Peace River Hydro Partners, Acciona Infrastructure Canada Inc., Samsung C&T Canada Ltd., Acciona Infraestructuras S.A. v. Samsung C&T Corporation, 2022 SCC 41

SUPREME COURT OF CANADA Citation: Peace River Hydro Partners v.

Petrowest Corp., 2022 SCC 41 Appeal Heard: January 19, 2022 Judgment Rendered: November 10, 2022 Docket: 39547 Between: Peace River Hydro Partners, Acciona Infrastructure Canada Inc., Samsung C&T Canada Ltd., Acciona Infraestructuras S.A. and Samsung C&T Corporation Appellants and Petrowest Corporation, Petrowest Civil Services LP by its general partner, Petrowest GP Ltd., carrying on business as RBEE Crushing, Petrowest Construction LP by its general partner Petrowest GP Ltd., carrying on business as Quigley Contracting, Petrowest Services Rentals LP by its general partner Petrowest GP Ltd., carrying on business as Nu-Northern Tractor Rentals, Petrowest GP Ltd., as general partner of Petrowest Civil Services LP, Petrowest Construction LP and Petrowest Services Rentals LP, Trans Carrier Ltd. and Ernst & Young Inc. in its capacity as court-appointed receiver and manager of Petrowest Corporation, Petrowest Civil Services LP, Petrowest Construction LP, Petrowest Services Rentals LP, Petrowest GP Ltd. and Trans Carrier Ltd.

Respondents - and - Canadian Commercial Arbitration Center, Arbitration Place, Chartered Institute of Arbitrators (Canada) Inc., Insolvency Institute of Canada and Canadian Federation of Independent Business Interveners Coram: Wagner C.J. and Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin, Kasirer and Jamal JJ. Reasons for Judgment : (paras. 1 to 189) Côté J. (Wagner C.J. and Moldaver, Rowe and Kasirer JJ. concurring) Concurring Reasons : (paras. 190 to 199) Jamal J. (Karakatsanis, Brown and Martin JJ. concurring)

Note: This document is subject to editorial revision before its reproduction in final form in the Canada Supreme Court Reports . Peace River Hydro Partners, Acciona Infrastructure Canada Inc., Samsung C&T Canada Ltd., Acciona Infraestructuras S.A. and Samsung C&T Corporation Appellants v.

Petrowest Corporation, Petrowest Civil Services LP by its general partner, Petrowest GP Ltd., carrying on business as RBEE Crushing, Petrowest Construction LP by its general partner Petrowest GP Ltd., carrying on business as Quigley Contracting, Petrowest Services Rentals LP by its general partner Petrowest GP Ltd., carrying on business as Nu-Northern Tractor Rentals, Petrowest GP Ltd., as general partner of Petrowest Civil Services LP, Petrowest Construction LP and Petrowest Services Rentals LP, Trans Carrier Ltd. and Ernst & Young Inc. in its capacity as court-appointed receiver and manager of Petrowest Corporation, Petrowest Civil Services LP, Petrowest Construction LP, Petrowest Services Rentals LP, Petrowest GP Ltd. and Trans Carrier Ltd.

Respondents and Canadian Commercial Arbitration Center, Arbitration Place, Chartered Institute of Arbitrators (Canada) Inc., Insolvency Institute of Canada and Canadian Federation of Independent Business Interveners Indexed as: Peace River Hydro Partners v. Petrowest Corp. 2022 SCC 41 File No.: 39547. 2022: January 19; 2022: November 10.

Present: Wagner C.J. and Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin, Kasirer and Jamal JJ. on appeal from the court of appeal for british columbia Bankruptcy and insolvency — Court-ordered receivership — Enforceability of arbitration agreement — Receiver commencing civil action for payment of amounts allegedly owed to debtors under agreements that include mandatory arbitration clauses — Defendants seeking stay of proceedings of receiver’s action under provincial arbitration legislation on basis that arbitration clauses govern dispute — Receiver opposing stay and arguing that court authorized to assert centralized judicial control over matter under federal bankruptcy and insolvency legislation — Whether receiver’s action should be stayed — Bankruptcy and Insolvency Act, R.S.C. 1985, c.

B-3, ss. 183(1) , 243(1) — Arbitration Act, R.S.B.C. 1996, c. 55, s. 15 . Peace River is a partnership formed to build a hydroelectric dam in northeastern British Columbia. Peace River subcontracted work to Petrowest, an Alberta-based construction company, and its affiliates. The parties executed several clauses providing that disputes arising from their relationship were to be resolved through arbitration (“Arbitration Agreements”).

When Petrowest encountered financial difficulties, the Alberta Court of Queen’s Bench granted an order (“Receivership Order”), pursuant to s. 243(1) of the Bankruptcy and Insolvency Act (“ BIA ”), appointing a receiver (“Receiver”) to manage the assets and property of Petrowest and its affiliates. The Receiver then brought a civil claim against Peace River seeking to collect funds allegedly owed to Petrowest and its affiliates for subcontracted work. Peace River applied under s. 15 of British Columbia’s Arbitration Act for a stay of proceedings on the ground that the Arbitration Agreements governed the dispute.

The chambers judge dismissed the stay application and the Court of Appeal dismissed Peace River’s appeal. Held : The appeal should be dismissed. Per Wagner C.J. and Moldaver, Côté , Rowe and Kasirer JJ. : The civil claim brought by the Receiver should be allowed to proceed.

Section 15 of the Arbitration Act does not require a court, in every case, to stay a civil claim brought by a court-appointed receiver where the claim is subject to a valid arbitration agreement. A court may decline to grant a stay where the arbitration agreement at issue is “void, inoperative or incapable of being performed” within the meaning of s. 15(2). An otherwise valid arbitration agreement may, in some circumstances, be inoperative or incapable of being performed if enforcing it would compromise the integrity of court-ordered receivership proceedings .

In the specific circumstances of this case, the chaotic nature of the arbitral proceedings bargained for by the parties would compromise the orderly and efficient resolution of the receivership, to the detriment of affected creditors and contrary to the purpose of the BIA . Accordingly, the chambers judge was entitled to refuse to grant a stay. Competence-competence is a principle that gives precedence to the arbitration process. Generally, arbitrators should be allowed to rule first on their own jurisdiction. The principle is not absolute, however.

A court may resolve a challenge to an arbitrator’s jurisdiction if the challenge involves pure questions of law or, as in this case, questions of mixed fact and law requiring only superficial consideration of the evidentiary record. In a dispute governed by an arbitration agreement with an insolvent or bankrupt counterparty, there is a tension between arbitration law and insolvency law as regards the forum in which the dispute is to be resolved.

The modern view expressed in Canadian arbitration legislation is that parties should be held to their contractual agreements to arbitrate, consistent with principles of party autonomy and freedom of contract. Generally speaking, judicial intervention in commercial disputes governed by a valid agreement clause should be the exception, not the rule. On the other hand, insolvency proceedings are creatures of statute subject to close judicial oversight.

The role of courts in ensuring the equitable and orderly resolution of insolvency disputes is reflected in the single proceeding model, which favours the enforcement of stakeholder rights through a centralized judicial process. Section 183(1) of the BIA confers a broad scope of authority on superior courts to deal with most bankruptcy disputes. Court-ordered receiverships under s. 243 of the BIA are one available tool for enhancing the judicial oversight and flexibility underlying Canadian insolvency law, whereby receivers may take various actions to preserve the debtor’s assets for the benefit of all creditors.

While a court order under s. 243 of the BIA gives a receiver wide-ranging powers, the receiver remains under a fiduciary duty to act honestly and in the best interests of all interested parties. Notwithstanding these differences, arbitration law and insolvency law have much in common. Each prioritizes efficiency and expediency; procedural flexibility is a hallmark of both arbitration and insolvency law; and both often rely on specialized decision makers to achieve their respective objectives.

In many cases, these shared interests will converge through arbitration, and parties should be held to their agreement to arbitrate notwithstanding ongoing insolvency proceedings. Valid arbitration agreements are generally to be respected. The presumption in favour of arbitral jurisdiction is supported by the Court’s longstanding jurisprudence, the pro-arbitration stance adopted in provincial and territorial legislation nationwide, and the foundational principle that contracting parties are free to structure their affairs as they see fit.

However, in certain insolvency matters, it may be necessary to preclude arbitration in favour of a centralized judicial process, when arbitration would compromise the orderly and efficient conduct of a court-ordered receivership. In such a scenario, a court may assert control over the proceedings, both to ensure the timely resolution of the parties’ dispute and to protect the orderly restructuring or dissolution of the debtor and the equal treatment of its creditors. The exercise required to determine if a stay of proceedings should be granted in favour of arbitration is highly factual.

It requires the court to review the statutory regimes and arbitration agreements in play, having regard to the principles of party autonomy and freedom of contract and to the policy imperatives underpinning bankruptcy and insolvency law. To guide this exercise, a two-part framework, implicit in provincial arbitration legislation across the country and mirrored in ss. 15(1) and (2) of the Arbitration Act , applies. The two general components of this framework are: (1) the technical prerequisites for a mandatory stay of court proceedings; and (2) the statutory exceptions to a mandatory stay of court proceedings.

