New Beginnings Contracting Ltd v Wedgewoods Condominium Corp, 2017 ABQB 501

Court of Queen’s Bench of Alberta Citation: New Beginnings Contracting Ltd v Wedgewoods Condominium Corp, 2017 ABQB 501 Date: 20170816 Docket: 1501 01203 Registry: Calgary Between: New Beginnings Contracting Ltd. Plaintiff - and - Wedgewoods Condominiums Corp., Condominium Corporation No. 0311443 and Dave Swan Defendants - and - New Beginnings Contracting Ltd., 2210958 Ontario Inc. and Dave Swan Defendants by Counterclaim - and - M.V. Pedersen Engineering Inc. Third Party Defendant

_______________________________________________________ Memorandum of Decision of A. R. Robertson , Q.C., Master in Chambers _______________________________________________________ Introduction [ 1 ] On this application the plaintiff asks for (

a) a stay of its own builder’s lien proceedings, and (

b) an order directing that the plaintiff and one of the defendants, a condominium corporation that was its customer, proceed to arbitration. [ 2 ] The condominium corporation opposes the application. The condominium corporation says that too much water has flowed under the bridge – the parties are well underway in the court proceedings. Furthermore, there are parties to the dispute who did not agree to arbitration – the property manager, his corporation, and an engineering company.

These other respondents support the condominium corporation’s opposition to the stay of this action. [ 3 ] The commencement of a proceeding to enforce a builder’s lien claim, as I have previously noted, is not, by itself, a bar to arbitration. The Builders’ Lien Act , RSA 2000 c. B-7, provides in

section 5 that the parties to a construction contract cannot contract out of their builders’ lien remedies. There has long been a peaceful coexistence of builders’ lien claims and arbitration: Renkinn Developments Inc v Stevens , 2016 ABQB 549 , 2016 CarswellAlta 1939, at para. 25 . Accordingly, a claimant may commence proceedings to preserve and enforce its remedies but have the dispute otherwise resolved by arbitration if it is available. [ 4 ] I have concluded here that the court proceedings are to continue. I decline to grant a stay or direct that the matter proceed by arbitration.

There has been undue delay in seeking arbitration, the arbitration process may be statute-barred even if it is available otherwise, and given the complexity of the issues and parties the dispute is not capable of being the subject matter of arbitration. It is not reasonable to separate the matters in dispute between the parties to the agreements and the other matters. The Facts [ 5 ] In this case the plaintiff was originally without legal counsel. I understand New Beginnings Contracting Ltd. to be essentially a one-man company.

The agreements that led to the claim were recorded using a blank form, with the business information filled in with pen and ink. The contracting parties were stated to be New Beginnings and “Wedgewood Condominiums Corp.” [ 6 ] The plaintiff sued “Wedgewoods Condominiums Corp.”, Dave Swan, and the condominium corporation by its registered number. Although once counsel became involved for the plaintiff the proceedings by statement of claim against Mr.

Swan were discontinued, the proceeding seems not to have been discontinued as against “Wedgewoods Condominiums Corp.” The claim against “Wedgewoods” would appear to be an error by the plaintiff in the statement of claim, referring to the condominium corporation by the business name that it uses, and which appeared in pen on the contracts. The statement of defence filed by the condominium corporation specifically pleads that there is no such corporation. The plaintiff has dropped that defendant from the style of cause in court documents filed recently, but has not discontinued as against it.

I assume for now that there is no separate party called “Wedgewoods Condominiums Corp.” [ 7 ] The form of agreement contained an arbitration reference as follows: The Contractor and Sub-Contractor agree to resolve disputes, if any, in a gentlemanly manner.

If the dispute cannot be resolved, then the matters in dispute are to be referred to the arbitration of a single arbitrator, to be chosen by both parties hereto and any arbitration proceedings are to be governed by the provisions of the Arbitration Act in and for the province of Alberta. [ 8 ] The agreements were entered into in August, September and October 2014. (There is a dispute about the authority of the property manager, Mr. Swan, to enter into them as the agent of the condominium corporation.

