2201 08887 2329716 Alberta Ltd., Buta Singh Rehill, Rehill Holdings Ltd., Poonamjeet Kaur Toor v. 2290808 Alberta Ltd., 2023 ABKB 297

Court of King’s Bench of Alberta Citation: 2329716 Alberta Ltd. v Jagroop Randhawa, 2023 ABKB 297 Date: 20230516 Docket: 2201 08887 2201 09306 Registry: Calgary Between: 2201 08887 2329716 Alberta Ltd., Buta Singh Rehill, Rehill Holdings Ltd., Poonamjeet Kaur Toor and 2290808 Alberta Ltd. Applicants - and – Jagroop Randhawa, Trilochan Singh Sekhon, Gurpreet Randhawa, Western Canada Consulting Group Ltd. and Neosome Lending Ltd. Respondents -and- Between: 2201 09306 Jagroop Randhawa, Trilochan Singh Sekhon, Gurpreet Randhawa, Western Canada Consulting Group Ltd., Neosome Lending Ltd. and 2290789 Alberta Ltd.

Applicants -and- Buta Singh Rehill, Rehill Holdings Ltd., Poonamjeet Kaur Toor, 2290808 Alberta Ltd. And Prabsharanjit Singh aka Sunny Toor Respondents

Corrected judgment: A corrigendum was issued on June 15, 2023; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Memorandum of Decision of the Honourable Justice M. J. Lema _______________________________________________________ I.

Introduction [ 1 ] Feuding shareholders dispute whether a shotgun-provision share sale closed or not. [ 2 ] The purchasers argue that it did and have been carrying on business as if the vendors have no ongoing rights in or connection to the business. [ 3 ] The vendors argue that the purchasers were late paying the purchase monies and failed to tender all required sale documents, that as a result the sale did not close, and that, by extension, they continue as shareholders and directors and accordingly have been improperly excluded from business decisions such as opening a new bank account and making new arrangements with critical suppliers. [ 4 ] The purchasers initially applied to this Court (Commercial List) for an order declaring the sale had closed.

Jones J. declined to hear the application on the basis it was not suitable for the Commercial List, as detailed in his costs decision ( 2023 ABKB 202 ). [ 5 ] The vendors then applied to this Court for various interim preservative relief pending resolution of the “closed or not” question.

On April 27, 2023, I granted limited interim interim relief pending the full hearing of the interim-relief application. [ 6 ] In response, the purchasers applied for a stay of the interim relief application, on the basis that the matters raised and relief sought are the subject of an arbitration provision in the buy-sell contract. [ 7 ] On May 12, 2023, I heard that stay application as well as an injunction application by the purchasers to effectively reinstate the new bank account (currently frozen) and to bar the vendors and their counsel from interfering with the business operations pending the outcome of the “closed or not” issue in (per the purchasers) arbitration proceedings. [ 8 ] For the reasons outlined below, I stay the vendor’s interim relief application (as arbitrable matters), decline to grant any injunctive relief to the purchasers (similarly arbitrable matters), and clarify my initial (interim interim) order as authorizing the business to use and continue using the new bank account pending the resolution of the “closed or not” issue in arbitration.

II. Analysis A. Arbitration provision covers all disputes [ 9 ] The threshold question is whether the buy-sell-agreement arbitration provision covers these various matters. I find that it does. [ 10 ] Here is the provision (s. 12): Dispute Resolution Any dispute, controversy, or claim arising out of, relating to, or in connection with this [Share Purchase] Agreement, including with respect to the

interpretation, breach, existence, validity or termination thereof … shall be resolved in accordance with the dispute resolution procedure set for this in this

Section 12 (“the Dispute Resolution Procedure”). [ 11 ] The vendors argue that some, if not all, of the matters in dispute fall outside the scope of this provision.

Here they point (in part) to ss 7(1) of the Arbitration Act : 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. [emphasis added] [ 12 ] As the vendors see it, their claims for rectification of Corporate Registry records of the operating business (restoring their principals as directors and returning the official shareholdings to the pre-transaction state), for nullification of certain banking steps taken by the purchasers after the (possible) sale, for an accounting of the business’s funds since that point, and generally for relief from assertedly oppressive conduct by the purchasers all fall outside the scope of the arbitration provision.