These components ought to remain analytically distinct because the burden of proof shifts between them. The applicant for a stay in favour of arbitration must establish the technical prerequisites. If the applicant discharges this burden, under the second component, the party seeking to avoid arbitration must show that a statutory exception applies. The first component, technical prerequisites, is concerned with whether the arbitration agreement at issue engages the mandatory stay provision in the applicable provincial arbitration statute.

Considerations at this stage may differ depending on the jurisdiction and the nature of the arbitration, i.e. whether it relates to domestic or international arbitration. There are typically four

technical prerequisites: an arbitration agreement exists; court proceedings have been commenced by a party to the arbitration agreement; the court proceedings are in respect of a matter that the parties agreed to submit to arbitration; and the party applying for a stay does so before taking any step in the court proceedings. The applicant must only establish an arguable case that these prerequisites are met.

For the purposes of the technical prerequisites set out in s. 15(1) of the Arbitration Act , a court-appointed receiver may be a party to the debtor’s pre-receivership arbitration agreement through the operation of ordinary contract law. First, it is well established that an entity connected with a signatory to a contract may become bound as a party by operation of law; for example, subsidiaries, assignees, trustees and others claiming through or under the named party.

There is no principled reason why this should not apply to a court-appointed receiver claiming through a debtor under a contract containing an arbitration agreement. It would violate basic principles of contract law to permit a receiver to enforce a contract on the debtor’s behalf while avoiding the burdens, including the obligations to arbitrate contractual disputes. Nor does a receiver’s duty as an officer of the court preclude it from being considered a party to an arbitration agreement within the meaning of s. 15(1).

To the contrary, a receiver owes a fiduciary duty to all interested parties involving the debtor’s assets, property, and undertakings, and may not arbitrarily break contracts entered into by the debtor with third parties prior to the receivership. Second, s. 15(1) does not expressly preclude non-signatories like receivers from being considered parties. Where legislation does not fully address a matter, courts may look to the common law to interpret the statutory language.

It is a foundational contractual doctrine that all non-signatories to a contract may claim only through or under a signatory upon stepping into its contractual shoes. Nothing in the legislative record or text of the Arbitration Act indicates that the legislature intended to change or displace the common law. Third, effectively preventing arbitration as soon as one of the contracting parties entered receivership would subvert the core arbitral principles of party autonomy, limited court intervention, and competence-competence.

As for determining whether the party applying for a stay took a step in the proceedings, this requires an objective approach. The court must ask itself whether, on the facts, the party should be held to have impliedly affirmed the correctness of the proceedings and its willingness to go along with a determination by a court of law instead of arbitration . Undertaking to file a defence does not constitute a step in the proceedings, nor does requesting an extension of time to file a defence.

In the context of s. 15(1) , the very purpose of such a request is to decide whether or not to take a step, and there is no election to proceed with the action. At the second stage of the analysis, the key question is whether, on a balance of probabilities, one or more of the statutory exceptions set out in the applicable provincial arbitration statute apply. If not, the court must grant a stay. A court should dismiss a stay application on the basis of a statutory exception only in a clear case.

One such exception, set out in s. 15(2) of the Arbitration Act , is when the arbitration clause is “void, inoperative or incapable of being performed”. A court-appointed receiver cannot unilaterally disclaim an arbitration agreement, thereby rendering it void, inoperative or incapable of being performed. Section 15(2) should be interpreted narrowly to prevent parties from avoiding arbitration in favour of what they view as a preferable procedure.

Allowing a receiver to avoid arbitration by unilaterally disclaiming a debtor’s pre-existing arbitration agreement conflicts with the text and intent of s. 15 and diminishes the presumptive enforceability and predictability of arbitration agreements. As s. 15(2) makes plain, the sole basis upon which a party may sue to enforce a contract and yet avoid the obligation to arbitrate is that the arbitration agreement has been found by a court to be void, inoperative, or incapable of being performed.

Preferably, court-appointed receivers should seek such a judicial determination by bringing a motion for directions in the supervising court. However, when a receiver initiates court proceedings without prior judicial approval, the court must decide whether to decline to enforce the agreement under s. 15 of the Arbitration Act .

Section 15(2) gives a court the power to refuse a stay by finding that an arbitration agreement has become inoperative or incapable of being performed because of court-ordered receivership proceedings where arbitration would compromise the orderly and efficient resolution of a receivership. There is no conflict between the provincial Arbitration Act and the federal BIA giving rise to paramountcy concerns. In the typical case, the purposes of the Arbitration Act will be served by holding the parties to their agreement to arbitrate through a narrow

interpretation of the words “void”, “inoperative” and “incapable of being performed”. An arbitration agreement will be considered “void” only in the rare circumstances where it is intrinsically defective according to the usual rules of contract law, including when it is undermined by fraud, undue influence, unconscionability, duress, mistake, or misrepresentation. The term “inoperative” has no universal common law definition. Possible reasons for finding an arbitration agreement inoperative include frustration, discharge by breach, waiver, or a subsequent agreement between the parties.

The party seeking to avoid arbitration bears the heavy onus of showing that the exception for an inoperative arbitration agreement applies. The making of a winding-up order or a receivership order may be grounds to find an arbitration agreement inoperative. However, the term inoperative may not always cover scenarios where a court-appointed creditor representative initiates court proceedings on behalf of a debtor. This is because insolvency law generally stays legal claims brought against a debtor while permitting claims brought on its behalf to proceed.

An arbitration agreement is “incapable of being performed” where the arbitral process cannot effectively be set into motion because of a physical or legal impediment beyond the parties’ control . Physical impediments may include inconsistencies, inherent contradictions, or vagueness in the arbitration agreement that cannot be remedied by

interpretation or other contractual techniques; the non-availability of the arbitrator specified in the agreement; the dissolution or non-existence of the chosen arbitration institution; or political or other circumstances at the seat of arbitration rendering arbitration impossible. Legal impediments include express legislative overrides of the parties’ agreement to arbitrate. There is statutory jurisdiction arising from ss. 183(1) and 243(1) (

c) of the BIA for a court to hold that an arbitration agreement is inoperative in the receivership context. It is therefore unnecessary for courts to resort to inherent jurisdiction, which is to be considered only after statutory jurisdiction is determined to be unavailable. The BIA is remedial legislation that is intended, in part, to provide for an orderly and efficient distribution of a bankrupt’s funds to various creditors. As such, it is to be given a liberal

interpretation in order to facilitate its objectives. Section 183(1) of the BIA confirms that superior courts have jurisdiction in bankruptcy and insolvency matters which may be exercised concurrently with their jurisdiction in ordinary civil matters. Further, under s. 243(1) (

c) of the BIA , a court may appoint a receiver to, among other things, take any action that the court considers advisable, if the court considers it just or convenient to do so. This very expansive wording has been interpreted as giving judges the broadest possible mandate in insolvency proceedings to enable them to react to any circumstances that may arise in relation to court-ordered receiverships. Section 243(1) (

c) thus permits a court to do not only what justice dictates but what practicality demands . Practicality demands that a court have the ability, in limited circumstances, to decline to enforce an arbitration agreement following a commercial insolvency. Factors that may be relevant in determining whether an arbitration agreement is inoperative under s. 15(2) include: (

a) the effect of arbitration on the integrity of the insolvency proceedings; (

b) the relative prejudice to the parties to the arbitration agreement and the debtor’s stakeholders; (

c) the urgency of resolving the dispute; (

d) the effect of a stay of proceedings arising from the bankruptcy or insolvency proceedings;

and (

e) any other factors the court considers material in the circumstances. Each factor may carry more or less weight depending on thecircumstances of the case. In the instant case, the technical prerequisites set out in s. 15(1) of the Arbitration Act are met. The impugned civilproceedings are in respect of a contractual dispute covered by valid arbitration agreements. In addition, Peace River has established anarguable case that the Receiver is a party to the Arbitration Agreements and Peace River has not taken a step in the proceedings.

As s. 15is engaged, a stay in favour of arbitration must be granted unless the Arbitration Agreements are found to be void, inoperative orincapable of being performed under s. 15(2). The Receiver has established that the Arbitration Agreements are inoperative. The multiplearbitral processes contemplated in the Arbitration Agreements would compromise the orderly and efficient resolution of the receivership,contrary to the objectives of the BIA.

While recognizing the importance of party autonomy and freedom of contract, referral to arbitrationin the unique circumstances of the instant case would jeopardize the Receiver’s ability to maximize recovery for the creditors and toallow Petrowest and its affiliates to move forward with certainty. Per Karakatsanis, Brown, Martin and Jamal JJ.: There is agreement that the appeal should be dismissed as the ArbitrationAgreements are inoperative under s. 15(2) of the Arbitration Act. However, there is disagreement as to the primary basis for finding theArbitration Agreements to be inoperative.

The analysis should start with the terms of the Receivership Order itself. By suing in court asauthorized under the Receivership Order, the Receiver disclaimed the Arbitration Agreements and they were thereby renderedinoperative.