That issue that is not part of this application.) [ 9 ] A dispute arose in the fall of 2014 and meetings were held in November, 2014 in an attempt to work towards resolution. The plaintiff had not been paid. [ 10 ] The dispute was over the construction of an exterior chimney box at the condominium building. It is said that combustible materials were installed in an area where they should not have been, a stop work order was imposed, and the work had to be redone. That has led to the engineering company becoming involved as well as the original contracting parties.

Among other things, the condominium corporation alleges that the engineering company was negligent in its direction and supervision of New Beginnings. Chronology [ 11 ] In light of the arguments in opposition, the chronology of the steps taken to enforce the claim is important. [ 12 ] On November 27, 2014, the plaintiff registered a statement of lien on the condominium additional plan sheet at the Land

Titles Office. The claim was for $65,269. [ 13 ] On January 14, 2015 counsel for the condominium corporation sent a notice to lienholder to take action on builder’s lien, pursuant to section 45(1) of the Builders’ Lien Act . This provision accelerates the deadline for commencing proceedings. [ 14 ] Proceedings were commenced, and a certificate of lis pendens was obtained on February 4, 2016, and (I assume) registered with the Registrar of Land Titles. The statement of claim named not only the condominium corporation but also “Wedgewoods Condominiums Corp.” and Dave Swan.

As discussed above, I have tentatively concluded that the reference to “Wedgewoods” was in error. Mr. Swan was the on-site property manager for the condominium corporation, working through 2210958 Ontario Inc. Neither he nor his company were party to the agreements that contained the arbitration reference. [ 15 ] The statement of claim was handwritten. The plaintiff had not yet retained counsel. [ 16 ] On February 24, 2015 the condominium corporation filed its statement of defence as well as a counterclaim.

This meant that New Beginnings Contracting Ltd. (the plaintiff) was a defendant by counterclaim, but it also added both 2210958 Ontario Inc. and Dave Swan as defendants by counterclaim. The counterclaim asserted mischief by Mr. Swan and 2210958 Ontario Inc. in the retention and supervision of New Beginnings and then wiping computer records when their relationship with the condominium corporation ended in October, 2014. [ 17 ] Mr. Swan was noted in default on March 17, 2015. [ 18 ] On March 19, 2015 New Beginnings Contracting Ltd. filed a statement of defence to the counterclaim.

It was professionally prepared, using a computer and printer, not in handwriting. However, New Beginnings did not yet have counsel of record. [ 19 ] On March 31, 2015 New Beginnings filed a notice of claim against co-defendants under the Alberta Rules of Court against Dave Swan and 2210958 Ontario Inc. [ 20 ] On April 24, 2015, 2210958 Ontario Inc. and Dave Swan filed a statement of defence to counterclaim and a notice of claim against co-defendant by counterclaim New Beginnings. [ 21 ] On April 30, 2015, the condominium corporation filed a third party claim against M.V.

Pedersen Engineering Inc. [ 22 ] In October 2015 an application was brought in connection with the sale of a condominium unit to pay a very small amount of money into Court to allow a real estate transaction to close, and an order was granted to that effect on November 2, 2015. [ 23 ] On November 13, 2015, M.V.

Pedersen Engineering Inc. filed a statement of defence to third party claim. [ 24 ] On March 11, 2016 a notice of change of representation was filed by counsel for New Beginnings. [ 25 ] On September 6, 2016, the noting in default of Dave Swan was set aside by consent order and then on September 7 New Beginnings discontinued its claim against Mr. Swan. (However, he still remains a party.

He is named as a defendant by counterclaim along with his company 2210958 Ontario Inc. and he is also named by the notice of claim against co-defendant filed by New Beginnings.) [ 26 ] In November 2016 another application was brought to pay a very small amount of money into Court to allow a real estate transaction to close. That does not seem to have resulted in an order. [ 27 ] Up to this point, there had been no discussion recorded in writing about arbitration and neither New Beginnings nor the condominium corporation had raised the possibility in their pleadings.

The first time the possibility of resolving the dispute by way of arbitration was raised, other than in an informal way mentioned below, was in a letter of March 23, 2016 from New Beginnings’ counsel, recently on the record, stating that the law firm had received instructions from New Beginnings to make an application to stay the action and have the matter directed arbitration.

