Nodricks Norsask Seeds Ltd. v. Dyck Forages & Date:, 2014 MBCA 79

Citation: Nodricks Norsask Seeds Ltd. v. Dyck Forages & Date: 20140902 Grasses Ltd., 2014 MBCA 79 Docket: AI 13-30-08097 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice Alan D. MacInnes Mr. Justice Marc M. Monnin Madam Justice Diana M. Cameron BETWEEN : NODRICKS NORSASK SEEDS LTD. ) E. G. Zazelenchuk ) for the Appellant ) (Applicant) Respondent ) K. A.

Pedersen ) for the Respondent - and - ) ) Appeal heard and DYCK FORAGES & GRASSES LTD. ) Decision pronounced: ) June 6, 2014 ) (Respondent) Appellant ) Written reasons: ) September 2, 2014 MacINNES J.A. (for the Court): [ 1 ] The appellant (Dyck) appeals a motion judge’s order that an arbitrator’s awards against it be recognized, and be enforceable in Manitoba, as a judgment of the Court of Queen’s Bench. [ 2 ] Following argument, the court allowed the appeal with reasons to follow. These are the reasons.

Facts [ 3 ] The respondent (Nodricks) and Dyck executed a contract dated November 13, 2008, whereby Nodricks agreed to sell and Dyck agreed to buy a quantity of alfalfa seed. The contract was set forth in a single page of text. It stipulated expressly the names of the parties, the fact that Nodricks was the seller and Dyck the buyer of alfalfa seed, the quantity of seed, namely, approximately 88,000 lbs. (two truckloads at approximately 44,000 lbs. each), the quality of seed, the price, namely, $140 U.S. dollars per 100 lbs. and the dates for shipment of the seed.

The motion judge described the aforesaid contract terms as “unambiguous and beyond dispute.” [ 4 ] Near the bottom of the single-page contract, the remainder of the contract appears as follows: RULES : Noramseed ARBITRATION : C.S.T.A. The motion judge described this language as “less explicit and more ambiguous.” [ 5 ] Both Nodricks and Dyck were members of the Canadian Seed Trade Association (CSTA), which is a voluntary association for businesses involved in the production and sale of commercial seeds. [ 6 ] A dispute arose between Nodricks and Dyck as to the quality of the seed.

Dyck refused to pay Nodricks for the seed supplied. [ 7 ] In the dispute, Nodricks took the position that the words in the contract “ RULES : Noramseed” and “ ARBITRATION : C.S.T.A.” clearly and unambiguously referred to the binding arbitration process set out in the CSTA by-laws. As well, it argued that, as both it and Dyck were members of the CSTA and significant players in the seed trade business, Dyck understood that, in signing the contract, it was agreeing to the binding arbitration process spelled out in the by-laws.

[ 8 ] Dyck argued that it was not aware that the provisions of the by-laws bound all CSTA members to mandatory arbitration in cases of dispute over the terms or enforcement of the contract, and that, in any event, the words in question were ambiguous. [ 9 ] In his decision, the motion judge concluded that the language in question, namely, “ RULES : Noramseed” and “ ARBITRATION : C.S.T.A.,” was ambiguous. He then reviewed the evidence before him consisting of an affidavit inclusive of exhibits sworn by Ms DeForest, the principal of Nodricks, and the affidavit of Mr.

Dyck, the principal of Dyck, as well as certain jurisprudence. He concluded that, while the courts have traditionally jealously guarded the right of contracting parties to have their day in court unless they have clearly agreed to an arbitration process, there has been a significant erosion in the strict

interpretation of arbitration clauses since the year 2000. He proceeded to decide that, in this case, Dyck knew some kind of arbitration clause was part of the contract and that it simply decided to boycott the arbitration process and roll the dice in court when it came time to enforce the decision of the arbitrator. [ 10 ] The motion judge thus allowed Nodricks’ application for recognition and enforcement of the arbitral awards and granted the order appealed from.

Issues and Standard of Review [ 11 ] Dyck asserts that the issue in this case is whether or not the contract between the parties made it sufficiently clear that the parties agreed to mandatory binding arbitration with no recourse to the courts. Dyck says the issue involves the

interpretation of a contract and that the standard of review is correctness. [ 12 ] Nodricks argues that there are two issues before the court on this appeal: 1. Did the motion judge err in finding that Dyck knew that binding arbitration was called for under the contract? 2. Did the motion judge err in holding that the

interpretation of an arbitration clause, including whether a party is bound by an arbitration clause, is a matter to be determined by the arbitral tribunal? [ 13 ] Nodricks relies upon this court’s recent decision in Hopkins v. Ventura Custom Homes Ltd. , 2013 MBCA 67 , 294 Man.R. (2d) 168 , asserting that, on a question of contractual

interpretation, the standard of review is no longer necessarily correctness. On the first issue, Nodricks submits that the motion judge made a finding of fact in reaching his conclusion and thus the appropriate standard of review on that issue is that of palpable and overriding error.