The Receivership Order authorized the Receiver to receive and collect all monies and accounts owed or owing to Petrowest;to exercise all remedies of Petrowest in collecting such monies; to initiate, prosecute, and continue the prosecution of any and allproceedings with respect to Petrowest’s property, assets, and undertakings, including all proceeds thereof; and to cease to perform anycontracts of Petrowest. An arbitration agreement is a contractual right of a party to have a claim referred to arbitration to the exclusion ofthe courts and thus could be disclaimed pursuant to the Receivership Order.

The combined effect of these terms authorized the Receiverto disclaim the Arbitration Agreements and to sue in court for amounts owing to Petrowest. The terms of the Receivership Orderauthorized the Receiver to sue, either in court or before an arbitrator, at the Receiver’s election, based on what will best promote theorderly and efficient resolution of the receivership under the BIA. The legal effect of the Receiver suing in court and not before anarbitrator was undoubtedly to disclaim reliance on the Arbitration Agreements.

There is agreement with the majority that to the extent that the Receivership Order did not authorize the Receiver to sue incourt, the BIA provided a statutory basis for the chambers judge to declare the Arbitration Agreements inoperative and to dismiss thestay application. Requiring arbitration of the Receiver’s collection action would compromise the orderly and efficient resolution of thereceivership. Cases Cited By Côté J. Referred to: Commonwealth Insurance Co. v.

Larc Developments Ltd., 2010 BCCA 18, 315 D.L.R. (4th) 242; Ontario v.Criminal Lawyers’ Association of Ontario, 2013 SCC 43, [2013] 3 S.C.R. 3; Residential Warranty Co. of Canada Inc. (Re), 2006 ABCA293, 275 D.L.R. (4th) 498; United Used Auto & Truck Parts Ltd., Re, 2000 BCCA 146, 16 C.B.R. (4th) 141; Harbour Assurance Co.(U.K.) Ltd. v. Kansa General International Insurance Co. Ltd., [1993] 3 W.L.R. 42; Uber Technologies Inc. v. Heller, 2020 SCC 16;Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801; TELUS Communications Inc. v. Wellman, 2019SCC 19, [2019] 2 S.C.R. 144; Seidel v.

TELUS Communications Inc., 2011 SCC 15, [2011] 1 S.C.R. 531; Rogers Wireless Inc. v. Muroff,2007 SCC 35, [2007] 2 S.C.R. 921; In re U.S. Lines, Inc., 197 F.3d 631 (1999); Societe Nationale Algerienne v. Distrigas Corp., 80 B.R.606 (1987); Astoria Medical Group v. Health Insurance Plan of Greater New York, 182 N.E.2d 85 (1962); Hofer v. Hofer, (SCC), [1970] S.C.R. 958; Century Services Inc. v. Canada (Attorney General), 2010 SCC 60, [2010] 3 S.C.R. 379; Sam Lévy &Associés Inc. v. Azco Mining Inc., 2001 SCC 92, [2001] 3 S.C.R. 978; Stewart v. LePage (1916), (SCC), 53 S.C.R. 337;Ostrander v.

Niagara Helicopters Ltd. (1973), (ON SC), 1 O.R. (2d) 281; Parsons v. Sovereign Bank of Canada, (UK JCPC), [1913] A.C. 160; Hayes Forest Services Ltd. v. Weyerhaeuser Co., 2008 BCCA 31, 289 D.L.R. (4th) 230;Rosenberg v. Minster, 2014 ONSC 845, 119 O.R. (3d) 27; Alberta (Attorney General) v. Moloney, 2015 SCC 51, [2015] 3 S.C.R. 327;Husky Oil Operations Ltd. v. Minister of National Revenue, (SCC), [1995] 3 S.C.R. 453; 3GS Inc. v. Altus Group Ltd.,2011 ONSC 5755, 96 B.L.R. (4th) 268; Hosting Metro Inc. v.

Poornam Info Vision Pvt, Ltd., 2016 BCSC 2371; Sum Trade Corp. v.Agricom International Inc., 2018 BCCA 379, 18 B.C.L.R. (6th) 322; Gulf Canada Resources Ltd. v. Arochem International Ltd. (1992), (BC CA), 66 B.C.L.R. (2d) 113; Clayworth v. Octaform Systems Inc., 2020 BCCA 117, 446 D.L.R. (4th) 626;Dalimpex Ltd. v. Janicki (2000), 137 O.A.C. 390, aff’d (2003), (ON CA), 228 D.L.R. (4th) 179; Ives & Barker v.Willans, [1894] 2 Ch. 478; Central Investments & Development Corp. v. Miller (1982), (PE SCTD), 133 D.L.R. (3d)440; ABN Amro Bank Canada v.

Krupp Mak Maschinenbau GmbH (1996), (ON SCDC), 135 D.L.R. (4th) 130;Petro-Canada v. 366084 Ontario Ltd. (1995), (ON SC), 25 B.L.R. (2d) 19; Therrien (Re), 2001 SCC 35, [2001] 2S.C.R. 3; Canada (Attorney General) v. Reliance Insurance Co. (2007), (ON SC), 87 O.R. (3d) 42; Heyman v.Darwins, Ld., [1942] A.C. 356; Kaverit Steel and Crane Ltd. v. Kone Corp. (1992), 1992 ABCA 7 , 87 D.L.R. (4th) 129; Jamesv. Thow, 2005 BCSC 809, 5 B.L.R. (4th) 315; Prince George (City) v. McElhanney Engineering Services Ltd. (1995), (BC CA), 9 B.C.L.R. (3d) 368; MacKinnon v.

National Money Mart Co., 2004 BCCA 473, 50 B.L.R. (3d) 291; Third Eye CapitalCorporation v. Dianor Resources Inc., 2019 ONCA 508, 435 D.L.R. (4th) 416; Cantore v. Nemaska Lithium Inc., 2020 QCCA 1333;DGDP-BC Holdings Ltd. v. Third Eye Capital Corporation, 2021 ABCA 226, 459 D.L.R. (4th) 538; Canada (Minister of Indian Affairsand Northern Development) v. Curragh Inc. (1994), (ON SC), 114 D.L.R. (4th) 176; GMAC Commercial CreditCorp. — Canada v. T.C.T. Logistics Inc., 2006 SCC 35, [2006] 2 S.C.R. 123; Orphan Well Association v. Grant Thornton Ltd., 2019SCC 5, [2019] 1 S.C.R. 150; Endean v.

British Columbia, 2016 SCC 42, [2016] 2 S.C.R. 162. By Jamal J. Referred to: Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801; Seidel v. TELUSCommunications Inc., 2011 SCC 15, [2011] 1 S.C.R. 531; Uber Technologies Inc. v. Heller, 2020 SCC 16.

Statutes and Regulations Cited Arbitration Act , R.S.B.C. 1996, c. 55, ss. 1 “arbitration agreement”, 15, 22. Arbitration Act , S.B.C. 2020, c. 2, s. 4 (a). Arbitration Act, 1991 , S.O. 1991, c. 17, ss. 7(2) , 17(2) . Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3, ss. 71 , 72(1) , 183 , 243 . Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36 . International Commercial Arbitration Act , R.S.B.C. 1996, c. 233, s. 2(1) “party”. Treaties and Other International Instruments Convention on the Recognition and Enforcement of Foreign Arbitral Awards , Can. T.S. 1986 No. 43, art. II(3). United Nations.

Commission on International Trade Law. UNCITRAL Model Law on International Commercial Arbitration , U.N. Doc. A/40/17, Ann. I, June 21, 1985, arts. 8(1), 16. Authors Cited Bennett, Frank. Bennett on Receiverships , 3rd ed. Toronto: Carswell, 2011. British Columbia. Legislative Assembly. Official Report of Debates of the Legislative Assembly (Hansard) , vol. 16, No. 7, 4th Sess., 33rd Parl., April 21, 1986, p. 7865. Casey, J. Brian. Arbitration Law of Canada: Practice and Procedure , 3rd ed. Huntington, N.Y.: Juris, 2017. Chan, Darius, and Sidharrth Rajagopal. “To Stay or Not to Stay?

A Clash of Arbitration and Insolvency Regimes” (2021), 38 J. Int’l Arb. 457. DaRe, Vern W., and Teodora Prpa. “Imagine One Restructuring Act in Canada” (2021), 36 B.F.L.R. 363. Esslinger, Heidi. “Creditors Over Contract: A Case Comment on Chandos ”, in Jill Corraini and D. Blair Nixon, eds., Annual Review of Insolvency Law 2021 . Toronto: Thomson Reuters, 2022, 747. Fortier, L. Yves. “Delimiting the Spheres of Judicial and Arbitral Power: ‘Beware, My Lord, of Jealousy’” (2001), 80 Can. Bar Rev. 143. Houlden, L. W., G. B. Morawetz and Janis Sarra. Bankruptcy and Insolvency Law of Canada , 4th ed. rev.

