Obcorp Holdings Inc v Mammoet Canada Western Ltd, 2019 ABQB 960

Court of Queen’s Bench of Alberta Citation: Obcorp Holdings Inc v Mammoet Canada Western Ltd, 2019 ABQB 960 Date: 20191216 Docket: 1903 00968 Registry: Edmonton Between: Obcorp Holdings Inc Plaintiff - and - Mammoet Canada Western Ltd and Mammoet AB Property Limited Defendants _______________________________________________________ Reasons for Decision of B.W.

Summers , Master, Court of Queen's Bench of Alberta _______________________________________________________ [ 1 ] The defendants apply for an order staying this action pursuant to s 7(1) of the Arbitration Act, RSA 2000, c A-43 on the basis that their joint venture contracts with the plaintiff have a mandatory arbitration clause. [ 2 ] The plaintiff does not dispute that there is a mandatory arbitration clause in their contracts with the defendants, but asserts that by their conduct in this action, the defendants have attorned to the jurisdiction of this court to settle the dispute between them. [ 3 ] The plaintiff issued its statement of claim against the defendants on January 14, 2019.

An amended statement of claim was issued on January 24, 2019.

The plaintiff’s claim is that it overpaid its share of property taxes with respect to lands under the joint venture contracts due to a misrepresentation by the defendants and consequently the defendants should be required to reimburse the plaintiff for the overpayment. [ 4 ] The defendants filed and served their statement of defence on March 21, 2019. [ 5 ] It is the uncontradicted affidavit evidence of the defendants that at the time that their statement of defence was filed they had not been able to locate a copy of the last of the joint venture contracts (called the “2009 Agreement”) which had a mandatory arbitration clause and consequently they were unaware of it.

The defendants’ witness states that if he had known about the arbitration clause in the 2009 Agreement on or before filing the statement of defence, the defendants would have requested that the matter proceed to arbitration. [ 6 ] The defendants requested relevant documents and records from their former legal counsel in early June 2019 and passed those records on to their current counsel on June 10, 2019. The 2009 Agreement which contained the mandatory arbitration clause was

included in those records. [ 7 ] The plaintiff served its affidavit of records on counsel for the defendants on June 21, 2019. Counsel for the defendants requested documents from counsel for the plaintiff on June 25, 2019 and they were provided to the defendants’ counsel the next day. [ 8 ] On the following day, June 27, 2019, counsel for the defendants advised counsel for the plaintiff that the joint venture contracts contained mandatory arbitration clauses.

He also advised them that the defendants wished to rely on those provisions and asked the plaintiff to consent to have the action stayed in favour of arbitration.

Counsel for the defendants further asked that if the plaintiff would not consent to a litigation stay in favour of arbitration, that the plaintiff consent to a proposed amendment allowing the defendants to amend their statement of defence in order to clarify the defendants’ position that the underlying action was contractually subject to mandatory arbitration and that the defendants did not attorn to the court’s jurisdiction. [ 9 ] The plaintiff refused to consent to the proposed litigation stay. [ 10 ] The evidence filed on behalf of the defendants concludes that: (1) other than filing and serving their statement of defence and receipt of the plaintiff’s affidavit of records, the defendants had no other participation in the action; and (2) other than filing and serving the amended statement of claim and serving its affidavit of records and providing copies of its producible records, the plaintiff did not have further participation in the action. [ 11 ] The defendants assert that the plaintiff would not be prejudiced in the event that the litigation is stayed in favour of arbitration.

The defendants are willing to utilize the existing pleadings for the purposes of defining the issues to be decided by the arbitrator and will reciprocate the plaintiff’s production of its affidavit of records by producing all of its relevant and material records in the context of the arbitration.

They state that these steps would eliminate any wasted expenditures incurred by either party. [ 12 ] Subsection 7(1) of the Arbitration Act states: 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. [ 13 ] Subsection (2) of the same

section sets out five grounds upon which the court may refuse to stay a proceeding when an application is made under subsection (1). In opposing the defendants’ application, the plaintiff is not relying upon any of the grounds stated in subsection (2), including any argument that there was delay on the part of the defendants in bringing this application. Rather, the plaintiff argues that the defendants have attorned to the jurisdiction of this court and consequently this action should not be stayed to allow for arbitration.

It is important to note that no limitation period has expired with respect to a potential arbitration.

Counsel for the plaintiff advised that she would be taking the cautionary step of commencing an arbitration proceeding in order that the plaintiff is not later faced with a limitation argument. [ 14 ] Counsel for the defendants asserts that the evidence is very clear that the defendants had no intention of waiving their contractual right to arbitration, but only failed to assert that right because they did not have a copy of the 2009 Agreement and were not aware of the mandatory arbitration provision. [ 15 ] Counsel for the plaintiff responds that she is not arguing waiver.

She makes the distinction between waiver and attornment. She states that attornment has no requirement of intention. She refers the court to the following passage in the case of Fath v Quadrant Construction Ltd, 2019 ABQB 151 which distinguishes between waiver and attornment: 46. Waiver is sometimes said to be intentional; an unequivocal act or representation with knowledge of a right. The principles of fair dealing often come down to asking what can be inferred from a party’s conduct. It is a question of fact in each case. 47. Attornment is sometimes spoken of as a species of estoppel by representation.

It is extra-contractual. Someone who attorns or submits to the jurisdiction of the court to determine a dispute cannot later take exception to the forum chosen by the suitor. In Stevenson & Côtés Civil Procedure Encyclopedia,

Chapter 2B, 11 we find: Submission (attornment) is objective or factual, and does not depend on intent; defending on the merits attorns despite simultaneous contest of the jurisdiction. A contest of the jurisdiction (wanting to have service out of the jurisdiction set aside) must be clear and unambiguous, and there must not be any other steps in proceeding until the jurisdiction question has been settled. The contest to the jurisdiction will be waived if it is left in abeyance and a defence and other interlocutory proceedings in the action are proceeded with.