[13] I disagree, accepting the purchasers’ argument that, at the core, all these matters turn on whether the purchasers did, or didnot, acquire control of the business via the buy-sell agreement. [14] As noted the vendors argue that the purchasers fell down two ways: late payment of the purchase price and failure to tenderall required closing documents.

Per the vendors, the result either way (or in tandem) is that the transaction did not close. [15] Alternatively, they argue that, even if the purchasers did not fall down in these ways or, if they did, if those shortcomingswere not material (such that, either way, the purchasers effectively performed all of their required steps), the vendors nonetheless havenot released the closing documents, or at least their documents, which continue to be held under trust conditions. [16] As I see it, all these issues “arise out of, relate to or are in connection with” the Share Purchase Agreement i.e. did thepurchasers perform all their obligations on closing?

If they did, did the transaction close? If not (e.g. because the vendors declined torelease the (or their) closing documents, were the purchasers entitled to act as if the transaction had closed? If the purchasers did notperform all their closing obligations strictly, were their shortcomings material, such that the vendors were entitled to treat the saletransaction as ineffective? Or were any shortcomings immaterial? If the latter, did the transaction not close because the vendorsdeclined to release the closing documents from trust? If so, did the vendors act properly or improperly in doing that?

If the former(justified failure by vendors to close), did the purchasers acquire any right to act as of the transaction had closed?

If the latter (improperfailure by vendors to close), were the purchasers entitled to treat the transaction as effectively closed i.e. as a consequence of such afailure by the vendors? [17] All these questions “arise out of, relate to or are in connection with” the “interpretation, breach, existence, validity ortermination” of the share purchase agreement. [18] Depending the answers to these questions, the purchasers either are or are not in control of the operating business. [19] If they are, their post-sale actions, such as changing the Corporate Registry records and making new banking and critical-supplier arrangements, are or may be legitimate. [20] If they are not, those actions are or may be illegitimate. [21] Those issues also “arise from, relate to or are in connection with” the Share Purchase Agreement, as they pivot on whether thepurchasers emerged with control of the operating business. [22] Here I rely on Kaverit Steel and Crane Ltd v Kone Corporation, 1992 ABCA 7: The submission before us limits itself to disputes "arising out of or in connection with" the contract.

I agree with the comments ofEvans, J. in Overseas Union Insce. v. AA Mutual [1988] 2 Lloyd's Law. Reports 63 (U.K.Q.B. ) at p. 67. He first described a narrowerform of submission, typically using only the words "under the contract", where only rights and obligations created by the contract can bereferred.

He contrasted that to the form of submission before us when he said, at p. 67: Conversely, if the parties agree to refer disputes arising 'in relation to' or 'in connection with' their contract, a fortiori if theclause covers disputes arising 'during the execution of this contract' (The Damianos, [1971] 1 Lloyd's Rep. 502; [1971] 2 Q.B. 588)or in relation to 'the work to be carried out hereunder', a common form in construction contracts, then both as a matter of language and ofauthority some wider category may be intended. In my view, this submission extends beyond rights and duties created by the contract.

A dispute meets the test set by the submission ifeither claimant or defendant relies on the existence of a contractual obligation as a necessary element to create the claim, or todefeat it. Thus, the pleading here that relies upon a claim of a conspiracy by unlawful means to harm the distributor meets the test. Thisis because a breach of the contract is relied upon as the source of the "unlawfulness".

That dispute should be referred toarbitration. [paras 29 and 30] [emphasis added] [See also Agrium Inc v Babcock, 2005 ABCA 82 (paras 13-15)] [23] Same here: the vendors’ complaints about the impugned post-transaction steps by the purchasers are anchored in the centralissue of whether the purchasers emerged with control or not. [24] On the broad scope of similarly worded arbitration provisions, see also Dancap Productions Inc v Key Brand Entertainment,Inc, 2009 ONCA 135 (paras 38-41); Woolcock v Bushert, (ONCA) at paras 19-24; and Electek Power Services Incv Greenfield Energy Centre Limited Partnership, 2022 ONSC 894 (paras 161-162). [25] All to say: the various relief sought by the vendors plainly falls inside the scope of the agreement’s arbitration provision.

B. No reasons not to apply arbitration clause [26] In the alternative, the vendors argued that the arbitration provision should not be applied. 1.