Toronto: Thomson Reuters, 2022 (loose-leaf updated March 2022, release 3). Jackson, Georgina R., and Janis Sarra. “Selecting the Judicial Tool to get the Job Done: An Examination of Statutory

Interpretation, Discretionary Power and Inherent Jurisdiction in Insolvency Matters”, in Janis P. Sarra, ed., Annual Review of Insolvency Law 2007 . Toronto: Thomson Carswell, 2008, 41. Joseph, David. Jurisdiction and Arbitration Agreements and Their Enforcement , 2nd ed. London: Thomson Reuters, 2010. Kirgis, Paul F. “Arbitration, Bankruptcy, and Public Policy: A Contractarian Analysis” (2009), 17 Am. Bankr. Inst. L. Rev. 503. Kröll, Stefan. “The ‘Incapable of Being Performed’ Exception in

Article II(3) of the New York Convention”, in Emmanuel Gaillard, Domenico Di Pietro and Nanou Leleu-Knobil, eds., Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice . London: Cameron May, 2008, 323. Kühn, Wolfgang. “Arbitration and Insolvency” (2011), 5 Disp. Res. Int’l 203. Lamm, Carolyn B., and Jeremy K.

Sharpe. “Inoperative Arbitration Agreements Under the New York Convention”, in Emmanuel Gaillard, Domenico Di Pietro and Nanou Leleu-Knobil, eds., Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice . London: Cameron May, 2008, 297. McElcheran, Kevin P. Commercial Insolvency in Canada , 4th ed. Toronto: LexisNexis, 2019. McEwan, J. Kenneth, and Ludmila B. Herbst. Commercial Arbitration in Canada: A Guide to Domestic and International Arbitrations . Toronto: Thomson Reuters, 2022 (loose-leaf updated February 2022, release 1). Meshel, Tamar. “ Petrowest v.

Peace River Hydro : The Revocability and Separability of Commercial Arbitration Agreements” (2022), 65 Can. Bus. L.J. 329. Pavlović, Marina, and Anthony Daimsis. “Arbitration”, in John C. Kleefeld et al., eds., Dispute Resolution: Readings and Case Studies , 4th ed. Toronto: Emond Montgomery, 2016, 483. Salzberg, Mark A., and Gary M. Zinkgraf. “When Worlds Collide: The Enforceability of Arbitration Agreements in Bankruptcy” (2007), 27 Franchise L.J. 37.

Schramm, Dorothee, Elliott Geisinger and Philippe Pinsolle. “Article II”, in Herbert Kronke et al., eds., Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention . Alphen aan den Rijn, The Netherlands: Kluwer Law International, 2010, 37. St. John Sutton, David, Judith Gill and Matthew Gearing. Russell on Arbitration , 24th ed. London: Thomson Reuters, 2015. Sullivan, Ruth. The Construction of Statutes , 7th ed. Toronto: LexisNexis, 2022. Swan, Angela, Jakub Adamski and Annie Y. Na. Canadian Contract Law , 4th ed. Toronto: LexisNexis, 2018. van den Berg, Albert Jan. The New York Arbitration Convention of 1958: Towards a Uniform Judicial

Interpretation . Hingham, Mass.: Kluwer Law and Taxation, 1981. Wood, Roderick J. Bankruptcy and Insolvency Law , 2nd ed. Toronto: Irwin Law, 2015. APPEAL from a judgment of the British Columbia Court of Appeal (Bennett, Dickson and Grauer JJ.A.), 2020 BCCA 339 , 43 B.C.L.R. (6th) 8, 452 D.L.R. (4th) 535, 5 C.L.R. (5th) 31, 84 C.B.R. (6th) 174, 9 B.L.R. (6th) 163, [2021] 7 W.W.R. 195, [2020] B.C.J. No. 1940 (QL), 2020 CarswellBC 3008 (WL), affirming a decision of Iyer J., 2019 BCSC 2221 , 5 C.L.R. (5th) 14, 74 C.B.R. (6th) 53, 100 B.L.R. (5th) 128, [2019] B.C.J. No. 2489 (QL), 2019 CarswellBC 3819 (WL).

Appeal dismissed. David de Groot , Joanne Luu , Robert Martz and Alison Scott , for the appellants. Kelsey Meyer , Ciara Mackey , Stephanie Clark and Paul Romaniuk , for the respondents. Laurent Debrun and Charles Côté-De Lagrave , for the intervener the Canadian Commercial Arbitration Center. Lisa C. Munro and Cynthia B. Kuehl , for the intervener Arbitration Place. Christina Doria , Michael Nowina and Brendan O’Grady , for the intervener the Chartered Institute of Arbitrators (Canada) Inc. Kibben Jackson , Tom Posyniak and Glen Nesbitt , for the intervener the Insolvency Institute of Canada.

Anthony Daimsis , for the intervener the Canadian Federation of Independent Business. The judgment of Wagner C.J. and Moldaver, Côté, Rowe and Kasirer JJ. was delivered by Côté J. — TABLE OF CONTENTS Paragraph I. Overview 1 II. Background 11 III. Statutory Provisions 18 IV. Decisions Below 19 A. British Columbia Supreme Court, 2019 BCSC 2221 , 100 B.L.R. (5th) 128 (Iyer J.) 19 B. British Columbia Court of Appeal, 2020 BCCA 339 , 452 D.L.R. (4th) 535 (Bennett, Dickson and Grauer JJ.A.) 28 V. Issues 32 VI. Analysis 37 A. Competence-Competence Principle 38

(1) General Principle 39

(2) Exceptions to the Competence-Competence Principle 42

(3) Application of the Principle in This Case 43 B. Relationship Between Arbitration Law and Insolvency Law 44

(1) Dispute Resolution by Arbitration 49

(2) Dispute Resolution in Insolvency 51

(3) Commonalities Between Arbitration Law and Insolvency Law 59 C. Two-Part Framework for Stays of Proceedings in Favour of Arbitration 76

(1) Technical Prerequisites 81

(2) Statutory Exceptions 87 D.

Section 15 of the Arbitration Act 91

(1) Text of

Section 15 92

(2) Proper

Interpretation of

Section 15 93 E. Application of

Section 15 of the Arbitration Act 159

(1) Technical Prerequisites:

Section 15 Is Engaged 159

(2) Statutory Exceptions: The Arbitration Agreements Are “Inoperative” Under Section 15(2) 172

(3) Conclusion on

Section 15 186 VII. Disposition 189 Appendix — Arbitration Agreements I. Overview [ 1 ] This appeal calls upon our Court to clarify whether and in what circumstances a contractual agreement to arbitrate governed by the Arbitration Act , R.S.B.C. 1996, c. 55 (“ Arbitration Act ”), should give way to the public interest in the orderly and efficient resolution of a court-ordered receivership under s. 243 of the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3 (“ BIA ”). [ 2 ] A construction dispute underlies this appeal.

The appellant Peace River Hydro Partners is a partnership formed to build a hydroelectric dam in northeastern British Columbia. Two members of that partnership, and their parent corporations, are also appellants in this Court (collectively, “Peace River”). The respondent Petrowest Corporation (“Petrowest”) is an Alberta-based construction company. In December 2015, Peace River agreed to subcontract certain work to Petrowest and its affiliates (“Petrowest Affiliates”), which are also respondents in this appeal.

The parties executed several clauses providing that disputes arising from their relationship were to be resolved through arbitration (“Arbitration Agreements”). [ 3 ] But Petrowest soon found itself in dire financial straits. The Alberta Court of Queen’s Bench ordered Petrowest and the Petrowest Affiliates into receivership pursuant to s. 243 of the BIA . The respondent Ernst & Young Inc. acts as their court-appointed receiver and manager (“Receiver”).

The Receiver brought a civil claim in the Supreme Court of British Columbia seeking to collect accounts receivable allegedly owed to Petrowest and the Petrowest Affiliates by Peace River. The latter applied to stay the civil proceedings under s. 15 of the Arbitration Act on the ground that the Arbitration Agreements governed the dispute.

The Receiver opposed the stay application on behalf of Petrowest and the Petrowest Affiliates, arguing that the BIA authorized the court to assert centralized judicial control over the matter rather than send the Receiver to multiple arbitral forums. [ 4 ] The chambers judge agreed with the Receiver and dismissed the stay application. The Court of Appeal upheld the chambers judge’s ruling on the basis that the Receiver was not a “party” to the Arbitration Agreements within the meaning of s. 15(1) of the Arbitration Act .

It held that the doctrine of separability allowed the Receiver to disclaim the Arbitration Agreements and sue on the underlying contracts to recover payment for past performance. Peace River now asks this Court to set aside both decisions below and stay the court proceedings in favour of arbitration. [ 5 ] I would dismiss the appeal and affirm the dismissal of the stay application by the courts below. The civil claim brought by the Receiver on behalf of Petrowest and the Petrowest Affiliates may proceed.

This conclusion flows from the following two-part analysis, which is mandated by s. 15 of the Arbitration Act and outlined in further detail later in these reasons. [ 6 ] First, the Court of Appeal erred in concluding that s. 15 was not engaged because the Receiver was not a “party” to the Arbitration Agreements.

Permitting a court-appointed receiver to avoid arbitration on the basis that it is not a party to the debtor’s pre-existing agreement to arbitrate is inconsistent with a proper reading of s. 15, ordinary principles of contract law, party autonomy, and this Court’s longstanding jurisprudence with respect to arbitration. Nor can disclaimer or the doctrine of separability permit receivers to unilaterally render otherwise valid arbitration agreements “inoperative” or “incapable of being performed” within the meaning of s. 15.

