Agrium Inc v Colt Engineering Corporation, 2020 ABQB 807

Court of Queen’s Bench of Alberta Citation: Agrium Inc v Colt Engineering Corporation, 2020 ABQB 807 Date: 20201222 Docket: 1601 03869 Registry: Calgary Between: Agrium, Inc. Plaintiff - and - Colt Engineering Corporation, Worleyparsons Canada Services Ltd., ACM Automation Inc., Orbis Engineering Field Services Ltd., Elliott Turbomachinery Canada, Inc., Elliott Company, Invensys Systems Canada, Inc.

Schneider Electric Systems Canada Inc., Rockwell Automation, Inc. and Allen-Bradley Defendants Corrected judgment: A corrigendum was issued on June 9, 2021; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Decision of the Honourable Madam Justice N. Dilts _______________________________________________________

Appeal from the Reasons for Decision by J.T. Prowse, Master in Chambers Dated the 20th day of January, 2020 ( 2020 ABQB 53 , Docket: 1601 03869) Introduction [ 1 ] The defendants Elliott Turbomachinery Canada Inc. and Elliot Company (together “Elliott”) and Orbis Engineering Field Services Ltd. (“Orbis”) appeal the decision of the Master in Chambers dismissing their application to strike the claim against them. Elliott and Orbis argue that a mandatory arbitration provision in their agreement with Agrium, Inc. (“Agrium”) precludes Agrium’s action against them.

As a preliminary issue, Agrium argues that the defendants have no right of appeal from the Master ’s decision under the Arbitration Act , RSA 2000, c. A-43 . [ 2 ] This appeal engages the following issues: First, whether s. 7(6) of the Arbitration Act precludes this appeal of the Master ’s decision. Second, if there is a right of appeal from the Master ’s decision, whether the action should be struck under s. 7(1) of the Arbitration Act , or whether Elliott and Orbis waived reliance on the mandatory arbitration provisions in their agreements with Agrium and attorned to the court.

This second issue raises the question of whether, on an application by the defendants under s. 7(1) of the Arbitration Act , the court retains jurisdiction to consider the issue of waiver and attornment notwithstanding the expiry of the limitation period to commence arbitration. Background [ 3 ] The facts are not in dispute. In 2013, Agrium separately engaged Elliott and Orbis to provide work or services relating to the upgrade of one of its production facilities (the “project”). The purchase orders governing the work or services included a mandatory arbitration provision: 28.

PROPER LAW and DISPUTE RESOLUTION: (a) [...] Any dispute relating to this Order shall be resolved by Arbitration in Calgary, Alberta, Canada pursuant to the UNCITRAL Model Law and Rules. The courts having exclusive supervisory jurisdiction with respect to the matters relating to this Order shall be the courts of the Province of Alberta. [ 4 ] The purchase orders were drafted by Agrium. [ 5 ] A failure occurred at the production facility on March 22, 2014.

Nearly two years later and on the eve of the limitation period, Agrium filed a Statement of Claim suing Elliott and Orbis and seven other defendants for its loss. None of the agreements with the seven other defendants contained a mandatory arbitration provision. [ 6 ] Agrium did not serve the Statement of Claim on Elliott or Orbis until March 14, 2017, nearly one year after commencing the Action. Service of the Statement of Claim on Elliott was undertaken pursuant to an Order for service ex juris .

There is no evidence that prior to service Elliott or Orbis were aware that the Action had been brought against them. The parties agree that service of the Statement of Claim occurred after the expiry of the limitation period for commencing arbitration. [ 7 ] The following is a list of the actions Orbis took following service of the Statement of Claim: On March 14, 2017, counsel for Orbis requested, and counsel for Agrium agreed, that no further steps would be taken in the litigation without notice.