Summary judgment exception [27] They first pointed to ss. 7(2) of the Arbitration Act, in particular para 7(2)(e): The court may refuse to stay the [civil litigation] 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; [and] e. the matter in dispute is a proper one for default or

summary judgment. [ 28 ] In their brief, they elaborated: It is clear and obvious that the [purchasers are] not in valid possession of director resignations and share transfer documentation; therefore, they have no more basis for acting as if they own and control [the operating business] than the aspiring purchaser of land in our analogy above [para 24 of their brief]. Returning conditions to where they were before the [purchasers] began to take the law into [their] own hands is something that can be dealt with on a

summary basis. [emphasis added] [ 29 ] Assuming that is so, the vendors have not launched a

summary-judgment proceeding. Here I follow Topolniski J. in Medicine Shoppe Canada Inc v Devchand , 2012 ABQB 375 : In my view, if a plaintiff wishes to contend on an application for a stay pending arbitration that the

Summary Judgment Exemption applies, the plaintiff must first have filed a

summary judgment application together with the supporting affidavit. Until that time, the

Summary Judgment Exemption is not in issue. Devchand has not done so. Accordingly, the questions posed of McKay are neither material nor relevant to the Stay Application. [para 28] [followed by AJ Schlosser in Melcor Reit Limited Partnership v TDL Group Corp , 2021 ABQB 379 (paras 28 and 29 ). 2. Waiver or attornment [ 30 ] The vendors also argued that the purchasers waived their right to arbitration or otherwise attorned to civil litigation by initially seeking the noted “transaction closed” relief from Jones J.

They also argue that the purchasers sought further civil-litigation relief when seeking terms for the (granted) adjournment of the vendors’ interim-relief application and again when seeking the noted injunction on May 12, 2023. [ 31 ] Per the vendors’ brief: According to Peace River [ Hydro Partners v Petrowest Corp , 2022 SCC 41 ], a party seeking to stay a court action in favour of an arbitration proceeding must not itself have taken a step in court.

The [purchasers have] not sought only interim or protective relief from King’s Bench, as [have the vendors], but asked Justice Jones to make a ruling on the underlying issues regarding the Disputed Transaction on March 3, 2023. It only sought arbitration at a later date in the face of an impending application to undo the unilateral revision of the Corporate Registry and the movement of funds out of the established [bank] accounts.

The British Columbia Court of Appeal has recently confirmed that a party takes a “step” when dealing with the substance of the dispute in court before applying for a stay . [ Hawthorn v Hawrish , 2023 BCCA 182 at para 58] . [paras 43 and 44 of brief] [emphasis added] [ 32 ] However, the BC Arbitration Act provision at issue there is different from its Alberta counterpart (ss. 7(2), reproduced above).

Here is the BC provision: If a party to an arbitration agreement commences legal proceedings in a court against another party to the agreement in respect of a matter agreed to be submitted to arbitration, a party to the legal proceedings may apply, before filing a response to civil claim or a response to family claim or taking any other step in the proceedings , to that court to stay the legal proceedings.

In an application under subsection (1), the court must make an order staying the legal proceedings unless it determines that the arbitration agreement is void, inoperative or incapable of being performed. [ss 15(1) and (2)] [emphasis added] [ 33 ] As noted, Alberta’s provision does not refer to taking civil-litigation steps i.e. as a potential obstacle to invoking arbitration rights. [ 34 ] As a result, Peace River Hydro does not illuminate the issues here. [ 35 ] On waiver and attornment, the purchasers cited Agrium Inc v Colt Engineering Corp , 2020 ABQB 807 (Dilts J.) (affirmed 2022 ABCA 266 without discussion by the majority of waiver or attornment) and Lafarge Canada Inc v Edmonton (City) , 2015 ABQB 56 (Dario J.). [ 36 ] In the former, Dilts J. accepted that waiver and attornment may operate in this “arbitration versus civil litigation” setting: ... 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 . [para 37] [Note: that is a different Lafarge Canada decision, being an appeal of Clackson J.’s decision] [ 37 ] Here is the cited paragraph from Hnatiuk : 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. It never raised the question of the arbitration clause after the statement of defence; the trial judge did that only at the beginning of the trial. [para 42] [emphasis added] [ 38 ] I note that, immediately after that comment, the ABCA in Hnatiuk stated:

Section 7 of the Act gives exceptions to the court’s duty to stay the suit; one exception is a stay motion “brought with unduedelay”. Here there was no motion, and even if there were some sort of deemed or notional or informal motion at trial, that delaywould be gross.