The suggested time frame for the application was April 11 – 15, 2016. [ 28 ] On April 1, 2016, or about a week later, counsel for the condominium corporation responded saying that her client did not agree to stay the action and proceed to arbitration. She pointed out that (

a) New Beginnings had commenced the court proceedings, (

b) it made no objection about proceeding with the litigation in its pleadings or otherwise, and (

c) there were additional parties involved in the litigation. She expressed doubt that the other parties could be forced to participate in arbitration. [ 29 ] That is where things stood for over a year. [ 30 ] This application was not brought an application was filed May 3, 2017, returnable May 18, 2017. It was heard on that date in morning chambers. Analysis [ 31 ]

Section 7 of the Arbitration Act , RSA 2000 c. A- 43, provides as follows: 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 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. [ 32 ] The defendants argue that the application has been brought after undue delay and it should be dismissed for that reason. [ 33 ] New Beginning’s principal, Rodney Magarrell, asserts that in November 25, 2015 he informed the condominium corporation of the need to have an arbitrator brought in to resolve the dispute, but he received no response.

Of course, at that time, the lawsuit had been in place for over eight months. [ 34 ] However, even after counsel became involved for the plaintiff and brought up the desire to proceed to arbitration by letter in March 2016, and after counsel’s proposal was rejected by counsel for the condominium corporation, this application was not brought until May 2017.

Even if the application has not been brought with “undue delay”, the defendants say that the plaintiff has waived, by its conduct, any right to proceed to arbitration. [ 35 ] Furthermore, the dispute as it has now been pled involves parties other than the two parties to the original contract that included the referenced arbitration. In particular, M.V. Pedersen Engineering Inc. did not consent to arbitration. Neither did 2210958 Ontario Inc. Neither did Mr. Swan. [ 36 ] One of the reasons given for opposing the reference to arbitration here is that the time for commencing arbitration proceedings has run.

The Limitations Act , RSA 2000

chapter L-4 , provides for two years to seek a remedial order, which could either be by a statement of claim or commencement of arbitration proceedings, and no arbitration proceedings have yet been brought, although the cause of action clearly arose more than two years ago. The limitation would have run in the fall of 2016. [ 37 ] Referring to A.G.

Clark Holdings Ltd v HOOPP Realty Inc , 2014 ABCA 20 , 2014 CarswellAlta 37, and Lafarge Canada Inc. v Edmonton (City) , 2015 ABQB 56 , 2015 CarswellAlta 83, the respondents argue that if an arbitration were mandatory here, then the claim should be struck out because proceedings should have been commenced by arbitration, not statement of claim.

At paragraph 7 in HOOPP , the Court said this: The Chambers Judge correctly interpreted this Court’s decision in Babcock & Wilcox , which holds that if the parties have agreed that they must arbitrator dispute, but one party has issued a statement of claim and has not commenced arbitration within the limitation period for arbitration, and the court must strike out the claim. [ 38 ] However, as noted above the Builders’ Lien Act does not allow the parties to give up their rights under the Act . It is at least doubtful that HOOPP would apply to a builder’s lien claim.

Furthermore, the respondent condominium corporation has waived any claim that it might have to insist upon arbitration by pleading to the claim and advancing claims over against other parties. [ 39 ] Of course, those parties to the action who were not parties to the arbitration reference were never in a position to insist that the case be referred to an arbitrator. [ 40 ] The case referenced in HOOPP in the passage quoted above was Agrium Inc v Babcock & Wilcox Canada Ltd , 2005 ABCA 82 , which addressed the mandatory language in

section 7 of the Arbitration Act . The Court said, at paragraph 7 of Agrium : The Court must stay litigation of the dispute covered by the arbitration agreement when the parties have agreed their disputes shall be resolved by arbitration; they need not have explicitly agreed that arbitration is a condition precedent to litigation. [ 41 ] However, at paragraph 14, the Court considered

section 7 of the Arbitration Act and said, “if the matter in dispute is beyond the scope of the arbitration agreement, the lawsuit can usually proceed. Obviously, the scope of the agreement depends on the wording of the arbitration clause.” [ 42 ] Here, the wording in the arbitration reference was to “disputes, if any” and then said that “the matters in dispute are to be referred to the arbitration of a single arbitrator”. These are broad words, but the nature of the dispute that has been raised here involves other parties. The engineers, in particular, have been brought in by the condominium corporation

[ 43 ] The respondents argue that it was not merely the commencement of proceedings under the Builders’ Lien Act that led the parties irreversibly down the road of litigation in the Court of Queen’s Bench, it was starting the litigation and then continuing it so as to require the other parties to take significant steps. New Beginnings did not just file the claim and CLP; it also defended the counterclaim and added other parties by making a claim over. [ 44 ] Although there has been no questioning or affidavits of records exchanged yet, the pleadings here are somewhat complex and extensive.

