Supreme Court of Canada

Appeal Heard: January 19, 2022 Judgment Rendered: November 10, 2022 Docket: 39547

Parties

Between:

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

Headnote

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 s. 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 the circumstances of the case.

In the instant case, the technical prerequisites set out in s. 15(1) of the Arbitration Act are met. The impugned civil proceedings are in respect of a contractual dispute covered by valid arbitration agreements. In addition, Peace River has established an arguable case that the Receiver is a party to the Arbitration Agreements and Peace River has not taken a step in the proceedings. As s. 15 is engaged, a stay in favour of arbitration must be granted unless the Arbitration Agreements are found to be void, inoperative or incapable of being performed under s. 15(2). The Receiver has established that the Arbitration Agreements are inoperative. The multiple arbitral 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 arbitration in the unique circumstances of the instant case would jeopardize the Receiver's ability to maximize recovery for the creditors and to allow 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 Arbitration Agreements are inoperative under s. 15(2) of the Arbitration Act. However, there is disagreement as to the primary basis for finding the Arbitration Agreements to be inoperative. The analysis should start with the terms of the Receivership Order itself. By suing in court as authorized under the Receivership Order, the Receiver disclaimed the Arbitration Agreements and they were thereby rendered inoperative.

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 all proceedings with respect to Petrowest's property, assets, and undertakings, including all proceeds thereof; and to cease to perform any contracts of Petrowest. An arbitration agreement is a contractual right of a party to have a claim referred to arbitration to the exclusion of the courts and thus could be disclaimed pursuant to the Receivership Order. The combined effect of these terms authorized the Receiver to disclaim the Arbitration Agreements and to sue in court for amounts owing to Petrowest. The terms of the Receivership Order authorized the Receiver to sue, either in court or before an arbitrator, at the Receiver's election, based on what will best promote the orderly and efficient resolution of the receivership under the BIA. The legal effect of the Receiver suing in court and not before an arbitrator 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 in court, the BIA provided a statutory basis for the chambers judge to declare the Arbitration Agreements inoperative and to dismiss the stay application. Requiring arbitration of the Receiver's collection action would compromise the orderly and efficient resolution of the receivership.

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 ABCA 293, 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, [2020] 2 S.C.R. 118; Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801; TELUS Communications Inc. v. Wellman, 2019 SCC 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, [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), 53 S.C.R. 337; Ostrander v. Niagara Helicopters Ltd. (1973), 1 O.R. (2d) 281; Parsons v. Sovereign Bank of Canada, [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, [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), 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), 228 D.L.R. (4th) 179; Ives & Barker v. Willans, [1894] 2 Ch. 478; Central Investments & Development Corp. v. Miller (1982), 133 D.L.R. (3d) 440; ABN Amro Bank Canada v. Krupp Mak Maschinenbau GmbH (1996), 135 D.L.R. (4th) 130; Petro‑Canada v. 366084 Ontario Ltd. (1995), 25 B.L.R. (2d) 19; Therrien (Re), 2001 SCC 35, [2001] 2 S.C.R. 3; Canada (Attorney General) v. Reliance Insurance Co. (2007), 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; James v. Thow, 2005 BCSC 809, 5 B.L.R. (4th) 315; Prince George (City) v. McElhanney Engineering Services Ltd. (1995), 9 B.C.L.R. (3d) 368; MacKinnon v. National Money Mart Co., 2004 BCCA 473, 50 B.L.R. (3d) 291; Third Eye Capital Corporation 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 Affairs and Northern Development) v. Curragh Inc. (1994), 114 D.L.R. (4th) 176; GMAC Commercial Credit Corp. — Canada v. T.C.T. Logistics Inc., 2006 SCC 35, [2006] 2 S.C.R. 123; Orphan Well Association v. Grant Thornton Ltd., 2019 SCC 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. TELUS Communications Inc., 2011 SCC 15, [2011] 1 S.C.R. 531; Uber Technologies Inc. v. Heller, 2020 SCC 16, [2020] 2 S.C.R. 118.

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.

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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.