In May 2017 counsel for Orbis and Agrium again exchanged communication confirming that a Statement of Defence was not yet required. On May 25, 2018, Agrium requested Statements of Defence from all parties within 60 days. On June 27, 2018, Orbis filed its Statement of Defence. The Statement of Defence did not plead the mandatory arbitration provision in the purchase order. Orbis denied any responsibility for Agrium’s losses and alleged that any losses were caused by Agrium or its other contractors or suppliers. Orbis filed Notices of Claim against its Co-Defendants claiming contribution and indemnity.

Orbis also demanded Agrium’s Affidavit of Records in accordance with the Rules of Court. On June 29, 2018, Orbis filed an Amended Statement of Defence. That Amended Statement of Defence pleads the mandatory arbitration provision in the purchase order. Orbis asserts that the court lacks jurisdiction and seeks a stay of the Action against it pursuant to the Arbitration Act . On March 4, 2019, Orbis filed an application to stay or strike the Action under s. 7(1) of the Arbitration Act .

[ 8 ] In addition to these steps, counsel for Orbis engaged in communications regarding Agrium’s obligation to produce its records. In February 2019, Agrium’s counsel advised it was reviewing many thousands of records and expected to have its Affidavit of Records complete within a month or so. At the initiation and request of counsel for one of the other defendants, all counsel were asked to advise what document management program they would be using to manage their client’s records.

Counsel for Orbis responded. [ 9 ] The following is a list of the actions Elliott took following service of the Statement of Claim: On March 27, 2017, Elliott’s counsel requested copies of the affidavits filed in support of the Order for service ex juris and requested that Agrium take no further steps in the litigation without notice. On May 25, 2018, Agrium requested Statements of Defence from all parties within 60 days. On July 10, 2018 Elliott filed its Statement of Defence. The Statement of Defence did not plead the mandatory arbitration provision in the purchase order.

Elliott denied any liability to Agrium for its loss. On July 23, 2018, Elliott filed Notices of Claim against its Co-Defendants claiming contribution and indemnity. On June 24, 2019, Elliott filed an application to amend its Statement of Defence to plead the mandatory arbitration provision and requested that the Action be stayed or struck under Rule 3.68 of the Rules of Court and s. 7(1) of the Arbitration Act . On January 20, 2020, Elliott filed its Amended Statement of Defence. The Amended Statement of Defence pleads the mandatory arbitration provision in the purchase order.

Elliott asserts that the court lacks jurisdiction and seeks a stay of the Action against it pursuant to the Arbitration Act . [ 10 ] Agrium produced its unsworn Affidavit of Records on May 10, 2019. The records produced relate to its claims against all defendants. [ 11 ] The parties agree that the matters in dispute in the Action fall within the scope of the mandatory arbitration provision in their respective purchase orders. The Decision of the Master [ 12 ] The application of Elliott and Orbis to stay or strike the Action was heard before the Master on January 15, 2020.

The Master concluded that he had the discretion to consider whether the defendants had waived reliance on the mandatory arbitration provision and attorned to the court notwithstanding the limitation period for commencing arbitration had expired. [ 13 ] He concluded that the test to be applied was whether it would be unfair to a plaintiff to allow a defendant to “go back on their choice to participate in this litigation.” He identified the relevant factors in that fairness analysis to include the promptness with which the defendant moved to stay or strike the action, the degree to which the defendant participated in the action prior to moving to stay or strike the action, and any adverse consequences suffered by the plaintiff whether the result of the defendant’s delay or the result of the defendant’s participation in the action. [ 14 ] He concluded that undue delay was a permissible factor to be considered in deciding whether to stay or strike an action based on waiver or attornment: To hold otherwise, taken to the extreme, would allow a defendant to proceed all the way to trial without seeking to have an action stayed or struck based on a mandatory arbitration provision, and then to allow that defendant to have the action struck at that late stage pursuant to the mandatory arbitration provision.

