Court rejects staying your own action in favour of an arbitration process

5 minute read
07 February 2023

10060 Jasper Avenue Building Limited and WIR Equities Inc. (Jasper) sued Scotia Place Tower III Inc. (Scotia) for amounts owing for maintenance conducted on a property owned and operated by the Parties. Operation and management of the property was governed by two agreements between Jasper and Scotia: an Owners Agreement and a Management Agreement (Agreements).  Both Agreements included a permissive dispute resolution process (Dispute Process) for issues arising between Jasper and Scotia.

Jasper brought a Notice of Default pursuant to the Agreements. Scotia's responding Notice of Objection confirmed the dispute, argued for referral to an "expert" pursuant to the Dispute Process and nominated an expert. Scotia was clear that its Notice of Objection and its expert nomination were made without prejudice to its right to argue the matter should be heard in another forum, including in the Alberta Courts. Scotia confirmed the Notice of Objection was filed solely in the event an Alberta Court refused to take jurisdiction.

Jasper then commenced an action in Court of King's Bench of Alberta seeking the amounts owing (Main Action).  Jasper commenced this action with a view to preserving the limitation period for claims arising from the disputed invoices and did not serve the claim. Despite the lack of service, Scotia filed a Statement of Defence and Counterclaim. Jasper refused to accept service of those pleadings but ultimately served its Affidavit of Records without prejudice to its right to argue that the dispute should proceed in the Dispute Process.   

No progress was made in the Dispute Process and Jasper filed a second Originating Application seeking an order directing that Scotia submit to the Dispute Process.  In response, Scotia filed an application seeking summary dismissal of the Main Action.  Jasper then brought an application seeking that its own claim in the Main Action be stayed pending progress of the Dispute Process under the Owners Agreement. The Court denied this application for a stay.

In its response to Jasper's stay application, Scotia agreed that the Dispute Process constituted an arbitration pursuant to the Arbitration Act but disputed Jasper's entitlement to a stay in accordance with s. 7.  In its stay application, Jasper relied on s. 7:

7(1) If a party to an arbitration agreement commences a proceeding in a court in respect of a matter in dispute to be submitted to arbitration under the agreement, the court shall, on the application of another party to the arbitration agreement, stay the proceeding.

In support of its stay and in favour of the matter being addressed in the Dispute Process, Jasper argued, in part, that the policy underlying the Arbitration Act is to respect party autonomy; that the onus of proof is on the party opposing the stay; and that it only commenced the action to preserve the limitation period.  In response Scotia argued that s. 7 did not apply because Jasper commenced the Main Action and was therefore not "another party" to the arbitration agreement and did not have status to apply for a stay.

The Court was not persuaded by Jasper's arguments in support of its stay.  While Jasper argued that the steps taken by Scotia in the Dispute Process justified staying the Main Action, the Court held, while noting the steps had occurred, that they were taken without Scotia's agreeing to commit to the Dispute Process and while reserving their rights to proceed in another forum.  Particularly, the Court was critical of Jasper's argument that the Main Action should be stayed because it was merely a limitation "placeholder" to be pursued as a secondary option in the event the Dispute Process did not proceed. 

This decision presents an interesting consideration for parties pursuing an arbitration process to which the opposing party has not committed.  The need for Jasper to protect a potentially expiring limitation period in this matter ultimately left it forced to participate in litigation it wanted to avoid in favour of a dispute resolution process.  In holding that a party filing a claim cannot be "another party" seeking a stay under s. 7 of the Arbitration Act, the Courts in Alberta have applied an interpretation to the legislation that is consistent with that applied in Ontario and elsewhere in Canada. The decision in 100600 Jasper Ave Limited, while not making reference to those decisions in other Canadian jurisdictions, follows similar reasoning.  It confirms the risk that parties may be forced to proceed with litigation if they file a claim when there is not clear agreement that a matter should proceed by way of an arbitration. Potentially expiring limitation periods may have to be addressed without reliance on placeholder litigation.

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