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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.

Counsel

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.

Reasons for Judgment

The judgment of Wagner C.J. and Moldaver, Côté, Rowe and Kasirer JJ. was delivered by

Côté J. —

TABLE OF CONTENTS

Section	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"). Peace River subcontracted work to Petrowest Corporation, an Alberta‑based construction company, and its affiliates (collectively, "Petrowest Affiliates"). The contracts between the parties contain mandatory arbitration clauses ("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 then brought a civil claim against Peace River in the Supreme Court of British Columbia seeking to recover funds allegedly owed to Petrowest and the Petrowest Affiliates for work subcontracted under the Main Agreements. Peace River, relying on the Arbitration Agreements, applied under s. 15 of the Arbitration Act for a stay of proceedings in favour of arbitration.

[ 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 permitted the Receiver to treat the Arbitration Agreements as disclaimed and severable from the main contracts.

[ 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.

[ 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 contrary to the basic principles of contract law. A receiver who steps into the shoes of a debtor, and claims through the debtor under a contract, becomes a party to that contract for the purposes of s. 15(1). Furthermore, the Court of Appeal's misapplication of the doctrine of separability does not support a different conclusion.

[ 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 the integrity of court‑ordered receivership proceedings. However, the party seeking to avoid arbitration must establish, on a balance of probabilities, that enforcing the agreement would compromise such proceedings.

[ 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 enforcing the arbitration agreement would compromise the orderly and efficient resolution of the court‑ordered receivership.

[ 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 receivership proceedings, and practicality demands that the Receiver's civil claim be allowed to proceed before the courts. The chambers judge's conclusion that a single judicial process would "be faster and less expensive than four arbitrations and a possible court case" is supported by the record.

[ 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. In the great majority of cases, parties should be held to their agreement to arbitrate, and courts should not interfere. I make this point clearly to guard against any suggestion that the right to stay legal proceedings in favour of arbitration may be broadly overridden simply because one of the parties is in receivership or insolvency proceedings.

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 Peace River partners, as well as their respective parent corporations, the appellants Acciona Infraestructuras S.A. and Samsung C&T Corporation. Petrowest is the third member of the partnership.

[ 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 arbitral institutions and procedures. The Arbitration Agreements are reproduced in an Appendix to these reasons.

[ 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 Petrowest and its affiliates. It authorized the Receiver to take a wide range of actions including, relevantly, to bring a civil claim on behalf of Petrowest and the Petrowest Affiliates.

[ 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 by Peace River.

[ 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.

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 for the purpose of exercising such jurisdiction:

. . .

(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 grant a stay unless it determined that the Arbitration Agreements were 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 claim and assumed the obligation to arbitrate disputes under those contracts.

[ 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, at para. 15).

[ 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: first, by preventing arbitration from occurring entirely; or second, by asserting supervisory control over the arbitration itself, similar to the court's control over insolvency proceedings.

[ 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 protect the public interest in the expeditious, efficient and economical resolution of insolvency matters.

[ 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).

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, at paras. 24‑25).

[ 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, at p. 60 (C.A.)). In the Court of Appeal's view, the separability doctrine allowed the Receiver to disclaim the Arbitration Agreements separate and apart from the main contracts.

[ 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 was not engaged.

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 shows on a balance of probabilities that a statutory exception to the mandatory stay applies, e.g., that the arbitration agreement is inoperative. In the specific circumstances of this case, enforcing the Arbitration Agreements would compromise the orderly and efficient resolution of the receivership, contrary to the purposes of the BIA.

[ 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 four arbitrations and a possible court case" (para. 56).

[ 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 to stays of proceedings in favour of arbitration. Fourth, I explain how this framework applies to s. 15 of the Arbitration Act through a detailed statutory interpretation exercise. Fifth, I apply the foregoing framework to the facts of 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). There is a corresponding obligation on courts to refrain from intervening on the question of an arbitrator's jurisdiction, at least in the first instance (J. K. McEwan and L. B. Herbst, Commercial Arbitration in Canada: A Guide to Domestic and International Arbitrations (loose‑leaf), at § 10:5).