Agrium, Inc. v Colt Engineering Corporation , 2020 ABQB 53 at para 28 [ 15 ] The Master concluded that given the two or more year delay by both Elliott and Orbis in applying to stay or strike the Action, and given their participation in the Action particularly by advancing claims against other defendants, it would be unfair to Agrium to allow Elliott and Orbis to go back on their choice to participate in the Action. On that basis, he dismissed Elliott and Orbis’ application. [ 16 ] Elliott and Orbis appeal from that decision.

Application by Agrium to Strike the Appeal Position of the Parties [ 17 ] Agrium argues that s. 7(6) of the Arbitration Act precludes an appeal of the Master ’s decision.

Section 7(6) reads: 7(6) There is no appeal from the court’s decision under this section. [ 18 ] Agrium says that as long as the Master had the jurisdiction to hear and decide the application, his decision is a decision of the “court” made under s. 7(1) of the Arbitration Act and is not subject to appeal by operation of s. 7(6) . [ 19 ] Agrium says this outcome aligns with parliament’s intention that there be limited court interference in arbitration matters.

Despite Alberta jurisprudence like Lamb v AlanRidge Homes Ltd ., 2009 ABCA 343 that originated as a decision of the Master and that progressed through appeal to a Justice in Chambers and then to the Court of Appeal , Agrium argues that s. 7(6) bars all appeals of

decisions made under s. 7 of the Arbitration Act , including an appeal from a Master to a Justice. It argues the

section cannot be read narrowly to only preclude an appeal of a decision made under s. 7 of the Arbitration Act to the Court of Appeal . [ 20 ] Elliott and Orbis say a right of appeal from the Master ’s decision lies in this case for two reasons. First, they argue that the restriction in s. 7(6) has no application in this case. They argue that the decision of the Master was not a decision made under s. 7 of the Arbitration Act as the Master went outside the Arbitration Act to find his authority to deny a stay.

Second, they argue that in any event, under constitutional law principles, the Arbitration Act cannot remove from a Justice of the Court of Queen’s Bench the authority to review a Master ’s decision. To do so would empower the Master to make a final decision with no right of appeal which they say would be contrary to the Constitution Act , 1867 . Decision [ 21 ] I am satisfied Elliott and Orbis are entitled to appeal the decision of the Master to a Justice of the Court of Queen’s Bench.

They are entitled to do so as a right if the Master ’s decision was not made under the Arbitration Act , and I am satisfied that they are entitled to do so notwithstanding s. 7(6) of the Arbitration Act . I say this looking at both the legislative framework governing appeals from a Master and the jurisprudence in Alberta relating to the

interpretation of s. 7(6) of the Arbitration Act . [ 22 ] Addressing first the legislative framework governing appeals from a Master , I am satisfied that s. 7(6) of the Arbitration Act , when given its ordinary meaning and in light of the defined terms in that Act , does not preclude an appeal of a Master ’s decision to a Justice in Chambers. Under s. 1(1)(

c) of the Arbitration Act , the “court” in respect of matters arising out of s. 7 of that Act is defined as the Court of Queen’s Bench and the Provincial Court. The

Interpretation Act , RSA 2000, c. I-8 , which applies to all legislation in Alberta, defines the Court of Queen’s Bench as the Court of Queen’s Bench of Alberta: s. 28(k). Under the Court of Queen’s Bench Act , the Court comprises the Justices of the court and the Masters who hold their authority under that Act . By ordinary construction, the “court” in the Arbitration Act comprises the Masters and Justices of the Court of Queen’s Bench of Alberta. [ 23 ]

Section 12 of the Court of Queen’s Bench Act creates layers of decision making authority within the Court of Queen’s Bench by providing that an appeal of a decision of a Master in Chambers lies to a Justice of this court. That legislated right of appeal is recorded in Rule 6.14 of the Rules of Court made under the Judicature Act , RSA 2000, c. J-2 . The legislature did not intend that a decision of a Master was “unappealable” and I do not accept that the language of s. 7(6) makes it so.