Only a court can make a finding that an arbitration agreement is inoperative or incapable of being performed. [ 7 ] Second, although s. 15 is engaged, the chambers judge was entitled to refuse to grant a stay under s. 15(2). An otherwise valid arbitration agreement may, in some circumstances, be inoperative or incapable of being performed. For example, an arbitration agreement may be inoperative if enforcing it would compromise court-ordered receivership proceedings under s. 243 of the BIA .

This may occur where the arbitration agreed to by the parties would preclude the orderly and efficient resolution of the receivership, contrary to the purposes of the BIA . [ 8 ] To be clear, the fact that a party has entered receivership or insolvency proceedings or is financially impecunious is not, on its own, a sufficient basis for a court to find an arbitration agreement inoperative. The party seeking to avoid arbitration must establish, on a balance of probabilities, that a stay in favour of arbitration would compromise the integrity of the parallel insolvency proceedings.

The following non-exhaustive list of factors, discussed further below, may assist in the court’s analysis: (

a) the effect of arbitration on the integrity of the insolvency proceedings, which are intended to minimize economic prejudice to creditors; (

b) the relative prejudice to the parties to the arbitration agreement and the debtor’s stakeholders; (

c) the urgency of resolving the dispute; (

d) the effect of a stay of proceedings arising from the bankruptcy or insolvency proceedings, if applicable; and (

e) any other factors the court considers material in the circumstances. [ 9 ] Applying the above factors, I find that the chambers judge correctly dismissed the stay application. The Arbitration Agreements are inoperative within the meaning of s. 15(2) of the Arbitration Act . Sections 243 and 183 of the BIA authorize courts to do what practicality demands in the context of a receivership. In this case, practicality demands that the Arbitration Agreements not be enforced, in the interest of an orderly and efficient resolution of the receivership.

In short, the chaotic nature of the arbitral proceedings bargained for by the parties would compromise the integrity of the receivership, to the detriment of affected creditors and contrary to the purposes of the BIA . [ 10 ] I stress that this result is context-specific. The unique facts of this case, which pit the public policy objectives underlying the BIA against freedom of contract and party autonomy, justify departing from the legislative and judicial preference for holding parties to their arbitration agreements.

Contrary to conventional wisdom, however, arbitration law and insolvency law need not always exist at “polar extremes”. They have much in common, including an emphasis on efficiency and expediency, procedural flexibility, and expert decision-making. These shared interests often converge through arbitration, such that granting a stay in favour of arbitration will promote the objectives of both provincial arbitration legislation and federal insolvency legislation. It is for this reason that courts should generally hold parties to their agreements to arbitrate, even if one of them has become insolvent.

To do otherwise

would not only threaten the important public policy served by enforcing arbitration agreements and thus Canada’s position as a leader in commercial arbitration, but also jeopardize the public interest in the expeditious, efficient, and economical clean-up of the aftermath of a financial collapse. II. Background [ 11 ] Peace River was formed to design and construct works at the Site C Project, a major dam and hydroelectric generating station on the Peace River in northeastern British Columbia.

The partnership includes the appellants Acciona Infrastructure Canada Inc. and Samsung C&T Canada Ltd., which are the Canadian subsidiaries of the appellants Acciona Infraestructuras S.A. and Samsung C&T Corporation. [ 12 ] Petrowest is the third member of the partnership.

The following agreements between the parties are relevant to this appeal (collectively, “Main Agreements”): • a general partnership agreement dated December 17, 2015, between Acciona Infrastructure Canada Inc., Samsung C&T Canada Ltd., and Petrowest, creating Peace River (“Partnership Agreement”); • a guarantee and cross-indemnity agreement dated December 17, 2015, between Acciona Infraestructuras S.A., Samsung C&T Corporation, and Petrowest, guaranteeing the obligations of the subsidiary partners to the Partnership Agreement (“Guarantee”); • purchase orders under which Peace River subcontracted certain work to Petrowest and the Petrowest Affiliates (“Purchase Orders”); and • a subcontract dated June 1, 2016, between a Petrowest Affiliate and Peace River, awarding further subcontracted work. [ 13 ] The Main Agreements contain the Arbitration Agreements in which the parties agree to refer disputes to arbitration.

It should be noted, however, that the wording of each Arbitration Agreement differs. [1] Each applies to a different set of potential disputes and provides for different arbitration procedures. And some of the Purchase Orders do not contain arbitration clauses. [ 14 ] Less than two years into the partnership, Petrowest encountered financial difficulties. It entered receivership on August 15, 2017. The Alberta Court of Queen’s Bench granted a receivership order pursuant to s. 243(1) of the BIA (“Receivership Order”).

The Receivership Order appointed the Receiver to manage the assets and property of the debtors, Petrowest and the Petrowest Affiliates. It authorized the Receiver to do the following, among other things: (

a) disclaim, abandon or renounce the debtors’ interest in property; (

b) initiate the prosecution of “any and all proceedings” with respect to the debtors and their property; (

c) assign the debtors into bankruptcy, become their trustee in bankruptcy, and take all steps reasonably required to carry out its role as trustee in bankruptcy; (d) “cease to perform any contracts of the Debtors”; and (e) “receive and collect all monies and accounts” owing to the debtors (A.R., vol. XI, at pp. 2900-2903). [ 15 ] On April 3, 2018, the Receiver assigned the Petrowest Affiliates into bankruptcy and became their trustee in bankruptcy.

It is important to note that Petrowest itself is not bankrupt. [ 16 ] On August 29, 2018, the Receiver brought a civil claim against Peace River in the Supreme Court of British Columbia on behalf of Petrowest and the Petrowest Affiliates. The Receiver sought to collect funds allegedly owing to Petrowest and the Petrowest Affiliates for performance of work subcontracted under the Main Agreements. [ 17 ] On August 30, 2018, Peace River was served with the notice of civil claim. In a letter dated September 28, 2018, counsel for Peace River undertook to file a defence.

Instead, Peace River ultimately applied under s. 15 of the Arbitration Act for a stay of proceedings on the ground that the Arbitration Agreements governed the dispute. The Receiver resisted the application on behalf of Petrowest and the Petrowest Affiliates. III. Statutory Provisions [ 18 ] This appeal concerns the interplay between two statutes: the Arbitration Act and the BIA . The key sections of these two statutes are set out below. Arbitration Act

Definitions 1 In this Act: . . . “arbitration agreement” means a written or oral term of an agreement between 2 or more persons to submit present or future disputes between them to arbitration, whether or not an arbitrator is named, but does not include an agreement to which the International Commercial Arbitration Act applies;

. . . Stay of proceedings 15

(1) 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.

(2) 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. BIA General Provisions Application of other substantive law 72

(1) The provisions of this Act shall not be deemed to abrogate or supersede the substantive provisions of any other law or statute relating to property and civil rights that are not in conflict with this Act, and the trustee is entitled to avail himself of all rights and remedies provided by that law or statute as supplementary to and in addition to the rights and remedies provided by this Act. . . . Jurisdiction of Courts Courts vested with jurisdiction 183

(1) The following courts are invested with such jurisdiction at law and in equity as will enable them to exercise original, auxiliary and ancillary jurisdiction in bankruptcy and in other proceedings authorized by this Act during their respective terms, as they are now, or may be hereafter, held, and in vacation and in chambers: . . . (

c) in the Provinces of Nova Scotia and British Columbia, the Supreme Court; . . . Secured Creditors and Receivers Court may appoint receiver 243

(1) Subject to subsection (1.1), on application by a secured creditor, a court may appoint a receiver to do any or all of the following if it considers it to be just or convenient to do so:

(

a) take possession of all or substantially all of the inventory, accounts receivable or other property of an insolvent person or bankrupt that was acquired for or used in relation to a business carried on by the insolvent person or bankrupt; (

b) exercise any control that the court considers advisable over that property and over the insolvent person’s or bankrupt’s business; or (

c) take any other action that the court considers advisable. IV. Decisions Below A. British Columbia Supreme Court, 2019 BCSC 2221 , 100 B.L.R. (5th) 128 (Iyer J.) [ 19 ] The first issue before the chambers judge was whether s. 15 of the Arbitration Act was engaged. If so, the second issue was whether the court had jurisdiction to decline a stay notwithstanding the application of s. 15(1) of the Arbitration Act .

Under s. 15(2), the court would be required to stay the proceedings in favour of arbitration unless it found the Arbitration Agreements “void, inoperative or incapable of being performed”. [ 20 ] On the first issue, the chambers judge held that s. 15 was engaged. She analyzed the four requirements for a mandatory stay contemplated in s. 15 . [ 21 ] First, the chambers judge found that the Receiver was a “party to an arbitration agreement” within the meaning of s. 15(1).

She stated that the Receiver was “the trustee in bankruptcy of Petrowest and the Petrowest Affiliates”, such that it had acquired their contractual rights to sue on the Main Agreements pursuant to s. 71 of the BIA (paras. 16-17). She concluded that by suing on the Main Agreements “in its own name as the trustee”, the Receiver became a party to the Arbitration Agreements within the meaning of s. 15(1) (para. 19). [ 22 ] Second, the chambers judge rejected the argument that Peace River had taken a “step in the proceedings” before bringing its stay application.