[ 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. Canadian provinces and territories have adopted the New York Convention as part of their domestic arbitration legislation, either directly or through the UNCITRAL Model Law on International Commercial Arbitration. The competence‑competence principle is embodied in Article 8 of the UNCITRAL Model Law and Article II(3) of the New York Convention. These provisions empower arbitrators to decide questions of jurisdiction, but do not wholly preclude court intervention in certain limited circumstances.

[ 41 ] In light of the foregoing, it is well established in Canada that a challenge to an arbitrator's jurisdiction should generally be decided at first instance by the arbitrator (see Uber, at paras. 31‑34; Seidel; Dell; Rogers Wireless Inc. v. Muroff, 2007 SCC 35, [2007] 2 S.C.R. 921). This rule exists to prevent parties from derailing or delaying the arbitral process by making a premature challenge to an arbitrator's jurisdiction in a court.

(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's jurisdiction if the challenge involves pure questions of law, or questions of mixed fact and law requiring only superficial consideration of the evidentiary record (Uber, at para. 34). In such circumstances, it would be inefficient to require a party to submit to a potentially costly arbitration process only to find out that the arbitrator has no jurisdiction over the dispute.

(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 the interpretation of arbitration and insolvency legislation and a superficial consideration of the evidentiary record. Accordingly, a court is entitled to resolve the question of whether s. 15 of the Arbitration Act is engaged and, if so, whether the Arbitration Agreements are void, inoperative, or incapable of being performed.

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 Petrowest Affiliates under the federal BIA has on the Arbitration Agreements, which are governed by British Columbia's Arbitration Act. Before I do so, it is helpful to explain the interaction between arbitration law and insolvency law in general terms.

[ 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: The Enforceability of Arbitration Agreements in Bankruptcy" (2007), 27 Franchise L.J. 37; P. F. Kirgis, "Arbitration, Bankruptcy, and Public Policy: A Contractarian Analysis" (2009), 17 Am. Bankr. Inst. L. Rev. 503; D. Chan and S. Rajagopal, "To Stay or Not to Stay? A Clash of Arbitration and Insolvency Regimes" (2021), 38 J. Int'l Arb. 457). In an oft‑cited passage, the United States Court of Appeals for 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 towards dispute resolution" (In re U.S. Lines, Inc., 197 F.3d 631 (1999), at p. 640; see also Societe Nationale Algerienne v. Distrigas Corp., 80 B.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 popular mechanism for resolving commercial disputes, both in Canada and abroad (Wellman, at para. 54; Seidel, at para. 23). Today, parties and counsel alike recognize the potential strategic and tactical advantages of arbitration as compared to traditional litigation. These may include privacy and confidentiality, efficiency and timeliness, relaxed rules of evidence, freedom to determine procedural rules and select decision makers with relevant expertise, and cross‑border enforceability of awards (J. B. Casey, Arbitration Law of Canada: Practice and Procedure (3rd ed. 2017), at ch. 1.6).

[ 47 ] Second, economic shocks, including the 2008 financial crisis and the disruptions resulting from the COVID‑19 pandemic, have placed increased demands on our insolvency laws (L. W. Houlden, G. B. Morawetz and J. Sarra, Bankruptcy and Insolvency Law of Canada (4th ed. rev. (loose‑leaf)), at § 1:6; H. Esslinger, "Creditors Over Contract: A Case Comment on Chandos", in J. Corraini and D. B. Nixon, eds., Annual Review of Insolvency Law 2021 (2022), 747; V. W. DaRe and T. Prpa, "Imagine One Restructuring 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 agreement with an insolvent or bankrupt counterparty. In this scenario, there is a tension between arbitration law and insolvency law as regards the forum in which the dispute is to be resolved. To understand this tension, it is necessary to briefly outline the characteristics of arbitration and 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 contractual agreements to arbitrate. This gives effect to the concept of "party autonomy", according to which parties are free to "charter a private tribunal" 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, [1970] S.C.R. 958, at p. 963). Modern arbitration legislation is premised on these principles, which inform the policy choices 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 arbitral proceedings. This latter principle is "fundamental" to modern arbitration law and "finds expression throughout modern Canadian arbitration legislation" (Wellman, at paras. 52‑55; McEwan and Herbst, at § 10:2; Casey, at ch. 7.1). For instance, s. 4(a) of British Columbia'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 so provided 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 an insolvency (¶¶1.1‑1.12).

