Alberta Court of King’s Bench finds primacy of receivership proceedings over arbitration proceedings when mandatory statutory stay of arbitration is not engaged.

Facts

Mayfield Investments Ltd. ("Mayfield") was the subject of a receivership order granted by the Court. Mayfield, Albert Stark (“Stark”) and Cameron Christianson (“Christianson”) had an indirect ownership interest in the Copper Coulis Casino located in Medicine Hat, Alberta (the "Casino"). The Court granted an order approving a sales and investment solicitation process (“SISP”) over Mayfield's assets, including its ownership interest in the Casino.

Mayfield, Stark and Christianson disagreed whether they had renewed the Casino lease with Mayfield by way of Directors’ Resolution. Several months into the SISP process, Stark served the receiver with a Notice to Arbitrate regarding whether the Directors’ Resolution and the Casino lease renewal were valid and enforceable.

The receiver took the position that Stark's Notice to Arbitrate was invalid given the receivership order and the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (the "BIA"), and sought declarations that the issues raised therein ought to be determined within the context of the receivership proceedings. Stark disagreed and sought to proceed with the arbitration proceedings.

Decision

The primary issue in this application was whether the validity and enforceability of the Directors' Resolution and the Casino's lease renewal should be determined via arbitration or whether it should be determined in the context of the receivership proceedings. The Court applied the two-part framework set out by the Supreme Court of Canada in Peace River Hydro Partners v. Petrowest Corp, 2022 SCC 41, for determining when one type of proceeding has primacy over the other:

  1. Whether the Arbitration Agreement at issue "engages the mandatory stay provision in the applicable provincial arbitration statute" – referring to a mandatory stay of civil proceedings and giving primacy to the Arbitration Agreement;
  2. Whether, on a balance of probabilities, one or more of the statutory exceptions to the mandatory stay provision applies.

The proponent of the arbitration proceedings must establish an arguable case that the following prerequisites are met to rely upon the mandatory stay in s 7(1) of Alberta’s Arbitration Act:

a) an arbitration agreement exists;

b) court proceedings have been commenced by a party to the arbitration agreement;

c) the court proceedings are in respect of a matter that the parties agreed to submit to arbitration; and

d) the party applying for a stay does so before taking any step in the court proceedings.

The Court held that Stark met the first three prerequisites – but not the fourth. The first and third prerequisite were easily met. The Court held that the second prerequisite was met by the ongoing receivership proceedings, although this requirement did not apply neatly to the circumstances in this case. The Court found that the receivership proceedings satisfied this pre-requisite given that 1) the receiver was a party to Mayfield's pre-receivership Arbitration Agreement; and 2) it was sufficient that the "court proceedings" engage an interest of that party.

However, the Court found the fourth prerequisite was not met. The Court reasoned that the Director’s Resolution and the Casino’s lease renewal had been in motion since early September 2024, and Stark waited until April 2025 to file the Notice to Arbitrate, during which time Stark participated in the receivership proceedings. As a result, the mandatory stay provision of section 7(1) of Alberta’s Arbitration Act was not engaged.

The Court raised the concern that Petrowest did not address the issue of when the mandatory stay provision was not engaged and that a problem remained that even if the mandatory stay provision does not apply here, the parties are still left with two overlapping proceedings. However, since the mandatory stay provision did not apply, there was no statutory conflict to be resolved between that provision and the BIA and the court’s statutory jurisdiction to decide which proceeding has primacy arises solely from ss 183(1) and 243(1)(c) of the BIA. The Court found that practicality demanded that the issues in the Notice to Arbitrate be dealt with through the receivership proceedings as it would be unfair, disruptive and prejudicial to the receivership to allow Stark’s proposed arbitration to derail the SISP. The Court stayed the arbitration pursuant to the receivership order.

Analysis

In addition to applying the Petrowest framework to determine primacy, Mayfield Investments (Re) emphasizes the distinction between provincial arbitration statutes. In this case, the Court rejected the receiver’s argument that for the same reasons in Petrowest, the arbitration agreement had become inoperative or incapable of being performed because arbitration would compromise the orderly and efficient resolution of a receivership. Petrowest's conclusion in this regard was based on the wording contained in s 15 of the former British Columbia’s Arbitration Act (currently s 7), and the receiver unsuccessfully argued that the Alberta Arbitration Act includes "comparable provisions" which should lead to a similar conclusion here.

The Court rejected the receiver’s argument finding that the exceptions in s 7(2) of Alberta’s Arbitration Act are “significantly different” from British Columbia’s Arbitration Act and do not include an exemption from arbitration when the arbitration agreement is "inoperative or incapable of being performed" which was the exception relied upon in Petrowest. Instead, Alberta’s Arbitration Act allows exemptions from an arbitration agreement, which can be more restrictive in some cases. Mayfield Investments (Re) is a good reminder that the principles applicable to exemptions to mandatory stays under one provincial statute cannot simply be transposed to analyze another.

Mayfield Investments Ltd (Re), 2025 ABKB 326