The Statement of Claim set, out pursuant to s. 30(1) (

d) of the Bankruptcy and Insolvency Act R.S.C. 1985, c. B-3, the Trustee claimed indemnity from 133 for the indebtedness pursuant to Clause 4.2 of the Agreement. It sought judgment against 133 for the full amount of the trial judgment, plus interest and costs owed to 681 by Gnumedia. [ 68 ] On January 7, 2014 a Registrar in Bankruptcy and Insolvency in this Court granted an Order authorizing 681 to continue the proceedings commenced in this action initiated by the Trustee in Bankruptcy of Gnumedia.

The Order allowed 681 to prosecute the proceedings in its own name and at its own expense and risk. [ 69 ] An Assignment of Action between the Trustee in Bankruptcy of Gnumedia as the Assignor and 681 as the Assignee was attached to the Order and filed in the within action.

Under the Assignment, 681 received any and all estate, right, title, interest, claim, demand and cause of action, both at law and in equity, including any supporting documentation. [ 70 ] With this Order, effective January 7, 2014, 681 finally had the authority, capacity and standing to demand payment and pursue 133 for liability under Clause 4.2. On January 7, 2014, 681 stood in the shoes of Gnumedia.

[71] The Court of Appeal decision gave 681 a judgment only against Gnumedia and Daniel Hunter. There was no liability createdagainst 133 by that judgment in favour of 681. At the time of the decision, 681 only knew under Clause 4.2 that 133 could be required byGnumedia to contribute jointly to Gnumedia’s liability under the judgment. [72] Until notice of the Court of Appeal decision and a demand was made of 133 by Gnumedia, no funds were owing toGnumedia.

Gnumedia had the right, through privity of contract under Clause 4.2 to have 133 contribute on the joint liability once noticeand demand were provided to 133. [73] A cause of action against 133 by Gnumedia would not arise until Gnumedia advised 133 of the Court of Appeal decision andmade a demand upon 133 for contribution to the joint liability. In turn the injury referred to in s. 3(1) of the Limitations Act, supra, wouldnot occur until 133 refused or omitted to contribute to the joint liability.

Only then would Gnumedia have the ability to seek a remedialorder against 133 for the injury attributable to its conduct of refusal or omission to contribute to the joint liability under Clause 4.2 of theAgreement. [74] Gnumedia was under no obligation to demand 133 contribute funds towards the joint liability. Common sense would dictatethat it would make such a demand. In turn, until Gnumedia advised 133 of the judgment and made a demand under Clause 4.2 forcontribution to the joint liability, 133 was under no obligation to contribute.

It was only Gnumedia which was the judgment creditor to681. [75] It was only on March 18, 2013 when 681 prepared its Application for Bankruptcy that 681 possibly knew Gnumedia did nothave sufficient assets to satisfy the full indebtedness of the judgment. At that date, 681 also knew 133 could be liable to Gnumedia underClause 4.2. Further, 681 knew 133 was not liable to it under Clause 4.2 at that time. [76] 681 could not pursue 133 until it had control of Gnumedia. [77] Although 681 had knowledge of 133’s potential contribution to the joint liability, it was Gnumedia which had control of theprocess.

Gnumedia had control of the process until 681 obtained the Bankruptcy Order of April 9, 2013. [78] 681 could not commence an action against 133 in accordance with s. 3(1) of the Limitations Act until an injury had beenoccasioned to 681 for which that injury was attributable to the conduct of 133 and which would warrant bringing a proceeding under s.3(1)(a)(iii) of the Limitations Act.

No such injury was occasioned to 681 by 133 before the Trustee issued the Statement of Claim as aPlaintiff in its capacity as Trustee in Bankruptcy of Gnumedia. [79] 681 knew and set out in its Application for Bankruptcy that Gnumedia had a potential claim against 133 for the indebtednesswhich arose from the Court of Appeal judgment and the joint liability of 133 created under Clause 4.2. But the belief of 681 as toGnumedia being bankrupt was not confirmed until Registrar Mason issued the Bankruptcy Order of April 9, 2013.

In that Order sheappointed a Trustee of the Estate of Gnumedia and ordered all of the assets of Gnumedia to be vested in the Trustee with authority tomanage those assets. At this time, the Trustee had the authority to notify and make a demand on 133 for contribution to the indebtednessof Gnumedia. It was that Order which allowed the Trustee to pursue 133 for the joint liability. [80] It is noted Gnumedia never commenced any legal proceedings against 133 to claim against and enforce the joint liability untilthe Trustee commenced this action on May 2, 2013.