It submits that, on the second issue, the judge’s conclusion involves a question of law for which the appropriate standard of review is correctness. [ 14 ] In our view, the question in this case for the motion judge, and for us on appeal, was whether the contracting parties agreed that, in the event of any dispute in respect of the contract, the process to be followed in resolving the dispute was that of mandatory arbitration. [ 15 ] In our opinion, the case raises an extricable question of law for which the standard of review is one of correctness. Decision [ 16 ] This case is one of the

interpretation of a contract. The starting point, therefore, is to determine the intention of the contracting parties at the time they entered into the contract. That intention must be determined on the basis of the words used by the parties in the contract, given their ordinary meaning. [ 17 ] The motion judge found that much of the contract was unambiguous and beyond dispute. However, he found that the provisions which purportedly pertained to “Rules” and “Arbitration” were ambiguous.

The finding of ambiguity is confirmed by the fact that the motion judge turned to consider parol evidence which, but for ambiguity, was not admissible. [ 18 ] In Dynatec Mining Ltd. v. PCL Civil Constructors (Canada) Inc. , [1996] O.J. No. 29 (QL) , Chapnik J. wrote (at para. 10): Incorporation of an arbitration clause can only be accomplished by distinct and specific words: Halsburys Laws of England, 4th ed. reissue (London: Butterworth, 1992), volume 4(2), at page 390; Lexair Ltd. v. Edgar W. Taylor Ltd. (1993), 65 B.L.R. 87 (Eng. Q.B.

Div.), at pages 99-102. [ 19 ] While it is true that courts have rightly embraced the vehicle of arbitration, mediation and the like for the purpose of resolving disputes, and have supported the broadened jurisdiction of arbitrators, still, in the case of private contracts such as this, the parties must clearly agree to arbitration before such a process can come into being. Although a 1996 decision, Dynatec remains good law. As Kennedy C.J.S.C. wrote in Sunny Corner Enterprises Inc. v.

Dustex Corp. et al. , 2011 NSSC 172 , 305 N.S.R. (2d) 51 (at para. 34 ): I conclude that Dynatec lives and remains relevant caselaw. ….

[ 20 ] Having found that the pivotal language in the contract pertaining to arbitration was ambiguous, it is our view that the motion judge erred in law in concluding that the contract mandated arbitration when the incorporation of an arbitration clause into a contract can be accomplished only by distinct and specific words. [ 21 ] Notwithstanding this conclusion, it is our opinion that even if the question raised on appeal was one where the facts and the law were inextricably intertwined, thus a question of mixed fact and law and subject to the standard of review of palpable and overriding error, the motion judge ’ s decision cannot stand. [ 22 ] As a result of his finding of ambiguity, the judge was entitled, as he did, to consider parol evidence, namely, the affidavit evidence of Ms DeForest and Mr.

Dyck. [ 23 ] The sworn evidence of Mr. Dyck was that he had his company join the CSTA primarily to raise the profile of the company in the industry and to find new business contacts. He was aware that, by being a member of CSTA, binding arbitration of disputes was something offered, but he denied any knowledge that, by being a member of CSTA, Dyck was mandated to go to arbitration to the exclusion of recourse to the courts in order to resolve contractual disputes. As well, he swore that, at no point in this matter, did Dyck agree to binding arbitration. Mr.

Dyck was not cross-examined on his affidavit and his evidence before the motion judge was uncontroverted. [ 24 ] Ms DeForest, in her affidavit, attached many exhibits including the contract in question, a copy of the Noramseed Rules, and the relevant provisions of the CSTA by-laws pertaining to arbitration. She did not, nor did anyone on behalf of Nodricks, swear that Nodricks believed disputes under the contract were subject to mandatory arbitration. [ 25 ] Of note is the fact that Ms DeForest wrote to Mr.

Dyck on August 20, 2009, advising that Nodricks had made a submission for arbitration of the dispute with Dyck. In the letter, she wrote: …. To date communications in this regard have been futile and we unfortunately believe that this is the only valid path that we may pursue short of litigation to successfully resolve this matter. …. [ 26 ] As well, on August 28, 2009, Ms DeForest faxed Dyck a document titled Submission to Dispute Resolution, which she asked Mr. Dyck to sign.

She described this as “the mediation submission to dispute resolution” and, in the form itself, selected “Mediation,” not “Binding Arbitration.” [ 27 ] While the latter, namely, the selection of mediation rather than binding arbitration, may have been a simple error on her part, the statement in the August 20, 2009 letter would indicate clearly that Ms DeForest did not consider arbitration mandatory, but rather, that it was a path to be taken short of litigation to resolve the dispute. [ 28 ] When one considers the evidence before the motion judge, it is our view that he committed palpable and overriding error in his apprehension and

interpretation of it. The evidence does not support a finding that the intent of the contracting parties was to resolve disputes by way of mandatory arbitration, a necessary finding for his ultimate conclusion. Rather, the evidence before him was to the contrary and demonstrated that neither party was of the view or intended that arbitration was mandatory to the exclusion of litigation. Conclusion [ 29 ] It is our view that, in this case, the terms of the contract pertaining to “Rules” and “Arbitration” were neither distinct nor specific. Rather, they were ambiguous, as was found by the motion judge.

Certainly, there was no express provision in the contract mandating binding arbitration. Nor was there any evidence of a mutual agreement, orally or otherwise, that the parties intended to have disputes under the contract determined by mandatory arbitration. Rather, the evidence leads to the conclusion that neither party anticipated mandatory arbitration to resolve disputes. [ 30 ] We would allow Dyck’s appeal, set aside the motion judge’s order and dismiss Nodricks’ application for recognition and enforcement of the arbitral awards in question. Dyck will have its costs here and below. J.A. J.A. J.A.