Much like in other jurisdictions, Alberta’s Arbitration Act provides that there is no appeal from a court’s decision to stay (or not stay) proceedings in respect of a dispute that is subject to a mandatory arbitration agreement (s. 7(6)). According to a recent decision of the Alberta Court of Appeal, however, this does not bar an appeal from an order which held that there was no mandatory arbitration agreement in the first place. The Court’s reasons can be found at this link:

A.G. Clark Holdings Ltd. v HOOPP Realty Inc., 2013 ABCA 101 (CanLII)

In the court below, the chambers judge held that the parties had not entered into a mandatory arbitration agreement, and, therefore, he refused to stay the respondent’s proceeding pursuant to s. 7 of the Arbitration Act. The relevant portions of that provision read as follows:

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.

[...]

(6) There is no appeal from the court’s decision under this section.

The unsuccessful applicant appealed from that order, and the respondent argued as a preliminary matter that the appeal was barred pursuant to s. 7(6) of the Arbitration Act. The Court of Appeal disagreed. In its view, if the judge at first instance concluded that there was no arbitration agreement upon which the proceedings could be stayed, as here, s. 7(6) is not applicable and cannot preclude an appeal. Put otherwise, s. 7(6) does not immunize from appeal a chambers judge’s decision that the parties had not entered into an arbitration agreement for the purposes of the Act. The Court thus proceeded with the appeal, concluding that the court below erred in its interpretation of the party’s agreement. It was, properly construed, an arbitration agreement. The matter was thus sent back for a determination as to whether the proceedings should be stayed.

The critical passages from the Court’s decision are as follows:

Does s 7(6) of the Arbitration Act prevent this appeal?

[6] We have considered whether s 7(6) of the Arbitration Act prevents this appeal. In our view, it does not.

[7] Section 7(1) of the Arbitration Act states that if a party to an arbitration agreement commences a court proceeding in respect of a matter to be submitted to arbitration under the agreement, the court shall, on the application of another party to the agreement, stay the proceeding. The sub-sections following go on to describe situations in which a stay of proceedings may be denied (s 7(2)) and in which a partial stay may be granted (s 7(5)). The last sub-section, s 7(6), continues:

(6) There is no appeal from the court’s decision under this section.

[8] The question is whether s 7(6) prohibits appeal in all circumstances. There is no Alberta case law on all fours with this case. Section 7(6) was considered by this Court in a slightly different context in Lamb v AlanRidge Homes Ltd, 2009 ABCA 343 (CanLII), 2009 ABCA 343, 464 AR 46. In Lamb, a chambers judge found that all the claims made in the court proceedings against the applicant were within the scope of the arbitration agreement. He also concluded, however, that the lawsuit included non-arbitrable matters involving other parties, leading him to consider whether he should grant a partial stay under s 7(5) of the Act. He declined to do so. The Court of Appeal refused to hear an appeal of that decision on the basis that the “chambers judge’s decision not to grant the stay was clearly made under the section”, so that subsection 7(6) applied.

[9] The Court in Lamb referred to a decision from Ontario in which that Court of Appeal had dealt with virtually identical legislation and a similar factual situation: Radewych v Brookfield Homes (Ontario) Ltd, 2007 ONCA 721 (CanLII), 2007 ONCA 721. In Radewych, the motion judge exercised his discretion under s 7(5) to direct that an entire claim proceed to trial, having concluded that a partial stay would be inappropriate because of the presence of parties to whom the arbitration agreement did not apply. In declining to hear an appeal from that decision, the Court of Appeal said, at para 4, “[h]is decision in that regard falls squarely within s 7(5) of the Arbitration Act and as such, s 7(6) of that Act applies and renders his decision unappealable.”

[10] Radewych is a very brief decision that relies on an earlier decision of the Ontario Court of Appeal, Brown v Murphy 2002 CanLII 41652 (ON CA), (2002), 159 OAC 75, 59 OR (3d) 404; the latter case is not mentioned in Lamb. In Brown v Murphy, the Ontario court distinguished between decisions made by a motions judge to grant or refuse a stay for the reasons set out in s 7, and decisions that amount to a preliminary interpretation of the arbitration agreement. The court concluded, at para 8:

. . . the bar under s 7(6) applied to any decision by the motions court under s 7 to grant or refuse a stay of “a proceeding in respect of a matter to be submitted to arbitration under the agreement” within the meaning of s 7(1). However, a decision by the motions court that a matter was not subject to arbitration under the terms of the arbitration agreement fell outside the scope of s 7 and a right of appeal lay to this court from that decision. (Emphasis in original)

[11] The same reasoning has been repeatedly applied in Ontario: see, for example, Huras v Primerica Financial Services Ltd 2000 CanLII 16892 (ON CA), (2000), 137 OAC 79 andGriffin v Dell Canada Inc, 2010 ONCA 29 (CanLII), 2010 ONCA 29 at para 25. The reasoning has also been adopted by the appellate courts of Manitoba and New Brunswick: see Hnatiuk v Court, 2010 MBCA 20 (CanLII), 2010 MBCA 20, 251 Man R (2d) 178 at para 30 and Opron Maritimes Construction Ltd v Irving Oil Ltd, 2011 NBCA 60 (CanLII), 2011 NBCA 60, 336 DLR (4th) 129 at paras 31-41. All of those provinces have similar, if not identical, arbitration legislation to that in force in Alberta.

[12] This Court also recently heard an appeal from a decision to stay proceedings that had been brought by a non-party to the arbitration agreement. The applicability of section 7(6) was not discussed in that decision, however, so it is of limited use in this analysis: Yaworski v Gowling Lafleur Henderson LLP, 2013 ABCA 21 (CanLII), 2013 ABCA 21.

[13] We have concluded that the situation in this case is more similar to that faced by the appellate courts in Brown v Murphy, Hnatiuk v Courtand Opron Maritimes than to the situation in Radewych. We agree with the conclusion reached by Richard JA of the New Brunswick court that, if the motion judge holds there is no applicable arbitration agreement upon which the proceedings could be stayed, then s 7(6) cannot be successfully invoked to bar an appeal: see Opron Maritimes at para 40. In such circumstances, the usual litigation process is followed. The litigants are entitled to access all the court processes, including appellate review, the agreement itself having been determined to fall outside the provisions of the Arbitration Act. If the agreement is outside the scope of the Act, s 7(6) can have no application.

[14] Applying that reasoning to this case, the initial issue before the chambers judge involved an interpretation of the parties’ agreement. Only if that agreement contained a mandatory arbitration clause would s 7 of the Arbitration Act apply. The chambers judge concluded that the agreement did not contain such a clause and he did not, therefore, address the application of s 7 to these parties and this dispute. The chambers judge’s decision on that preliminary issue is subject to appeal. If, on appeal, we determine that the agreement does contain a mandatory arbitration clause, then the Act will apply and the dispute must go back to Queen’s Bench for a determination of the issues not addressed by the chambers judge. The Queen’s Bench determination of those issues, involving the application of s 7, will not be subject to appeal.