Given s. 12 of the Court of Queen’s Bench Act and Rule 6.14, the legislature has provided for the appeal of decisions of the Master to a Justice of this court. Absent express language, I am satisfied that s. 7(6) should not be read in a manner that would be inconsistent with that legislated right. [ 24 ] That same conclusion is borne out in Alberta jurisprudence. There is no authority in Alberta supporting Agrium’s argument that a Master ’s decision under s. 7 of the Arbitration Act is unappealable.

In my view, there is sufficient indication in the existing case law that s. 7(6) is not intended to circumscribe s. 12 of the Court of Queen’s Bench Act . [ 25 ] The underlying purpose of s. 7(6) is to ensure that the court’s intervention in arbitration matters is limited to ensuring the parties arbitrate as they agreed. The Lamb decision of the Court of Appeal and on which Agrium relies originated as a decision of the Master , was appealed to a Justice in Chambers, and then was appealed onward to the Court of Appeal .

The Court of Appeal confirmed that s. 7(6) precludes the appeal of a decision made under s. 7 of the Arbitration Act to the Court of Appeal ; it made no observation that the decision of the Master dismissing the initial application to stay legal proceedings under the Arbitration Act was not properly the subject of an appeal to the Justice in Chambers. [ 26 ] In 2013 and 2014, the Court of Appeal framed the issue arising under s. 7(6) as concerning the scope or nature of the questions that can be appealed to the Court of Appeal : A.G. Clark Holdings Ltd. v HOOPP Realty Inc ., 2013 ABCA 101 ( A.G.

Clark ) at para 8 ; and HOOPP Realty Inc. v A.G. Clark Holdings Ltd. , 2014 ABCA 20 ( HOOPP ) at para 6 . While the Court of Appeal did not address whether a decision of the Master can be appealed to a Justice in Chambers, its comments support the conclusion that the question engaged in s. 7(6) (for our purposes) is the scope of the right of appeal beyond the Court of Queen’s Bench to the Court of Appeal .

I make no comment on whether there is a right of appeal under s. 7(6) of a decision of a Provincial Court judge to a Justice of the Court of Queen’s Bench, the scenario considered by Sullivan, J in Tatlow v Carolina Homes Inc . , 2010 ABQB 412 . [ 27 ] Agrium directed my attention to the Eggiman v Martin , 2019 ONCA 974 decision of the Ontario Court of Appeal. Like the Alberta Court of Appeal in Lamb , the Ontario Court of Appeal in Eggiman addressed whether it had jurisdiction to hear an appeal from a motions judge’s order made under s. 7 of the Arbitration Act .

Like the Alberta Court of Appeal, the Ontario Court of Appeal concluded that it did not. This decision does not stand for the proposal that a decision of the Master cannot be appealed to a Justice in Chambers. [ 28 ] Agrium also directed my attention to the decision of the Ontario Superior Court of Justice (Divisional Court) in Wang v Mattamy Corporation , 2020 ONSC 7012 . The court in Wang expressed the general principle that a decision under s. 7 of the Arbitration Act is “unappealable”. The Arbitration Act , 1991, S.O. 1991, c. 17 contains subtle distinctions to its Alberta counterpart.

Most particularly, s. 7 of the Ontario Act reads: “If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding...” (emphasis added). Section 7(6) of the Ontario Act says “There is no appeal from the court’s decision.” While those distinctions in the language of the legislation may not themselves compel a different outcome, I cannot reach the same conclusion as the court in Wang .

The Wang decision is not binding on this court and its reasoning does not satisfy me that s. 7(6) precludes the appeal of a Master ’s decision made under s. 7 of the Arbitration Act to a Justice of this Court. [ 29 ] While Agrium complains that by first applying for relief to the Master , Elliott and Orbis now get a second chance to argue their position, that is a right to which they are entitled by statute and by our Rules of Court. While the courts are always concerned with protracted litigation, there is a legislated right to appeal a Master ’s decision.