Alberta courts have refused to stay actions in favor of arbitration where the defendant has waited too long to move for a stay: Eiffel Dev vPaskuski, 2010 ABQB 619, 511 AR 11, 99 Constr LR (3d) 148 (M); Millennial Constr v 1021120 Alta, 2005 ABQB 533, file JDC 0401-07824, 2005 CarswellAlta 975 (Jul 12). [paras 43 and 44] [39] Both Eiffel Dev and Millenial Constr (the latter in an alternative finding) applied ss 7(2)(d), finding undue delay. [40] Here is the cited (by Dilts J.) paragraph from Lafarge (CA): A party to a contact with a mandatory arbitration clause may waive its benefit and may do so specifically by attornment: see Hnatiuk v.Assured Developments Ltd., 2012 ABCA 97 at paras. 42-44, 522 AR 3. [para 39] [41] The latter comment was obiter, with the ABCA expressly commenting that the court below had not addressed issues of delayand attornment (paras 38, 40 and 41). [42] Here is the segment of Babcock & Wilson (QB) addressing waiver and attornment that the ABCA emphasized in Hnatiuk andLafarge: What is the effect of the commencement of legal action on the contractual right to arbitration?

The commencement of litigation by the filing of a Statement of Claim, and the response of the defendant by filing a Statement ofDefence ends the arbitration process. The parties will have submitted to the jurisdiction of the court: Hudson’s Bay Insurance Co.v. Walker (1914) (BC CA), 6 W.W.R. 147 (B.C.C.A.). This case has not been considered in Alberta, but has beenwidely followed in British Columbia in recent years. In

summary, if the defendant has filed a Statement of Defence, then it is evidence it has submitted to the jurisdiction of the courtand has ended its right to enter into arbitration under the original contract. If the defendant has not filed a Statement of Defence,then it appears arbitration is still alive, subject to the question of whether the limitations period for arbitration has expired. The law in Alberta is well equipped to deal with the issue of attornment to the jurisdiction of a court as an alternative to arbitration, andneed not rely on foreign law.

If, in Alberta, the filing of a Statement of Defence is merely evidence of attornment to the court(Cincurak), then it would be entirely inconsistent to hold that seeking a dismissal of the litigation on the basis of limitationsarguments is unequivocally determinative. [paras 31, 34 and 36] [emphasis added] [43] However, Babcock & Wilcox (QB) was overturned by the Court of Appeal on this very aspect: The 1991 amendments to the Arbitration Act significantly restricted the previous broad discretion courts were given to stay thelitigation of a dispute governed by an arbitration clause.

Section 4 of the previous Act used permissive language: a court “may” staylitigation if it is satisfied “there is no sufficient reason why the matter should not be” arbitrated (R.S.A. 1980, c. A-43). Section 7(1) ofthe new Arbitration Act uses mandatory language: a court “shall” stay parallel litigation, except in the five narrow circumstancescontained in s. 7(2). The legislative intent from the addition of this

section is clear and reflects a distinct change in policy infavour of holding parties to their arbitration agreements. Moreover, by using the word “shall” in s. 7(1), the distinction betweenordinary arbitration clauses and Scott v. Avery clauses has been eliminated. The court must stay litigation of a dispute covered by thearbitration agreement when parties have agreed their disputes shall be resolved by arbitration; they need not have explicitly agreed thatarbitration is a condition precedent to litigation.

In coming to this conclusion we are guided by this Court’s decision in International Resource Management (Canada) Ltd. v. KappaEnergy (Yemen) Inc. (2001), 281 A.R. 373, 2001 ABCA 146. In allowing the appeal and staying the suit of the matter that fell within thescope of an arbitration agreement, the Court held at para. 12 that s. 7 of the Arbitration Act had rewritten the rules for a stay and thatwhen the plaintiff is a party to the contract for arbitration a “court must stay a suit in favour of arbitration” because “[i]t has nochoice.” More recently, in New Era Nutrition Inc. v.