She held that undertaking to file a defence without invoking the rules of court did not constitute a step in the proceedings ( Commonwealth Insurance Co. v.

Larc Developments Ltd. , 2010 BCCA 18 , 315 D.L.R. (4th) 242). [ 23 ] Third, the chambers judge concluded that at least some of the contractual claims advanced by the Receiver were captured under the broadly worded Arbitration Agreements. [ 24 ] Finally, the chambers judge was “prepared to assume” that at least some of the Arbitration Agreements at issue were not void, inoperative, or incapable of performance within the meaning of s. 15(2) (para. 33). [ 25 ] On the second issue before her, the chambers judge concluded that the court had “inherent jurisdiction”, flowing from s. 183 of the BIA , to override arbitration agreements governed by s. 15 of the Arbitration Act .

She noted that the exercise of this power could function in one of two ways: (

a) it could render an arbitration clause incapable of being performed or inoperative within the meaning of s. 15(2); or (

b) if s. 15(2) did not admit of that

interpretation, s. 183 of the BIA could prevail over s. 15 of the Arbitration Act based on the principle of paramountcy. The chambers judge did not address this question because it had not been argued before her (para. 42). [ 26 ] The chambers judge went on to exercise her “inherent jurisdiction” to dismiss the stay application.

She found that s. 183 of the BIA empowers superior courts to disrupt private contractual rights where doing so is necessary to achieve fairness in the bankruptcy or insolvency process and to promote the underlying objectives of the BIA , such as the proper administration and protection of a bankrupt’s estate. [ 27 ] The chambers judge noted that enforcing the Arbitration Agreements would entail multiple overlapping arbitrations and potential litigation, resulting in “significant cost and delay” when compared with a single judicial proceeding (para. 60).

She emphasized that the parties agreed that overriding the Arbitration Agreements “would promote the efficient and inexpensive resolution of their dispute” (para. 56). On this basis, the chambers judge concluded that granting a stay would “significantly compromise achievement of the objectives of the BIA ” (para. 61). She dismissed Peace River’s stay application and allowed the civil claim to proceed. B.

British Columbia Court of Appeal, 2020 BCCA 339 , 452 D.L.R. (4th) 535 (Bennett, Dickson and Grauer JJ.A.) [ 28 ] Peace River appealed the chambers judge’s decision, primarily on the basis that courts do not have inherent jurisdiction under s. 183 of the BIA to decline a stay mandated by s. 15 of the Arbitration Act . [ 29 ] The Court of Appeal dismissed the appeal but did not endorse the chambers judge’s reasoning. It cautioned that inherent jurisdiction should be invoked only rarely and cannot be used to negate an unambiguous expression of legislative will ( Ontario v.

Criminal Lawyers’ Association of Ontario , 2013 SCC 43 , [2013] 3 S.C.R. 3; Residential Warranty Co. of Canada Inc. (Re) , 2006 ABCA 293 , 275 D.L.R. (4th) 498; United Used Auto & Truck Parts Ltd., Re , 2000 BCCA 146 , 16 C.B.R. (4th) 141).

However, the Court of Appeal found it unnecessary to consider whether the chambers judge had discretion under the BIA to refuse to grant a stay notwithstanding the application of s. 15 of the Arbitration Act . [ 30 ] The Court of Appeal relied on the doctrine of separability in arbitration law, which permits an arbitration clause to be treated as a “self-contained contract collateral to the containing contract” ( Harbour Assurance Co. (U.K.) Ltd. v. Kansa General

International Insurance Co. Ltd. , [1993] 3 W.L.R. 42 (C.A.), at p. 49 ; see also Uber Technologies Inc. v. Heller , 2020 SCC 16 , at paras. 221-25 , per Côté J., dissenting, but not on this point).

According to the Court of Appeal, separability allows a receiver, as a court-appointed fiduciary, to disclaim an otherwise valid arbitration agreement even though it has adopted the containing contract for the purpose of suing on it (para. 55). [ 31 ] Applying the doctrine of separability, the Court of Appeal found that the Receiver had disclaimed the Arbitration Agreements by bringing the civil claim on behalf of Petrowest and the Petrowest Affiliates. Accordingly, the Receiver was not a party to those agreements and s. 15 of the Arbitration Act did not apply.

In any event, if the Receiver was a party, its disclaimer rendered the Arbitration Agreements inoperative or incapable of being performed within the meaning of s. 15(2) (para. 56). Accordingly, the Court of Appeal dismissed the appeal, upholding the chambers judge’s decision to refuse to grant a stay in favour of arbitration. V.

Issues [ 32 ] This appeal raises the following question: • In what circumstances is an otherwise valid arbitration agreement unenforceable under s. 15(2) of the Arbitration Act in the context of a court-ordered receivership under the BIA ? [ 33 ] This question raises the following sub-questions: (

a) Did the Court of Appeal err in concluding that s. 15 of the Arbitration Act is not engaged? (

b) If s. 15 is engaged, did the chambers judge err in finding that a court nevertheless has jurisdiction to refuse a stay of proceedings in the context of a court-ordered receivership under the BIA ? (

c) If a court has jurisdiction to refuse to grant a stay in the context of a court-ordered receivership, how should this jurisdiction be exercised in this case? [ 34 ] In brief, I conclude that s. 15 of the Arbitration Act does not require a court, in every case, to stay a civil claim brought by a court-appointed receiver where the claim is subject to a valid arbitration agreement. A court may decline to grant a stay where the party seeking to avoid arbitration establishes that the arbitration agreement at issue is “void, inoperative or incapable of being performed” within the meaning of s. 15(2).

In the context of a court-ordered receivership, an arbitration agreement may be inoperative if enforcing it would compromise the orderly and efficient resolution of the receivership. This analysis necessarily turns on the particular factual scenario before the court. [ 35 ] Applying the foregoing, I find that the Receiver, on behalf of Petrowest and the Petrowest Affiliates, has established that the Arbitration Agreements are inoperative.

I see no basis on which to interfere with the chambers judge’s finding that a single judicial process “will be faster and less expensive” than the multiple overlapping proceedings required by the Arbitration Agreements (para. 56). The parties agreed before the chambers judge that proceeding through the courts, rather than by arbitration, “would promote the efficient and inexpensive resolution of their dispute” (para. 56).

On this basis, I conclude that arbitration would compromise the orderly and efficient resolution of the receivership, contrary to the objectives of the BIA . [ 36 ] Therefore, the chambers judge was entitled to refuse Peace River’s request for a stay in favour of arbitration under s. 15(2) of the Arbitration Act . I would accordingly dismiss the appeal. VI. Analysis [ 37 ] My analysis below proceeds as follows. First, I explain and apply the “competence-competence” principle. Second, I discuss the relationship between arbitration law and insolvency law, including key commonalities between these bodies of law.

Third, I outline the general two-part framework applicable on stay applications brought under domestic arbitration legislation in Canada. Fourth, I interpret s. 15 of the Arbitration Act and resolve the four interpretive issues raised. Finally, I apply the two-part s. 15 stay framework to this case. A. Competence-Competence Principle [ 38 ] I begin with a discussion of the competence-competence principle in Canadian arbitration law, as it is germane to the issues in this appeal.

(1) General Principle [ 39 ] Competence-competence is a principle that gives precedence to the arbitration process. It holds that, generally speaking, “arbitrators should be allowed to exercise their power to rule first on their own jurisdiction” ( Dell Computer Corp. v. Union des consommateurs , 2007 SCC 34 , [2007] 2 S.C.R. 801, at para. 70 ). This preference for arbitration is a departure from the traditional approach in Canada, which favoured an interventionist judicial role ( Dell , at para. 69).

Historically, judges took a dim view of arbitration, “treating it as a ‘second-class method of dispute resolution’” ( TELUS Communications Inc. v. Wellman , 2019 SCC 19 , [2019] 2 S.C.R. 144, at para. 48 ; Seidel v. TELUS Communications Inc. , 2011 SCC 15 , [2011] 1 S.C.R. 531, at para. 96 ). [ 40 ] However, in 1986, Canada acceded to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards , Can. T.S. 1986 No. 43 (“New York Convention”), which established a single, uniform set of rules for international commercial arbitration that applied worldwide.

Canada also adopted the UNCITRAL Model Law on International Commercial Arbitration , U.N. Doc. A/40/17, Ann. I, June 21, 1985 (“Model Law”), prepared by the United Nations Commission on International Trade Law. The Model Law was intended to guide legislative development in jurisdictions seeking to establish a modern legal framework in order to encourage commercial arbitration (J. K. McEwan and L. B. Herbst, Commercial Arbitration in Canada: A Guide to Domestic and International Arbitrations (loose-leaf), at § 1:4).

Article 16 of the Model Law articulates the

competence-competence principle. British Columbia adopted the principle, as set out in the Model Law, through s. 22 of the ArbitrationAct (Seidel, at para. 28). [41] In light of the foregoing, it is well established in Canada that a challenge to an arbitrator’s jurisdiction shouldgenerally be decided at first instance by the arbitrator (see Uber, at paras. 31-34; Seidel; Dell; Rogers Wireless Inc. v. Muroff, 2007 SCC35, [2007] 2 S.C.R. 921). This reflects the presumption that arbitrators have fact-finding expertise comparable to that of courts, and thatthe parties intended an arbitrator to determine the validity and scope of their agreement (McEwan and Herbst, at § 5:10).