In my view, that does not contradict the policy considerations underlying the Arbitration Act as noted by the Court of Appeal in Lamb at para 14 : ...the process of determining whether the parties should proceed with arbitration, or legal proceedings, should not become bogged down

by resort to the appeal process. The legislature obviously intended that the decision of the Court of Queen’s Bench should be final, so as to promote an expeditious determination of the forum to hear the disputes of the parties. [ 30 ] If the Master’s decision was made outside of s. 7 of the Arbitration Act , and instead was made based on some residual discretion inherent in the court, that decision can be appealed. Elliott and Orbis are entitled to access all the court processes, including appellate review: A.G. Clark at para 13 .

If the Master’s decision was made under s. 7 of the Arbitration Act , Elliott and Orbis are entitled to appeal that decision relying on s. 12 of the Court of Queen’s Bench Act and the Rules of Court. Section 7(6) does not preclude an appeal of the Master ’s decision to a Justice in Chambers. Given this conclusion, I need not address whether the Master ’s decision was made under s. 7 of the Arbitration Act . [ 31 ] Agrium’s application to strike the appeal is dismissed.

Appeal of the Master’s Decision [ 32 ] Having concluded that Elliott and Orbis are entitled to appeal the decision of the Master to a Justice in Chambers, I move on to consider the appeal on its merits.

Where the appeal from a Master raises a question of law, the standard of review is correctness: McGowan v Lang , 2015 ABCA 217 at para 11 . [ 33 ] As said earlier, the issue to be addressed on this appeal is whether Elliott and Orbis are entitled to have the Action against them struck under s. 7(1) of the Arbitration Act , or whether Elliott and Orbis waived reliance on the mandatory arbitration provisions in their purchase orders with Agrium and attorned to the court, and are therefore required to remain in the Action.

To answer this issue, I am required to address whether this court retains any authority to consider the issue of waiver and attornment after the limitation period to commence arbitration has expired. Each of Elliott, Orbis and Agrium take a different view of the law on this issue. [ 34 ] There are some general principles, largely agreed to by the parties, that underpin my analysis. [ 35 ] First, where a party commences litigation in respect of a dispute that falls within the scope of a mandatory arbitration provision, the court should stay the litigation.

This principle respects the underlying policy consideration that parties to a valid arbitration agreement should abide by their agreement to arbitrate. Where parties have agreed to submit a dispute to arbitration, s. 7(1) of the Arbitration Act makes arbitration a condition precedent to litigation: Agrium Inc. v Babcock , 2005 ABCA 82 at para 12 . [ 36 ] Second, if the limitation period to commence arbitration has expired, the court has no further authority to consider the statutory exceptions under s. 7(2) of the Arbitration Act : Babcock at para 11 .

To conclude otherwise and to permit the court to consider whether an application to strike was unduly delayed under s. 7(2) (

d) would have the effect of extending the limitation period: HOOPP at para 8 . [ 37 ] Third, a party can waive its right to arbitration and can attorn to the jurisdiction of the court by participating in the action on the merits: Hnatiuk v Assured Developments Ltd. , 2012 ABCA 97 at para 42 ; Lafarge Canada Inc. v Edmonton (City) , 2013 ABCA 376 ( Lafarge CA ) at para 39 . Position of the Parties [ 38 ] Elliott says that based on Babcock and HOOPP , the Master had no discretion to refuse to stay or strike the Action.

It argues that where the limitation period to commence arbitration has expired, the court cannot engage in a review of the defendant’s conduct under the principles of waiver and attornment. Elliott says the court has no remaining supervisory authority to refuse to stay or strike the litigation. It says this is so regardless of the extent of the defendant’s participation in the litigation and reflects the legislative policy embedded in the Arbitration Act affirming the importance of extending deference to the parties’ decision to arbitrate.