Balance Bar Co. (2004), 245 D.L.R. (4th) 107, 2004 ABCA 280 at para. 36, this Court statedthat s. 7 contains a “mandatory requirement that the court stay an action, upon application, subject to a short list of situations inwhich the court can refuse such an application [in s. 7(2)].” Other lower court decisions also support this

interpretation: Crystal Rose Home Ltd. v. Alberta New Home Warranty Program (1994), (AB KB), 163 A.R. 96 at para. 110 (Master) (the use of the mandatory “shall” in s. 7(1) requires a court to stay aproceeding, unless an exception is established under s. 7(2), when matters in dispute are required to be submitted to arbitration);Graham v. Canadian Health Care Guild (1999), 1999 ABQB 899 , 254 A.R. 363 at para. 18 (Q.B.) (“where the parties haveagreed by contract that a dispute shall be decided by an arbitrator, instead of resorting to the courts, they should be held to theircontracts”); G v.

G. (2000), 264 A.R. 22, 2000 ABQB 219 at para. 22 (“the clear policy thrust of the legislation is to limit courtintervention and to promote arbitral autonomy”). In

summary, s. 7(1) of the Arbitration Act makes arbitration a condition precedent to litigation when the parties have agreed theirdisputes shall be submitted to arbitration, and the previous distinction between ordinary arbitration clauses and Scott v. Avery clausesno longer exists. In those circumstances, a court must stay parallel litigation, unless the narrow exceptions contained in s. 7(2)apply. Parties to an arbitration agreement, like parties to any contract, can agree that arbitration is not mandatory. But unless they useappropriate permissive language, s. 7 applies.

In this case the parties used mandatory language and none of the s. 7(2) exceptionsapply. Because the underlying arbitration is statute-barred, the statement of claim should be dismissed. [paras 7-10 and 12][emphasis added]

[44] Interestingly, the ABCA in Lafarge expressly approved of the narrow-exceptions holding of that Court in Babcock & Wilcox: ... arbitral autonomy is recognized both in arbitral agreements themselves and in legislation that has sought to fortify the arbitrationprocess. The latter is reflected, for example, in ss. 6 and 7 of the Arbitration Act which specify that the Court should not try disputesgoverned by a mandatory arbitration agreement, subject to a short list of exceptions and a limited process and resultsurveillance: see New Era Nutrition Inc. v.

Balance Bar Company, 2004 ABCA 280 at para. 36, 357 AR 184; Babcock & WilcoxCanada Ltd. v. Agrium Inc., 2005 ABCA 82 at para. 7, 363 AR 103. [para 25 of Lafarge] [45] The cited paragraph from New Era Nutrition echoes this approach:

Section 7 contains much of what was in

section 8 of the Institute’s draft legislation. It contains the mandatory requirement that the courtstay an action, upon application, subject to a short list of situations in which the court can refuse such an application (section 7(3)).Significantly, however,

section 7 contains two subsections that were not part of the Institute’s draft legislation. [para 36 of New EraNutrition] [46] The same dimension of the ABCA decision in Babcock & Wilcox (in a limitations context) was also applied by that Court inHOOPP Realty Inc v Emery Jamieson LLP, 2020 ABCA 159 (para 6) and in Weir-Jones Technical Services Inc v Purolater CourierLtd, 2019 ABCA 49 (para 57). [47] And by Wakeling JA (in dissent), where the majority did not address the point, in Agrium v Orbis Engineering FieldServices, 2022 ABCA 266 (footnote 34). [48] Returning to the parties’ discussions of Dario J.’s decision in a different Lafarge Canada case (2015 ABQB 56), whichfollowed the CA’s Lafarge Canada decision (handing the attornment, waiver and delay issues to her, with Clackson J. having notdecided them), on the basis of the above cases and as discussed immediately below, I have (with respect) a different view on theavailability of such defences in an arbitration context. [49] I do not read Hnatiuk, which linked its delay-and-attornment findings to undue-delay cases (i.e. to the express exception in ss.7(2)(d)), and Lafarge (where the CA’s discussion of waiver and attornment was obiter), both of which anchored their observations ofdelay and attornment in later-overturned passages from Babcock & Wilcox (QB), as having undercut the express and detailed findings ofthat Court in Babcock & Wilcox (CA) on the limited-to-subsection-7(2) exceptions, especially where the CA has expressly approved ofthe latter decision several times. [50] All to say: I do not see room for any delay, waiver or attornment argument falling outside the ss. 7(2) exceptions. [51] The vendors did not argue that there was undue delay here by the purchasers.