[ 53 ] This procedural flexibility has allowed Canadian courts to become instrumental in (a) providing a forum for the orderly resolution of the competing rights and objectives of individual stakeholders of insolvent business enterprises, and (b) creating mechanisms for the preservation of the value of the insolvent business or its assets for the benefit of all stakeholders (Century Services Inc. 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 on these 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 legislative policy in favour of "single control" is reflected in Canadian bankruptcy, insolvency, and winding‑up legislation (Century Services, at paras. 22‑23). The single proceeding model is intended to mitigate the inefficiency and chaos that would result if each stakeholder in an insolvency initiated a separate claim to enforce its rights. In other words, the single proceeding model protects the clear "public interest in the expeditious, efficient and economical clean‑up of the aftermath of a financial collapse" (Sam Lévy & Associés Inc. v. Azco Mining Inc., 2001 SCC 92, [2001] 3 S.C.R. 978, at para. 27, citing Stewart v. LePage (1916), 53 S.C.R. 337). This Court 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 tool for enhancing the judicial oversight and flexibility underlying Canadian insolvency law. Section 243(1) of the BIA confers broad authority 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 appoint a receiver to do any of the following, with a view to enhancing and facilitating the preservation and realization of the debtor's assets for the benefit of all creditors: (a) take possession of all or substantially all of the debtor's inventory, accounts receivable or other property that was acquired for or used in relation to a business carried on by the debtor; (b) exercise any control that the court considers advisable over 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 . . . Court appointment and from the directions given [to them] by the Court" (Ostrander v. Niagara Helicopters Ltd. (1973), 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 receiver wide‑ranging powers.

[ 58 ] Despite this flexibility, court‑appointed receivers have a fiduciary duty to act honestly and in the best interests of all interested 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, Bennett on Receiverships (3rd ed. 2011), at p. 42; Parsons v. Sovereign Bank of Canada, [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 and economically" (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, efficient and 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] 3 S.C.R. 327, at para. 33; Husky Oil Operations Ltd. v. Minister of National Revenue, [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 necessary because 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 prerequisites on the applicable standard of proof (McEwan and Herbst, at § 3:43; Hosting Metro Inc. v. Poornam Info Vision Pvt, Ltd., 2016 BCSC 2371, at paras. 29‑30).

[ 79 ] If the applicant discharges this burden, then under the second component, the party seeking to avoid arbitration must show 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 agreement at issue engages the mandatory stay provision in the applicable provincial arbitration statute.

[ 82 ] 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). Broadly speaking, however, this threshold inquiry requires the court to determine whether the party seeking to rely on the arbitration agreement has established the technical prerequisites for a stay in favour of arbitration.

[ 83 ] There are typically four technical prerequisites relevant at this stage:

(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 in favour of arbitration does so before taking any "step" in the court proceedings.

If all the technical prerequisites are met, the mandatory stay provision is engaged and the court should move on to the second component of the analysis.

[ 84 ] It is important to note that the standard of proof applicable at the first stage is lower than the usual civil standard. To satisfy the first component, the applicant must only establish an "arguable case" that the technical prerequisites are met (McEwan and Herbst, at § 3:47; Sum Trade Corp. v. Agricom International Inc., 2018 BCCA 379, 18 B.C.L.R. (6th) 322, at paras. 26 and 32, citing Gulf Canada Resources Ltd. v. Arochem International Ltd. (1992), 66 B.C.L.R. (2d) 113 (C.A.), at paras. 39‑40).