Elliott says the Master ’s only authority to refuse to stay the litigation was under the limited exceptions in s. 7(2) of the Arbitration Act and those statutory exceptions were not available because Agrium did not commence arbitration proceedings within the limitation period. [ 39 ] Alternatively, Elliott says that if the court has residual jurisdiction to review Elliott’s delay in bringing this application or its participation in the action, that equitable jurisdiction must be exercised in a manner consistent with the decisions in Babcock and HOOPP such that if the limitation period to commence arbitration has expired, the action must be struck. [ 40 ] Finally, Elliott says that if the court is entitled to consider whether Elliott waived reliance on the mandatory arbitration provision and attorned to the court, the Master applied the wrong test.

Elliott argues that the proper inquiry is not a question of fairness to Agrium but a question of whether Elliott did anything by word or conduct that allowed Agrium to believe it was not going to rely on its contractual rights to insist that the dispute be arbitrated. It says Elliott’s participation in the litigation was obligatory: it was required to file a Statement of Defence and to issue Notices to Co-Defendant to protect its interests. It says there is no evidence of reliance by Agrium on Elliott’s actions to Agrium’s detriment.

Elliott says there cannot be waiver of the mandatory arbitration provision where Agrium chose to litigate, did not issue an arbitration notice within the limitation period, and did not rely to its detriment on Elliott’s conduct: nothing that Elliott did placed Agrium in the circumstance it finds itself in today. [ 41 ] Orbis makes similar arguments, but unlike Elliott, Orbis says this court has residual authority to review a party’s conduct under its equitable authority to control its own process.

Orbis says this equitable authority allows the court to prevent the mischief that the Master was concerned about where a defendant participates in an action and waits for the limitation period to expire before raising a mandatory arbitration provision. Orbis says the court has the inherent discretion to prevent the abuse of its processes, but that it should exercise that discretion only in extraordinary circumstances and in the clearest of cases, like where there is gross delay by the defendant in bringing an application to stay or strike.

Further, it says any equitable review must include a review of Agrium’s conduct, including its decision not to serve the Statement of Claim until the limitation period had expired, and its breach of its agreement with Orbis by failing to include a mandatory arbitration provision in every contract relating to the project.

[ 42 ] In response, Agrium says that case law makes clear that the court has the jurisdiction to consider waiver and attornment even after the limitation period to commence arbitration has expired. It relies on Hnatiuk at para 42 and Lafarge CA at para 39 , and on Lafarge Canada Inc. v Edmonton (City) , 2015 ABQB 56 ( Lafarge QB ) at para 37 . It says any decision not to strike an action based on waiver is not breathing life into an expired limitation period governing an arbitration process, but is permitting validly constituted litigation to continue.

Agrium disagrees with the Master ’s conclusion that the court is to engage in a fairness analysis. Rather, it says that the law permits the court to undertake an objective analysis of the defendant’s conduct and participation in the litigation to determine whether it has waived reliance on the mandatory arbitration provision. Agrium says the court must look at the defendants’ conduct as a whole and maintains that delay in bringing an application to strike or stay is a relevant consideration in determining waiver and attornment.

It says the court’s inquiry should have no regard to the plaintiff’s conduct: Agrium is not required to demonstrate that it relied on the defendants’ waiver to its detriment. [ 43 ] Agrium argues that Elliott and Orbis waived their right to rely on the mandatory arbitration provision and attorned to the jurisdiction of the court by taking steps in the litigation and by failing to move swiftly to apply to strike or stay the Action. Agrium invites the court to consider the “undue delay” cases under 7(2) of the Arbitration Act to assist in its analysis of waiver and attornment.

In that regard, it refers to the factors identified by Dario, J in Lafarge QB at para 44 as factors that might assist in conducting a waiver analysis. Those factors include how long the parties have been active in the litigation, the length of delay until moving to stay or strike, whether the parties applied for a stay based on a genuine desire to arbitrate, the amount spent on litigation, and notice given to the Plaintiff that arbitration was mandatory. Agrium suggests this list is instructive in assessing delay in the context of waiver and attornment.

Decision Does the court retain jurisdiction to consider waiver and attornment where the limitation period to commence arbitration has expired? [ 44 ] I am satisfied that the court has jurisdiction to consider the question of waiver and attornment after the limitation period has expired to commence arbitration. To conclude otherwise would be inconsistent with both the Hnatiuk and Lafarge CA decisions.