(2) Exceptions to the Competence-Competence Principle [42] The competence-competence principle is not absolute, however. A court may resolve a challenge to an arbitrator’sjurisdiction if the challenge involves pure questions of law, or questions of mixed fact and law requiring only superficial consideration ofthe evidentiary record (Uber, at para. 32; Dell, at paras. 84-85). This exception is justified by the particular expertise that courts have indeciding such questions. Further, it allows a legal argument relating to the arbitrator’s jurisdiction “to be resolved once and for all, andalso allows the parties to avoid duplication of a strictly legal debate” (Dell, at para. 84).

(3) Application of the Principle in This Case [43] The questions in this appeal are of mixed fact and law. In the circumstances of this case, all that is required is theinterpretation of arbitration and insolvency legislation and a superficial consideration of the evidentiary record. Accordingly, a court isentitled to resolve the question of arbitral jurisdiction without offending the competence-competence principle. B.

Relationship Between Arbitration Law and Insolvency Law [44] To decide this appeal, I must determine the effect, if any, that the receivership of Petrowest and the PetrowestAffiliates under the federal BIA has on the Arbitration Agreements, which are governed by British Columbia’s Arbitration Act. Before Ido so, it is helpful to explain the interaction between arbitration law and insolvency law more generally. [45] Arbitration law and insolvency law have long been understood to embody “opposing interests” (see, e.g., W. Kühn,“Arbitration and Insolvency” (2011), 5 Disp. Res. Int’l 203, at p. 203; M. A.

Salzberg and G. M. Zinkgraf, “When Worlds Collide: TheEnforceability of Arbitration Agreements in Bankruptcy” (2007), 27 Franchise L.J. 37; P. F. Kirgis, “Arbitration, Bankruptcy, andPublic Policy: A Contractarian Analysis” (2009), 17 Am. Bankr. Inst. L. Rev. 503; D. Chan and S. Rajagopal, “To Stay or Not to Stay? AClash of Arbitration and Insolvency Regimes” (2021), 38 J. Int’l Arb. 457).

In an oft-cited passage, the United States Court of Appealsfor the Second Circuit described the interaction between arbitration law and insolvency law as “a conflict of near polar extremes:bankruptcy policy exerts an inexorable pull towards centralization while arbitration policy advocates a decentralized approach towardsdispute resolution” (In re U.S. Lines, Inc., 197 F.3d 631 (1999), at p. 640; see also Societe Nationale Algerienne v. Distrigas Corp., 80B.R. 606 (D. Mass. 1987), at p. 610). [46] Recently, two trends have thrown this tension into sharp relief.

First, arbitration has become an increasingly popularmechanism for resolving commercial disputes, both in Canada and abroad (Wellman, at para. 54; Seidel, at para. 23). Today, parties andcounsel alike recognize the potential strategic and tactical advantages of arbitration as compared to traditional litigation. These mayinclude privacy and confidentiality, efficiency and timeliness, relaxed rules of evidence, freedom to determine procedural rules and selectdecision makers with relevant expertise, and cross-border enforceability of awards (J. B.

Casey, Arbitration Law of Canada: Practiceand Procedure (3rd ed. 2017), at ch. 1.6). [47] Second, economic shocks, including the 2008 financial crisis and the disruptions resulting from the COVID-19pandemic, have placed increased demands on our insolvency laws (L. W. Houlden, G. B. Morawetz and J. Sarra, Bankruptcy andInsolvency Law of Canada (4th ed. rev. (loose-leaf)), at § 1:6; H. Esslinger, “Creditors Over Contract: A Case Comment on Chandos”, inJ. Corraini and D. B. Nixon, eds., Annual Review of Insolvency Law 2021 (2022), 747; V. W. DaRe and T.

Prpa, “Imagine OneRestructuring Act in Canada” (2021), 36 B.F.L.R. 363, at p. 364). [48] It is thus not unusual now for a commercial party to find itself in a dispute governed by an arbitration agreementwith an insolvent or bankrupt counterparty. In this scenario, there is a tension between arbitration law and insolvency law as regards theforum in which the dispute is to be resolved. To understand this tension, it is necessary to briefly outline the characteristics of arbitrationand insolvency proceedings. Despite clear differences, these two bodies of law have much in common.

Accordingly, as I will explain,courts must assess the enforceability of arbitration agreements in the context of parallel insolvency proceedings on a case-by-case basis.Below, I provide guidance in this regard.

(1) Dispute Resolution by Arbitration [49] The modern view expressed in Canadian arbitration legislation is that parties should be held to their contractualagreements to arbitrate. This gives effect to the concept of “party autonomy”, according to which parties are free to “charter a privatetribunal” to resolve their disputes (Wellman, at para. 52, citing Astoria Medical Group v. Health Insurance Plan of Greater New York,182 N.E.2d 85 (N.Y. 1962), at p. 87; M. Pavlović and A. Daimsis, “Arbitration”, in J. C. Kleefeld et al., eds., Dispute Resolution:Readings and Case Studies (4th ed. 2016), 483, at p. 485).

Party autonomy is closely related to freedom of contract (Hofer v. Hofer, (SCC), [1970] S.C.R. 958, at p. 963). Modern arbitration legislation is premised on these principles, which inform the policychoices embodied in provincial arbitration statutes like the Arbitration Act (Wellman, at para. 52). [50] Party autonomy and freedom of contract go hand in hand with the principle of limited court intervention in arbitralproceedings.

This latter principle is “fundamental” to modern arbitration law and “finds expression throughout modern Canadianarbitration legislation” (Wellman, at paras. 52-55; McEwan and Herbst, at § 10:2; Casey, at ch. 7.1). For instance, s. 4(

a) of BritishColumbia’s new Arbitration Act, S.B.C. 2020, c. 2, provides that “[i]n matters governed by this Act, a court must not intervene unless soprovided in this Act”. Similar expressions of principle are found in provincial arbitration legislation across the country. It follows that,generally speaking, judicial intervention in commercial disputes governed by a valid arbitration clause should be the exception, not the

rule.

(2) Dispute Resolution in Insolvency [51] On the other hand, insolvency proceedings are creatures of statute subject to close judicial oversight. [52] Insolvency engages broad public interests. It “affects all of the stakeholders of the insolvent business enterprise”,including creditors, employees, landlords, suppliers, shareholders, and customers (K. P. McElcheran, Commercial Insolvency in Canada(4th ed. 2019), at ¶1.1). In the case of very large companies, an insolvency may even “threaten the existence of whole communities”(¶1.1).

Canadian legislation therefore offers stakeholders a wide range of judicial procedures to resolve problems presented by aninsolvency (¶¶1.1-1.12). [53] This procedural flexibility has allowed Canadian courts to become instrumental in (

a) providing a forum for theorderly resolution of the competing rights and objectives of individual stakeholders of insolvent business enterprises, and (

b) creatingmechanisms for the preservation of the value of the insolvent business or its assets for the benefit of all stakeholders (Century ServicesInc. v. Canada (Attorney General), 2010 SCC 60, [2010] 3 S.C.R. 379, at paras. 2 and 22; McElcheran, at ¶¶1.1-1.14). I elaborate onthese two points below. (

a) Single Proceeding Model [54] The central role of courts in ensuring the equitable and orderly resolution of insolvency disputes is reflected in the“single proceeding model”. [55] This model favours the enforcement of stakeholder rights through a centralized judicial process. The legislativepolicy in favour of “single control” is reflected in Canadian bankruptcy, insolvency, and winding-up legislation (Century Services, atparas. 22-23).

The single proceeding model is intended to mitigate the inefficiency and chaos that would result if each stakeholder in aninsolvency initiated a separate claim to enforce its rights. In other words, the single proceeding model protects the clear “public interestin the expeditious, efficient and economical clean-up of the aftermath of a financial collapse” (Sam Lévy & Associés Inc. v. Azco MiningInc., 2001 SCC 92, [2001] 3 S.C.R. 978, at para. 27, citing Stewart v. LePage (1916), (SCC), 53 S.C.R. 337).

ThisCourt has held that s. 183(1) of the BIA confers a “broad scope of authority” on superior courts to deal with most bankruptcy disputes, as“[a]nything less would unnecessarily complicate and undermine the economical and expeditious winding up of the bankrupt’s affairs”(Sam Lévy, at para. 38). (

b) Court-Ordered Receiverships Under the BIA [56] Court-ordered receiverships under s. 243 of the BIA, like the receivership in the present case, are one available toolfor enhancing the judicial oversight and flexibility underlying Canadian insolvency law. Section 243(1) of the BIA confers broadauthority on a court to appoint a receiver if the court “considers it to be just or convenient to do so”. Under s. 243(1), a court may appointa receiver to do any of the following, with a view to enhancing and facilitating the preservation and realization of the debtor’s assets forthe benefit of all creditors: (

a) take possession of all or substantially all of the debtor’s inventory, accounts receivable or other propertythat was acquired for or used in relation to a business carried on by the debtor; (

b) exercise any control that the court considers advisableover that property and over the debtor’s business; or (

c) take “any other action that the court considers advisable” (R. J. Wood,Bankruptcy and Insolvency Law (2nd ed. 2015), at pp. 553-54). [57] Given the breadth of their powers, court-appointed receivers are necessarily subject to close judicial oversight.Receivers represent neither a security holder nor the debtor; they are officers of the court whose “sole authority is derived from . . . Courtappointment and from the directions given [to them] by the Court” (Ostrander v. Niagara Helicopters Ltd. (1973), (ONSC), 1 O.R. (2d) 281 (H.C.), at p. 286).