Nor would any such argument have beensuccessful, given the short (approximately two-month) period between the dispute emerging and the purchasers pointing to thearbitration route (via their April 19, 2023 letter). [52] In any case, the purchasers’ toe-in-the-water attempt to seek civil-litigation relief on the Commercial List, which wasdismissed strictly for wrong-setting reasons (i.e. not substantively) and which sparked no further litigation steps by either side would beinsufficient to constitute waiver or attornment here. [53] As for the purchasers effectively seeking civil-litigation relief by arguing for (and obtaining) certain interim interim relief terms, that was in response to the vendors’ initial attempt to obtain interim relief on or about April 27th.

As I recall, at that application,the purchasers expressly raised the issue of arbitration and took the position that the vendors’ interim relief application and the central(“closed or not” issue) had to move to arbitration.

The focus became what “hold the line” (interim interim) relief should be grantedpending the return of the vendors’ interim relief application and the move-to-arbitration-in-response application by the purchasers. [54] As for purchaser’s application on May 12th for an injunction, it was effectively in support of their bid to move all matters toarbitration and, in any case, given my ruling below on the “account freeze” aspect, was not actually required in light of an implicit (nowexplicit) ruling in my interim interim order (as explained later). [55] In any case, as explained above, ss. 7(2) governs, and it makes no reference to “litigation steps”, however many taken, only to“undue delay” i.e. on this aspect of “too late to move to arbitration.” 3.

Relief against third parties [56] The vendors also argued that any arbitrator will be unable to grant relief against third parties: Even if the subject matter of this dispute were covered by the dispute resolution clauses of the Share Purchase Agreement (“SPA”), the[purchasers’] actions have necessitated relief being sought against non-parties to the SPA. The Corporate Registry now improperlyshows [a particular person] as a director. He is a Respondent in this Amended Application. He is not a party to the SPA. This is a keyconsideration according to Peace River.

Further, we have reason to believe that [he] was involved in the diversion of funds away from the existing [bank] accounts of [theoperating business] to the BMO account by representing to a third party that he had in his possession sale documents signed by allparties. [footnote omitted] As Binnie J. in Seidel [v TELUS Communications Inc 2011 SCC 15 , [2011] 1 SCR 531] stated at paragraph 39: Yet it can hardly be denied that arbitrators, who derive their jurisdiction by virtue of the parties’ contract, cannot order relief that wouldbind third parties, or that only superior courts have the authority to grant declarations and injunctions enforceable against the whole

world. [footnote omitted] The Court of King’s Bench can direct the Registrar of the Corporate Registry to rectify records pursuant to the Alberta Business Corporations Act . An arbitrator cannot. There is no way that the parties could have submitted this issue to arbitration.

In Seidel the Supreme Court of Canada concluded that a stay should not apply to relief sought under consumer protection legislation where the statute in question “offers remedies different in scope and quality from those available from an arbitrator.” [footnote omitted] The same principle applies here. [paras 40-42 and 45 and 46 of vendors’ brief] [ 57 ] I have already found that these parties agreed, via their share purchase agreement, to make arbitrable every dispute arising from, related to or otherwise connecting with the agreement.

As already found, that includes consequential steps such as changing Corporate Registry records and making new banking arrangements i.e. with the propriety (or not) of such steps turning on the core issue of the purchaser obtaining control (or not) of the operating business. [ 58 ] I also disagree that an arbitrator will not have the power to effectively reverse such steps (if perceived appropriate), by way of directing bound-by-the-agreement parties to submit revised filings to the Corporate Registry or to make new banking arrangements.

Such parties necessarily have the power to make such changes (i.e. if directed to do so by the arbitrator e.g. as part of any interim relief directed by her or him), with the Corporate Registry and any bank presumed to follow such requests i.e. made by persons with authority to make them. [ 59 ] No evidence shows that the noted “new person” has or would have any greater authority over such questions (i.e. than the signatory parties) or for some reason have a veto over the decisions of those parties. 4.