It also would permit the mischief that the Master identified where a defendant could participate in an action to any degree, allow the limitation period to expire, and then raise the mandatory arbitration provision to defeat the claim. I do not agree that this is an extension of the party autonomy principle that underlies the Arbitration Act . [ 45 ] Nor do I find any authority in the case law to support Orbis’ position that the court’s authority rests within its power to prevent an abuse of process.

I am satisfied that the court retains a supervisory function to consider the issue of waiver and attornment even where the limitation period to arbitrate has expired. In reaching this conclusion, I rely on Hnatiuk and Lafarge CA , as followed by this court in Lafarge QB and Fernandes v Jennings Capital Inc. , 2016 ABQB 594 . [ 46 ] In Hnatiuk , the trial judge (and not the parties) raised the presence of a mandatory arbitration provision at the opening of trial.

The Court of Appeal observed that for years, the plaintiffs pressed on actively with their lawsuit and the defendant fully participated and defended the suit on the merits in many different ways, including examinations for discovery and a certificate of readiness. At para 42, the Court of Appeal concluded in the face of a long expired limitation period to commence arbitration that: A party can waive its right to arbitration, and can attorn to the jurisdiction of the court by participating in the suit on the merits. See Babcock & Wilson Can v Agrium , 2003 ABQB 1004 , 347 AR 107. This defendant plainly did both.

The Court of Appeal concluded that the defendant gave up its right to arbitrate. [ 47 ] This principle was reiterated in Lafarge CA at para 39 and is reflected again in Lafarge QB , at para 37 : The court of course retains a supervisory role in determining whether the arbitration agreement is valid and the matter in dispute is subject to arbitration (per s. 6 and s 7(1) of the Arbitration Act ).

This can include a determination of whether the parties have, by their conduct repudiated the agreement and attorned to the jurisdiction of the court. [ 48 ] In my view, that means that regardless of whether the limitation period to arbitrate has expired, the court may consider whether the mandatory arbitration provision has been waived or repudiated, and the defendant has attorned to the court. [ 49 ] This principle was followed by Jeffrey, J in Fernandes .

There Jeffrey, J acknowledged that he had no jurisdiction to consider the s. 7(2) statutory exceptions as the limitation period to commence arbitration had expired, but he accepted the authority under Hnatiuk and HOOPP to consider waiver and attornment. His analysis regarding waiver and attornment principally focused on whether the defendants engaged in the action on it merits. In that case, the defendants had plead reliance on the mandatory arbitration clause from the outset and had reinforced their position by email.

Jeffrey, J concluded at para 111 that despite the fact that the defendants had brought a security for costs application and had applied to adjourn the

summary judgment application, they did not resile from their insistence on arbitration of the dispute. In discussing the steps taken by the defendants in the action, Jeffrey, J noted that neither step lead to any disposition of the merits of the claim. [ 50 ] Whether a defendant has waived its right to insist that the dispute be submitted to arbitration has been described as determining whether the defendant voluntarily placed the matters in dispute in the hands of the court: Hnatiuk at para 41 .

It is either conduct of the defendant that signals an agreement to litigate or conduct of the defendant that reflects the intention not to arbitrate. [ 51 ] I agree with Agrium that the court must undertaken an objective analysis of the defendant’s conduct and participation in the litigation to determine whether it has waived reliance on the mandatory arbitration provision. That includes reviewing the pleadings, looking at when the mandatory arbitration provisions were raised by the defendants, and considering the nature and extent of the defendants’ participation in the litigation.

It also includes considering the timeliness of the defendant’s application to strike the action. An analysis of waiver may also include consideration of the plaintiff’s conduct, particularly if the plaintiff relied on the defendant’s

conduct to its detriment. I am of the view, however, that the absence of reliance by the plaintiff is not determinative. [ 52 ] It may also be relevant to consider whether there are provisions in the agreement between the parties that define how waiver of a provision in that agreement can be achieved. And it will be relevant to consider what actions the defendant took prior to the expiry of the limitation period, if any, to indicate an agreement to litigate or the intention not to arbitrate.

