Lawrence v Wood, 2016 ABQB 664

Court of Queen’s Bench of Alberta Citation: Lawrence v Wood, 2016 ABQB 664 Date: 20161124 Docket: 1603 13957 Registry: Edmonton Between: Dennis Lawrence, Matthew J. Lawrence, Phyllis Pylko, Instant Storage (Edmonton) Inc., Instant Storage Inc., Venture Leasing Corp., Business Care Corp., Pro Land Corp., and 572750 Alberta Ltd. Applicants - and - Laurie I. Wood, Laurie I. Wood Professional Corporation, Laurie I. Wood Professional Corporation carrying on business as Wood Law Office, Michael Harold, 1288314 Alberta Ltd., MGN Contracting Co. Ltd., Northridge Management Ltd., and MGN Constructors Inc.

Respondents _______________________________________________________ Reasons for Decision of S.L. Schulz , Master in Chambers _______________________________________________________ [ 1 ] This application to appoint an arbitrator came before me in morning chambers and was adjourned to allow counsel to provide written briefs. For the reasons that follow, I direct that this matter proceed to arbitration. Facts [ 2 ] There are numerous actions before the Court between the parties and in an effort to bring resolution to the litigation, the parties attended a settlement meeting.

Not all issues were resolved at this meeting, and representatives of the parties eventually signed a document dated May 7, 2016 entitled Memorandum of Understanding for the business terms of the Settlement and Arbitration Agreement which is to be formalized by counsel between the Wood Parties and the Lawrence Parties (“MOU”). That MOU included the following provisions: Whereas: The Terms of this MOU are provided as a stop-gap measure in order to facilitate the ability of the Parties to subsequently arbitrate all of the disputes between them.

Therefore: 1. The terms herein are subject to formalization by counsel and where so stated are subject to confirmation or other advice required. The

preamble forms a part of this agreement. ... 14. Closing is a date in the near future to be determined. 15. The parties agree to arbitrate any and all claims, allegations, disputes, disagreements etc. that they may have between each other. Any payments made or actions taken pursuant to this agreement are without prejudice to the ability of the Parties to arbitrate that payment or any other issue underlying that payment, or any other issue, in the arbitration. 16. The Parties shall not take any action adverse in interest to the other outside of the arbitration.

Emphasis Added [ 3 ] Counsel for the Applicants forwarded a form of Settlement and Arbitration Agreement to Counsel for the Respondents but the Respondents objected to some of the terms, asking for an increase in some of the payments set out in the MOU. [ 4 ] This application to direct the matter to arbitration was brought, and subsequently there have been disputes about the sufficiency of compliance with some of the terms of the MOU.

Applicable Legislation [ 5 ] The applicable sections of the Arbitration Act, RSA 2000, c A-43 ( Act ) include: 1(1) (a) “arbitration agreement” means, subject to subsections (2) and (3), an agreement or part of an agreement by which 2 or more persons agree to submit a matter in dispute to arbitration; ... 5(1) An arbitration agreement need not be in writing. ... 6 No court may intervene in matters governed by this Act , except for the following purposes as provided by this Act: (

a) to assist the arbitration process;... 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. ...

(3) If the arbitration forms part of another agreement, it shall , for the purposes of a ruling on jurisdiction, be treated as an independent agreement that may survive even if the other agreement is found to be invalid . Emphasis Added Position of the Applicants [ 6 ] The Applicants take the position that clause 15 of the MOU clearly sets out an agreement to arbitrate the disputes. All disputes about the nature of the MOU, the terms of MOU, and the performance of the terms under the MOU, must all be sent to the Arbitrator pursuant to clause 15 of the MOU.

Position of the Respondents [ 7 ] The MOU was intended to address and overcome specific impediments so that the parties could proceed to a single comprehensive arbitration. However, the MOU is an agreement to agree and therefore unenforceable. Further, the MOU is void for both uncertainty and mistaken facts fundamental to the MOU. [ 8 ] Additionally, the Respondents argue that Clause 15 of the MOU cannot be exercised pursuant to section 17(3) of the Act as suggested by the Applicants.

Clause 15 of the MOU is a without prejudice clause that ensured the agreed upon provisions did not prevent the matter from proceeding to arbitration on the whole dispute. Section 17(3) does not apply when there is no excisable arbitration clause in the MOU. Analysis

[ 9 ] It is not necessary for the Court to determine if the MOU is binding or invalid for lack of certainty or mistake of fact. Section 17(3) of the Act provides that even if the base agreement is invalid, the arbitration clause can survive as an independent agreement. It is therefore only necessary for the Court to determine if there is an independent agreement to arbitrate. [ 10 ] Clauses 15 and 16 of the MOU state that the parties agree to arbitrate all of the issues. This is supported by the full title of the MOU.

Further, the MOU reflected the oral agreement to arbitrate reached at the meeting on May 7 th , 2016. Oral agreements to arbitrate are allowed by section 5(1) of the Act . [ 11 ] Can Clause 15 be excised and treated as a separate agreement or do the words “without prejudice” in that clause mean the clause cannot be relied upon? From a clear reading of Clause 15, it is obvious that the clause means that any payments that may or may not have been made pursuant to the MOU can be considered and reconciled when the matter goes to arbitration.

It does not mean that the payments or lack of payments cannot be introduced into evidence at the arbitration. These words do not invalidate the agreement to arbitrate expressly set out in Clause 15. [ 12 ] The Respondents may be expressing a concern that the agreement to arbitrate arises from settlement discussions which were presumably without prejudice. While the discussions that occur at a without prejudice settlement meeting are considered inadmissible, the agreements reached at a settlement meeting can be introduced into evidence for proof of the agreement.

I do not find that this is a barrier to excise clauses 15 and 16 as a standalone agreement to arbitrate under section 17(3) of the Act . [ 13 ] There is sufficient evidence before the Court to support an arguable case that the parties agreed to arbitrate. Accordingly, the matter should be sent to the arbitrator who has the ability pursuant to Section 17(1) of the Act to rule on its own jurisdiction and hear objections concerning the validity or existence of the arbitration agreement.

The arguments of the Respondents that there is non- performance or incomplete performance or mistaken facts are issues to be addressed by the arbitrator (See: CWL Commercial (Edm) Inc v Dynafour Real Estate, A Partnership , 2013 ABQB 545 at para 16-18 (Master Schlosser) (“ CWL ”). [ 14 ] The Respondent must show that it is “beyond doubt” that the matter is one to which the Act or the agreement to arbitrate do not apply, or show that the matter is one of pure law, before the jurisdiction of the arbitrator is supplanted ( CWL at para 18 ).

That has not been done in this case. [ 15 ] Conclusion [ 16 ] An arguable case has been made out by the Applicant that the parties agreed to arbitrate. Accordingly, this matter is referred to an arbitrator for decision, including the issues of jurisdiction and validity of the arbitration agreement. If an arbitrator cannot be agreed upon between the parties within 7 days of the date of this decision, the parties may re-attend before the Court pursuant to

section 10 of the Act for assistance. [ 17 ] The costs of this application will be addressed at the arbitration. Dated at the City of Edmonton, Alberta this 24 th day of November, 2016. S.L. Schulz M.C.C.Q.B.A. Appearances: Ian Wachowicz Dentons Canada LLP for the Applicants Liam Kelly Witten LLP for the Respondents