Application of s. 8 (Court’s continuing jurisdiction in arbitration setting) [ 60 ] The vendors finally argued that this Court has exclusive or at least overlapping jurisdiction (with an arbitrator) to grant interim preservative relief and that it should exercise that relief here. [ 61 ] This brings ss. 8(1) AA on stage: The court’s powers with respect to the detention, preservation and inspection of property, interim injunctions and the appointment of receivers are the same in arbitrations as in court actions. [ 62 ] The vendors here argue: A large part of the Amended Application [for preservative relief] deals with the preservation of corporate property.

The [purchasers] have directed the considerable monthly revenue of the [operating business] away from bank accounts where the [vendors] can see what is going on and have a say in expenditure by virtue of the Banking Resolution to accounts [where] anything could be happening and the [vendors] have no say. Status quo “injunctive” relief is very common in all kinds of shareholder disputes and oppression remedy actions. The remedies sought in the Amended Application are essentially designed to preserve rights and property as they [were] before the [purchasers] took the law [into] their own hands.

They are “interim” in the sense that the [purchasers] could still initiate the specific performance action suggested by Justices Jones. As

section 8 … provides, courts retain the power to order interim injunctions even when arbitration is commenced, which is not the case here. J. Brian Casey confirms this court jurisdiction in his text Arbitration Law of Canada: Practice and Procedure , and notes it is of particular importance[:] “[i]nterim preservation orders are required from a court in situations where non-parties need to be bound by the order, or there is concern a party may not comply with the order of the tribunal.

Also in urgent situations, before the tribunal is constituted, the court may be the only recourse.” It is obvious that there is urgency in the present Action and that non-parties are included in the Action and the requested relief. As such, the court remains the only proper form for hearing this Action and granting the relief requested. [footnote omitted] [ 63 ] I have already found the “bind third parties” rationale not applicable here.

And non-compliance by a party here with an arbitrator order or direction, preliminary relief or otherwise, is speculation at this stage. [ 64 ] As well, I have already granted interim interim preservative relief to the vendors, via my April 27, 2023 order, in the stage before (as I understand it) any arbitrators had been proposed by either side. (The purchasers’ brief refers to them proposing certain arbitrators on May 2, 2023.

The record does not show the vendors proposing any arbitrators.) [ 65 ] With the purchasers having proposed arbitrators approximately two weeks ago, I do not see the present absence of an arbitrator (even an emergency-relief one) as a compelling rationale for further court relief in favour of the vendors, at least not without evidence from them as to the (perceived) unsuitability of any of the proposed arbitrators or otherwise why an arbitrator is not currently in place. [ 66 ] More generally, I adopt and accept the purchasers’ submissions on the s. 8 aspect as outlined in paras 54-73 of their brief.

In a nutshell: • no compelling reason exists for the court to grant preservative relief that an arbitrator (or emergency arbitrator) can grant; • the ICDR Canadian Arbitration Rules , selected by the parties via s. 12.4 of their share purchase agreement, contemplate wide- ranging preservative relief including to-parties injunctions, effectively covering all the interim relief sought by the vendors and available in a matter of days;

• “The policy that parties to a valid arbitration agreement should abide by their agreement gives effect to the concept of party autonomy – which, in the arbitration context, stands for the principle that parties should generally be allowed to craft their own dispute resolution mechanism through consensual agreement ….

The policy that parties to a valid arbitration agreement should abide by their agreement goes hand in hand with the principle of limited court intervention in arbitration matters ….”: [ TELUS v Wellman [SCC], cited above, paras 52 and 55]; and • since determining interim relief may require an assessment of the (at least prima facie ) merits of each side’s arguments on the central dispute (purchasers lawfully in charge of the business or not) and depending on whether the interim-relief arbitrator will also handle the main-issue arbitration, it is preferable to leave both inquiries for the one decision maker. 5.

Conclusion on arbitrability of main and preservative relief [ 67 ] As reviewed above, no reason exists not to put both sets of relief to an arbitrator. [ 68 ] With the arbitration clause embracing all the proposed relief, the vendors having commenced a court proceeding (i.e. the within bid for interim relief) in respect of a subset of the proposed overall relief, the purchasers having applied to stay that civil litigation under ss. 7(1) AA , and with none of the ss 7(2) exceptions applying, “the court shall ” (per ss. 7(1)) and hereby does stay this (interim relief) proceeding. III.