In most cases, including the one at bar, a court order under s. 243 of the BIA gives a receiverwide-ranging powers. [58] Despite this flexibility, court-appointed receivers have a fiduciary duty to act honestly and in the best interests of allinterested parties. For example, a receiver is generally not permitted to terminate existing contracts between third parties and the debtor,but must apply to the court to discharge onerous contracts, such as those which would be unduly costly to perform (F. Bennett, Bennetton Receiverships (3rd ed. 2011), at p. 42; Parsons v.

Sovereign Bank of Canada, (UK JCPC), [1913] A.C. 160 (P.C.),per Viscount Haldane L.C.). This demonstrates the key supervisory role that courts play in receivership proceedings.

(3) Commonalities Between Arbitration Law and Insolvency Law [59] Notwithstanding the differences just described, arbitration law and insolvency law also have much in common.Below, I address three commonalities that are particularly relevant to this appeal. (

a) Efficiency and Expediency [60] First and foremost, arbitration law and insolvency law each prioritize efficiency and expediency. [61] Commercial arbitration is a “process designed to enable parties to deal with disputes efficiently, effectively andeconomically” (McEwan and Herbst, at § 2:1, citing Hayes Forest Services Ltd. v. Weyerhaeuser Co., 2008 BCCA 31, 289 D.L.R. (4th)230, at para. 1). As such, it is expected to be “less formal, more expeditious and therefore faster than a court determination of issues”(Rosenberg v.

Minster, 2014 ONSC 845, 119 O.R. (3d) 27, at para. 58). [62] Likewise, the raison d’être of the single proceeding model in Canadian insolvency law is the “expeditious, efficientand economical clean-up of the aftermath of a financial collapse”. To maximize global recovery for creditors, this model avoids“inefficiencies and chaos” by “favouring an orderly collective process” (Alberta (Attorney General) v. Moloney, 2015 SCC 51, [2015] 3S.C.R. 327, at para. 33; Husky Oil Operations Ltd. v. Minister of National Revenue, (SCC), [1995] 3 S.C.R. 453, at

para. 7 ). [ 63 ] As noted, the single proceeding model applies to proceedings under the BIA , the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36 (“ CCAA ”), and other insolvency legislation. For example, s. 243 of the BIA authorizes a court to appoint a receiver with the power to act nationally. This promotes efficiency “by removing the need to have a receiver appointed in each jurisdiction in which the debtor’s assets are located” (Houlden, Morawetz and Sarra, at § 12:3). (

b) Procedural Flexibility [ 64 ] Further, procedural flexibility is a hallmark of both arbitration law and insolvency law. [ 65 ] Chief among the reputed advantages of arbitration is the freedom of parties to choose their own procedural rules rather than being bound by rules of court ( Seidel , at para. 22 ; Wellman , at paras. 48-56 ; L. Y. Fortier, “Delimiting the Spheres of Judicial and Arbitral Power: ‘Beware, My Lord, of Jealousy’” (2001), 80 Can. Bar Rev. 143).

This enhances expediency and cost-effectiveness in arbitral proceedings, where discovery procedures can be curtailed, written submissions can be used instead of witness testimony, and strict evidentiary rules can be relaxed (McEwan and Herbst, at §§ 2:1 and 7:12). [ 66 ] Flexibility is likewise a characteristic of Canadian insolvency law. But in the insolvency context, both the court and the parties can tailor proceedings to fit a particular case.

Indeed, the BIA and the CCAA both accord broad judicial discretion to, among other things, authorize the assignment and disclaimer of contracts and the sale of assets, impose and lift stays of proceedings, grant extensions of time, terminate proceedings, and approve creditor proposals (Wood, at pp. 432-33). Much like arbitration law does for arbitrating parties, Canadian insolvency law thus allows debtors, creditors, and courts “to design a process and [an] outcome that is appropriate for individual . . . cases” (McElcheran, at ¶¶5.11 -5.12). (

c) Decision Makers With Specialized Expertise [ 67 ] Finally, both arbitration law and insolvency law often rely on specialized decision makers to achieve their respective objectives. [ 68 ] One “great merit” of arbitration is that parties are able to select a decision maker with “special expertise in the field of their dispute” ( 3GS Inc. v.

Altus Group Ltd. , 2011 ONSC 5755 , 96 B.L.R. (4th) 268, at para. 19 ; McEwan and Herbst, at § 4:1). [ 69 ] Similarly, specialized judicial expertise is essential to meet the challenges of complex restructuring and insolvency proceedings, often called the “hothouse of real-time litigation” ( Century Services , at para. 58, quoting R. B. Jones, “The Evolution of Canadian Restructuring: Challenges for the Rule of Law”, in J. P.

Sarra, ed., Annual Review of Insolvency Law 2005 (2006), 481, at p. 484). [ 70 ] The interests of expediency and procedural flexibility inform the need for judicial specialization in the realm of bankruptcy and insolvency. Indeed, in many provinces, there are specialist judges who take carriage of restructuring proceedings and all related issues.

Their expertise and “file knowledge” allow them to find the right balance of procedural formality while meeting the need for timely resolution of disputes within the overall restructuring process (McElcheran, at ¶5.85). [ 71 ] In sum, reliance on a decision maker with expertise in the relevant field is a core feature of both arbitration law and insolvency law, and for good reason. Specialized expertise can assist in capitalizing on other attributes that are also common to both bodies of law, such as expediency and procedural flexibility. (

d) Conclusion on the Interplay Between Arbitration Law and Insolvency Law [ 72 ] In many cases, the shared interests in expediency, procedural flexibility, and specialized expertise will converge through arbitration. In such a scenario, the parties should be held to their agreement to arbitrate notwithstanding ongoing insolvency proceedings. In other words, the court should grant a stay of legal proceedings in favour of arbitration, and any dispute as to the scope of the arbitration agreement or the arbitrator’s jurisdiction should be left to the arbitrator to resolve.

As is evident from the foregoing, valid arbitration agreements are generally to be respected. This presumption in favour of arbitral jurisdiction is supported by this Court’s longstanding jurisprudence, the pro-arbitration stance adopted in provincial and territorial legislation nationwide, and the foundational principle that contracting parties are free to structure their affairs as they see fit. [ 73 ] However, in certain insolvency matters, it may be necessary to preclude arbitration in favour of a centralized judicial process.

This may occur when arbitration would compromise the orderly and efficient conduct of a court-ordered receivership. In such a scenario, a court may assert control over the proceedings, both to ensure the timely resolution of the parties’ dispute and to protect the public interest in the orderly restructuring or dissolution of the debtor and the equal treatment of its creditors. This authority arises from the statutory jurisdiction conferred on superior courts under ss. 243(1) and 183(1) of the BIA . [ 74 ] This exercise is necessarily a highly factual one.

It requires the court to carefully review the particular statutory regimes and arbitration agreements in play, having regard to the principles of party autonomy and freedom of contract as well as the policy imperatives underpinning bankruptcy and insolvency law. [ 75 ] To guide this exercise, I will briefly summarize the two-part stay framework that is implicit in provincial arbitration legislation like the Arbitration Act . C.

Two-Part Framework for Stays of Proceedings in Favour of Arbitration [ 76 ] There are two general components to the stay provisions in provincial arbitration legislation across the country. As the framework is similar across jurisdictions, it will be useful to provide a general overview before turning to the

interpretation of s. 15 of the Arbitration Act itself. The two components are as follows:

(

a) the technical prerequisites for a mandatory stay of court proceedings; and (

b) the statutory exceptions to a mandatory stay of court proceedings. [77] Though interrelated, these two components ought to remain analytically distinct. This distinction is necessarybecause the burden of proof shifts between the first component and the second. [78] Under the first component, the applicant for a stay in favour of arbitration must establish the technical prerequisiteson the applicable standard of proof (McEwan and Herbst, at § 3:43; Hosting Metro Inc. v.

Poornam Info Vision Pvt, Ltd., 2016 BCSC2371, at paras. 29-30 ). [79] If the applicant discharges this burden, then under the second component, the party seeking to avoid arbitration mustshow that one of the statutory exceptions applies, such that a stay should be refused (McEwan and Herbst, at § 3:43; Casey, at ch. 3.4).Otherwise, the court must grant a stay and cede jurisdiction to the arbitral tribunal. [80] I will briefly elaborate on each component and its respective standard of proof.

(1) Technical Prerequisites [81] The first component is concerned with whether the applicant for a stay has established that the arbitration agreementat issue engages the mandatory stay provision in the applicable provi

[…]