It is then too late to revive the objection to the jurisdiction. Therefore one cannot defend on the merits even if one has first had to appear to contest a seizure of assets. Attornment to the jurisdiction by defending does not bar a later motion to object to this forum as unsuitable. [ 16 ] In the Fath case Master Schlosser was faced with an application by the defendant to stay (or strike) the court action because there was a mandatory arbitration clause, but the limitation period to commence arbitration had expired. In denying the defendant’s application, the Master stated: 49.

In this case the defendant did not object to the lawsuit in a timely way. It took steps in the lawsuit, including raising defences on the merits. I acknowledge that the arbitration provision was in the defence but it was only acted upon with great delay and with knowledge of the right. In my view, the defendant, by its conduct, led the plaintiff to believe that the defendant’s strict rights under the contract would not be insisted upon. It only objected when the default was certainly too late to cure. 50.

If I am incorrect about the court’s ability to consider s. 7(2) of the Act at this late stage, I find that the applicant has submitted to the jurisdiction of this court for the resolution of this dispute, or has otherwise waived its right to rely on the arbitration clause. The applicant proceeded with the lawsuit, and slept upon its rights after it had identified this right in its defence. A party with this type of defence should move promptly. It is not something to be left to the end of the day. And all the more so if the right could have been given effect with little prejudice to either side.

51. The law in this area is in a very unsettled state. One of the many issues with not being able to consider the s. 7(2) exceptions, post- limitation is that it resurrects a type of problem that had plagued limitations law; the problem of the late-suing plaintiff. ... 53. If I am wrong about all of this, it is my view that the uncertainty about the limitation period, the unsettled state of the law and the parties’ approach to this lawsuit all weigh in favour of the default position being that the lawsuit should proceed. [ 17 ] We are not faced with a limitation period in this case.

Granting a stay of this action will not prevent a determination of the issues between the parties. [ 18 ] Counsel for the defendants referred to the decision of Madam Justice Dario in Lafarge Canada Inc v Edmonton (City), 2015, ABQB 56 .

In that case Justice Dario ruled that the defendant City of Edmonton had not attorned to the jurisdiction of the Court of Queen’s Bench even though it had filed a statement of defence in the action, as the defendant stated in its statement of defence that mandatory arbitration was a reason that the plaintiff’s claim would be defeated and also communicated to the plaintiff in an email when it conveyed the statement of defence its view that arbitration was mandatory.

Consequently, the court found that the plaintiff did not rely on the City’s statement of defence and did not attorn to the jurisdiction of the court or waive its right to arbitration. [ 19 ] In Lafarge the plaintiff cited several cases in which the court found attornment in circumstances where a statement of defence had been filed. Justice Dario found those cases distinguishable. She also found that conflicts of law cases dealing with the issue of attornment were of limited application in arbitration cases as they apply different principles and underlying policies. She went on to state [1] : 82.

Even if the conflicts of law cases on attornment applied or offered relevant guidance, I note there is a spectrum of views, ranging from more strict

interpretations, in which attornment is found based on filing a statement of defence and engaging in the merits of the claim…, to more broad

interpretations, in which the circumstances and evidence of the participation in the litigation process are considered…. 83. In Bansal v Ferrara Pan Candy Co. , 2014 ABQB 384 (Alta QB) [ Bansal ], a conflicts of laws case, Justice Veit noted the ambiguity in Alberta over what attornment and defending on the merits means. She considered that “in its recent Van Damme decision the Ontario Court of Appeal held that even filing a statement of defence might not constitute attornment”: at para 19 citing Van Damme v Gelber , 2013 ONCA 388 (Ont. C. A.), leave to appeal refused, [2013] SCCA No. 342 (SCC). 84.

Justice Veit ultimately held: 20 The only conclusion to draw from the case law is that the circumstances of each particular case must be examined to assess whether a specific person has submitted to the jurisdiction of the court concerning the merits of the case. [ 20 ] The circumstances in this case are particularly unique: the defendants filing a statement of defence in ignorance that their dispute with the plaintiff is subject to a mandatory arbitration clause.

In this very unique circumstance I find that the defendants did not attorn to the jurisdiction of this court, nor did they waive their right to arbitration. Master Schlosser noted in Fath that “attornment is sometimes spoken of as a species of estoppel by representation.” The underlying rationale for having the legal principle of attornment is “fairness”. Once a defendant has committed to defending in a jurisdiction, it is not fair that the defendant may change its mind and seek another jurisdiction to hear the case. [ 21 ] In this case, there is nothing unfair about staying this action in favour of arbitration.

Mandatory arbitration is what the parties agreed upon under their joint venture contracts. Nor will there be anything lost. The parties may use their pleadings and the plaintiff’s affidavit of records in the arbitration. [ 22 ] The defendants’ application for an order staying this action is granted. [ 23 ] In this very unique case I award costs of this application to the plaintiff on the appropriate column. Although the plaintiff was not the successful party, the plaintiff was not the author of the circumstances that brought about this application to the court.

The defendants were the ones responsible for this court application being necessary. Heard on the 25 th day of November, 2019. Dated at the City of Edmonton, Alberta this 16 th day of December, 2019. B.W. Summers M.C.Q.B.A.

Appearances: Debra Lister Miller Thomson LLP for the Plaintiff Bryan Walker Norton Rose Fulbright Canada LLP for the Defendants