Purchaser’s injunction application [ 69 ] As noted, the purchasers themselves applied to this Court for an injunction against the vendors and their counsel, seeking to bar them from interfering with the purchasers’ conduct of the operating business (e.g. from contacting banks and critical suppliers to outline the vendors’ perception that the purchasers do not have authority to carry on the business) and also to direct BMO to unfreeze a certain bank account established by the purchasers post-transaction and frozen by BMO shortly after the vendors wrote to them outlining such perceptions. [ 70 ] For largely the same reasons outlined above, these too are a matters falling within the scope of the arbitration clause, being issues “arising from, relating to or in connection with” whether or not the purchasers are (or are not) lawfully in control of the operating business. [ 71 ] As for an arbitrator’s power to bind the vendors’ counsel, I am certain that any injunctive direction issued by an arbitrator to the vendors on this aspect will be complied with (i.e. honoured) by their counsel. [ 72 ] As for issuing a direction to BMO to unfreeze the account in question, I note that, at the opening of the application on May 12, 2023, counsel for the purchasers advised that they had served the BMO branch in question with the injunction materials and that the branch manager had confirmed receipt of them, that BMO had not had time to arrange for counsel to assist, and that, in any case, BMO would comply with whatever order or direction the Court made. [ 73 ] I am not convinced of the Court’s power, in these circumstances or generally, to direct the unfreezing of a bank account i.e. where I do not have any direct evidence of the bank’s reason(

s) for freezing the account.

As I see it, if it came to it, BMO could simply interplead the account balance i.e. exit the scenario without any further involvement. [ 74 ] However, another answer is available here. [ 75 ] At their initial application (and still), the vendors asked for an order directing the purchasers to move monies in the BMO account to (or back to) two other bank accounts in use when the shareholders were conducting the business jointly, as well as an accounting of all funds moved into and out of the BMO account since opening. [ 76 ] I declined to include that relief as part of my interim interim order. [ 77 ] Effectively, my decision was that, pending further order or an arbitrator’s decision, the purchasers could continue to use the BMO account (albeit having, per my order, to provide periodic reports on the activity in that account). [ 78 ] The vendors did not appeal my order i.e. on the basis that this implicit approval of the banking-at-BMO activity was in error. [ 79 ] I hereby amend my interim interim order to make explicit what was implicit i.e. that the purchasers can continue using the BMO account in question for the operations of the business pending (in light of the current decision) any different direction or order of an arbitrator. [ 80 ] All to say: BMO can proceed on the basis that my interim interim order (so amended) clarifies the propriety of the purchasers using that account to conduct their banking business i.e.

BMO can rely on that order to assure itself that the purchasers’ use of the account is proper and that the vendors’ challenge to that use has been rejected i.e. pending whatever else an arbitrator may decide later, going forward. IV. Conclusion [ 81 ] For these reasons, both the interim-relief and central-questions relief must shift to the arbitration sphere. [ 82 ] Both the vendors’ preservative-relief action and the purchasers’ injunction application (the latter effectively challenged as offside the arbitration agreement by the vendors at the May 12 th application) are stayed.

[ 83 ] The main event here was the purchasers’ application to stay the vendors’ interim relief application. On that event, the purchasers have been successful. [ 84 ] They are entitled to their costs of the application on a scale to which the parties may agree or, failing agreement, I will set. [ 85 ] If the parties do not agree on costs by May 23, 2023, the purchasers shall submit their costs materials (maximum 2 pages, excluding any associated materials, such as bills of costs) by June 2, 2023, with the vendors submitting their response materials (same limits) by June 16 th .

Heard on the 12 th day of May, 2023. Dated at the City of Calgary, Alberta this 16 th day of May, 2023. M. J. Lema J.C.K.B.A. Appearances: Christian J. Popowich and Katherine Reiffenstein Code Hunter LLP for the Purchasers (Applicants in 2201 09306 and Respondents in 2201 08887) Robert J. Stack and Ronald S. Girvitz, P.Eng Wilson Laycraft Barristers & Solicitors for the Vendors (Applicants in 2201 08887 and Respondents in 2201 09306) _______________________________________________________ Corrigendum of the Memorandum of Decision of The Honourable Justice M. J.

Lema _______________________________________________________ Heading III changed from Vendor’s Injunction Application to Purchaser’s Injunction Application. Paragraph 69: vendors changed to purchasers. Paragraph 78: implicitly changed to implicit.