The Statement of Claim claimed indemnity from 133 for the indebtedness underClause 4.2. On this Application, on the evidence before me, there was no evidence that Gnumedia ever advised 133 of the existence ofthe judgment and made a demand upon 133 for payment of funds to contribute to any joint liability with Gnumedia.

Further, thereappeared to be no evidence that 133 ever refused or omitted to pay under any demand for joint liability contribution before litigation wascommenced. [81] Prior to the issuance of the Bankruptcy Order, neither the Trustee nor 681 had any privity of contract with 133 and no injuryhad been occasioned to either by 133 for refusal or non-payment of the joint liability. [82] A decision somewhat analogous to the issue in the case at bar respecting the date the two year limitation period begins to runis under s. 3(1)(

a) is Sawchuk v Bourne, 2005 ABCA 382 , 2005 A.B.C.A. 382. In an application to restore a struck appeal,Ritter J.A. stated the following at paras. 3 & 15: 3. One of the issues at trial was whether the Limitations Act, R.S.A. 2000, c. L-12 (“Act”) barred Sawchuk’s claims. The trial judgeapplied s. 3(1)(

a) and held that the two year limitation period began to run when Sawchuk knew or ought to have known that Bourne didnot intend to pay back the loan. The trial judge found that date to be June 1, 2001 and, as Sawchuk’s statement of claim was filed inOctober of 2001, the Bourne’s could not rely on an expired limitation period for any of the three loans. 15. The Bournes cite Barclay Construction Corp. v Bank of Montreal (1988), (BC SC), 28 B.C.L.R. (2d) 376(B.C.S.C.) for the principle that the limitation period begins immediately upon the advancement of a demand loan.

The cases citedwithin Barclay are indeed authority for that proposition; however, those cases require only knowledge of the debt, they do not requirethat there be further knowledge that the debt will not be repaid. Recent Supreme Court cases have been clear that this further type ofknowledge is necessary: a claim is deliverable only when there is knowledge that a cause of action exists: M. (K.) v. M. (H.), (992) 3S.C.R. 6 (S.C.C.); Peixeiro v. Haberman, (SCC), [1997] 3 S.C.R. 549 (S.C.C.); see also Sparham-Souter v. Town &Country Developments (Essex) Ltd., [1976] Q.B. 858 (Eng.

C.A.) [83] In this connection 681 could only be said to have known a possible cause of action, which warranted bringing a proceeding,by Gnumedia against 133, when it became clear to 681 that Gnumedia had ceased to meet its liabilities generally and Gnumedia hadfailed to meet its obligation to is creditor, 681. [the judgment debt would not be repaid].

At such time, and as stated in the Application forBankruptcy Order, 681 had the requisite knowledge that Gnumedia had no assets, except a significant asset in the form of a possiblecause of action against 133 under Clause 4.2. [84] In my view under s. 3(1) of the Limitations Act, the limitation period for the Trustee and subsequently for 681 did not end

until 2 years after 681 obtained the requisite knowledge that its judgment debtor, Gnumedia, could not satisfy the judgment based on its asset structure and the only means possible to satisfy the judgment would lie in a cause of action against 133 under Clause 4.2. On the evidence here, due to Gnumedia’s lack of advice to 133 of the existence of the judgment, and the lack of any demand by Gnumedia to 133 to contribute under the joint liability, and no refusal or omission by 133 to contribute to the joint liability, 133 could not have committed injury to Gnumedia or the Trustee.

The evidence detailed that the earliest date 681 knew Gnumedia could not satisfy the judgment would be that of the Application for Bankruptcy Order, and Gnumedia had neither advised nor demanded 133 contribute to the liability. [ 85 ] It was the date of the Application for Bankruptcy Order that 681 knew Gnumedia had no assets and it could only have its judgment satisfied by looking to 133 for contribution to the joint liability under Clause 4.2. [ 86 ] The date of the filed Application for Bankruptcy Order was March 26, 2013.

The Statement of Claim filed against 133 for payment of the joint liability was May 2, 2013. The Statement of Claim was filed well within the 2 year limitation period which commenced on March 26, 2013, being the date of the filed Application for Bankruptcy Order. [ 87 ] The Notice to Arbitrate was filed on March 18, 2015. It, too, was filed within the limitation period. [ 88 ] In

summary, I find the within action is not to be stayed and 681 can proceed with its cause of action in this Court. The Master’s Order is set aside in its entirety. [ 89 ] Counsel may make an appointment with me to speak to costs, if necessary. Dated at the City of Calgary, Alberta this 18 th day of July, 2016. A.G. Park J.C.Q.B.A. Appearances: Sheena L. Owens for the Plaintiff/Appellant John H. Wilson, Q.C. for the Defendant/Respondent