In my view, it is necessary to consider the quality of the evidence that the defendant voluntarily placed the matters in dispute in the hands of the court, particularly when by agreeing to litigate the defendants will have given up a limitation defence. In such circumstances, the defendant’s conduct cannot be equivocal but must clearly waive the mandatory arbitration provision. [ 53 ] Finally, the analysis of waiver and attornment must not be undertaken as if it is an analysis of undue delay under s. 7(2) (d). Nor is it a fairness assessment as suggested by the Master .

Waiver and delay are distinct considerations, although delay may be a factor in assessing waiver. As a result, a court should be cautious about approaching a discussion of waiver in the context of the factors identified in a s. 7(2) analysis.

Did the defendants by their conduct indicate the intention to participate in litigation or the intention not to arbitrate? [ 54 ] I am satisfied that when examined in the context of waiver rather than within the fairness framework discussed by the Master , the facts do not support the conclusion that these defendants waived reliance on the mandatory arbitration provision in their agreements. [ 55 ] The law is clear that defendants are expected to act without delay to assert their resistance to litigation.

Orbis signalled in its pleadings from the outset that it intended to rely on the mandatory arbitration provision in its agreement with Agrium. After that, its actions were largely defensive, to prevent default by filing a Statement of Defence, and to prevent a misallocation of fault by asserting claims against the other contractors and suppliers to the project. By our Rules of Court, those actions must be taken within prescribed time limits.

In these circumstances where the Arbitration Act was plead, the fact that the defendant defended and advanced claims for contribution or indemnity are of little value in determining whether the defendant has signalled an agreement to litigate. In addition, making very limited inquiries into Agrium’s obligation to produce its records is not sufficient to change the outcome. None of the steps taken by Orbis indicate the voluntary intention to forego reliance on the mandatory arbitration provision or an engagement by Orbis in the merits of the Action.

Orbis put Agrium on notice that it intended to rely on the mandatory arbitration clause and has not resiled from that position. Its application to stay or strike was filed less than one year after filing its Statement of Defence. These facts are arguably more favourable than those in Fernandes where the defendants brought an application for security for costs.

In these circumstances, there are not sufficient facts from which to conclude that Orbis voluntarily agreed to have the dispute determined through litigation. [ 56 ] An analysis of Elliott’s conduct is slightly different, impacted by its failure to plead the mandatory arbitration provision in its initial Statement of Defence. Its delay in raising the mandatory arbitration provision exceeds one year from when its Statement of Defence was filed. However, as with Orbis, even when I factor in Elliott’s delay, I am not satisfied that Elliott’s conduct is sufficient to constitute a waiver of the right to arbitrate.

Despite the gap in its initial pleadings, none of the steps taken by Elliott or its delay in acting amounts to a waiver of its right to arbitrate, particularly when to so find would result in the loss of a limitation defence. [ 57 ] The appeal by Elliott and Orbis is allowed and the Action against them is struck. Heard on the 18 th day of December, 2020. Dated at the City of Calgary, Alberta this 22 nd day of December, 2020. N. Dilts J.C.Q.B.A. Appearances: Daniel J. McDonald, Q.C. /James M. Delaney Burnet, Duckworth & Palmer LLP for the Plaintiff Agrium, Inc Richard B.

Drewry, Q.C. / Allyson Jeffs / Laura Feehan Emery Jamieson LLP

for the Defendant Orbis Christian J. Popowich / Katherine Reiffenstein Code Hunter LLP for the Defendant Elliott _______________________________________________________ Corrigendum of the Decision of The Honourable Madam Justice N. Dilts _______________________________________________________ Citation has been revised without the comma- page 1 Dated line on page 12- typographical error corrected