Of significance is that no reference was made to arbitration in the original statement of claim and neither was a reference made to it in the statement of defence to counterclaim filed by New Beginnings. [ 45 ] No complaint by New Beginnings was raised about other parties becoming involved in April 2015, nor was a complaint raised about reference to the Court when applications were brought to close real estate transactions that required clearing the title (although that is a minor matter). [ 46 ] The first time the concern about arbitration was raised (aside from some informal and apparently unwritten communication) was in March 2016, but even then no application was brought for over another year.

Conclusion [ 47 ] In the result, in my view the application to move the proceedings to arbitration has been brought too late. There has been undue delay. [ 48 ] In addition, the subject-matter of the dispute is not capable of being the subject of arbitration because of the other parties involved. In my view, paragraph 7(2) (

c) of the Arbitration Act is in play, but in any event, subsection 7(5) is applicable: Lamb v AlanRidge Homes Ltd , 2009 ABQB 170 , 2009 CarswellAlta 396 , aff’d 2009 ABCA 343 , which followed New Era Nutrition Inc v Balance Bar Co , 2004 ABCA 280 , 357 A.R. 184 . In New Era , Conrad J.A. found that the Arbitration Act was intended to “discourage duplicative proceedings where there are overlapping matters that cannot be reasonably divided” (para. 6). Here, the claim by New Beginnings and the third

part claim against the engineering company are inter-related. [ 49 ] Furthermore, s ending the original claim to arbitration would at least bifurcate the dispute and possibly lead to many complexities in its resolution. It would likely not lead to less expensive proceedings. I expect they would be far more expensive and they would not, on a functional analysis, be readily capable of resolution that way. [ 50 ] The consequence of referring the claim to arbitration would be that the condominium corporation’s claim over against the engineering firm and New Beginnings’ claim over against Mr.

Swan and his company would be in a separate claim from the this claim, which was commenced by New Beginnings. The order sought would have to be only a partial stay of this action - and the part stayed would be the original claim - leaving the other claims in a remnant proceeding. In my view, that would not be reasonable, which is the test in section 7(5) (

b) of the Arbitration Act . [ 51 ] Finally, in my view the time for commencing arbitration proceedings has passed. Accordingly, if I were to direct that the proceedings proceed by way of arbitration because that is what the agreement required, the consequence of the decision in HOOPP could be that the court proceedings involving New Beginnings should be struck, if

section 5 of the Builder’s Lien Act did not save them as I have indicated above. That would leave New Beginnings without any remedy at all. That is another reason why it is not reasonable to separate the dispute. [ 52 ] Accordingly, the application to stay the proceedings is dismissed and the parties are directed to proceed through litigation in accordance with the Alberta Rules of Court subject to the provisions of the Builders’ Lien Act . [ 53 ] If the parties are not able to agree on costs, they may contact the Masters’ Chambers clerk to arrange to speak to the issue. Heard on the 18 th day of May, 2017.

Dated at the City of Calgary, Alberta this 16 th day of August, 2017. A. R. Robertson, Q.C. M.C.C.Q.B.A. Appearances:

Allie Laurent Kahane Law Office for the Applicant (Plaintiff and Defendant by Counterclaim) Fiona G. McLean McLean Legal for the Respondent (Defendant) Condominium Corporation No. 0311443 Gillian Holowisky Scott Venturo Rudakoff LLP for the Respondent (Defendant and Defendant by Counterclaim) 2210958 Ontario Inc. and Dave Swan Marlena Bova Borden Ladner Gervais LLP for the Respondent (Third Party Defendant) M.V. Pedersen Engineering Inc.