[ 85 ] I acknowledge that, in Dell, this Court characterized the applicable standard of proof as that of proof on a "prima facie" basis (para. 82). However, as the Court of Appeal for British Columbia has noted, there is no substantive difference between the arguable case test in Gulf Canada Resources and the prima facie test in Dell:

The significance of both standards is that there is room for a judge to dismiss a stay application when there is no nexus between the claims and the matters reserved for arbitration, while referring to the arbitrator any legitimate question of the scope of the arbitration jurisdiction. This avoids duplication and respects the competence‑competence principle.

(Clayworth v. Octaform Systems Inc., 2020 BCCA 117, 446 D.L.R. (4th) 626, at para. 30)

[ 86 ] Notwithstanding this less onerous standard of proof, court proceedings are not automatically stayed in favour of arbitration where the technical prerequisites are met. Rather, the court must move on to the second component and assess whether any of the statutory exceptions apply (Dell, at para. 87; Clayworth, at paras. 31‑32).

(2) Statutory Exceptions

[ 87 ] Certain exceptions, such as whether the arbitration clause is "void, inoperative or incapable of being performed", arise from the Model Law and the New York Convention and appear in several provincial arbitration statutes, including the Arbitration Act. I will discuss these particular exceptions in the context of this appeal in further detail below. Other statutory exceptions may also be relevant, depending on the jurisdiction (see, e.g., Arbitration Act, 1991, S.O. 1991, c. 17, s. 7(2)).

[ 88 ] At this second stage, the key question is whether, even though the technical requirements for a stay are met, the party seeking to avoid arbitration has shown on a balance of probabilities that one or more of the statutory exceptions apply. If not, the court must grant a stay. The mandatory nature of stay provisions across jurisdictions in Canada reflects the presumptive validity of arbitration clauses and the principle of party autonomy.

[ 89 ] It follows that a court should dismiss a stay application on the basis of a statutory exception only in a "clear" case (McEwan and Herbst, at § 3:55; A. J. van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation (1981), at p. 155). A clear case is, for example, one in which the party seeking to avoid arbitration has established on a balance of probabilities that the arbitration agreement is void, inoperative, or incapable of being performed. Where the invalidity or unenforceability of the arbitration agreement is not clear (but merely arguable), the matter should be resolved by the arbitrator. Such an approach accords due respect to arbitral jurisdiction, in light of the competence‑competence principle, as well as to the parties' intention to refer their disputes to arbitration (McEwan and Herbst, at § 3:55; Dalimpex Ltd. v. Janicki (2000), 137 O.A.C. 390 (S.C.J.), at paras. 3‑5, aff'd (2003), 228 D.L.R. (4th) 179 (C.A.)).

[ 90 ] As I have indicated, the application of the above two‑part framework in a particular case must begin with a proper interpretation of the governing stay provision. This brings me to the focal point of this appeal: s. 15 of the Arbitration Act.

D. Section 15 of the Arbitration Act

[ 91 ] The modern approach to statutory interpretation requires us to read the words of s. 15 in their entire context and in their grammatical and ordinary sense harmoniously with the scheme and object of the Arbitration Act and the intention of the legislature.

(1) Text of Section 15

[ 92 ] The text of s. 15(1) and (2) of the Arbitration Act mirrors the two‑part analytical framework just described. The sections read as follows:

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 [the technical prerequisites].

(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 [the statutory exceptions].

(2) Proper Interpretation of Section 15

[ 93 ] The parties disagree on four issues of statutory interpretation regarding s. 15 of the Arbitration Act. Two relate to the technical prerequisites set out in s. 15(1):

(a) whether undertaking to file a defence constitutes a "step in the proceedings"; and

(b) whether a court‑appointed receiver may be a "party" to a debtor's arbitration agreement.

[ 94 ] The other two relate to the statutory exceptions provided for in s. 15(2):

(c) whether a receiver's purported disclaimer of an arbitration agreement renders it "void, inoperative or incapable of being performed"; and

(d) whether the Arbitration Act permits a court to find an arbitration agreement "inoperative" or "incapable of being performed" due to a receivership.

[ 95 ] All four interpretive issues must be resolved before s. 15 is applied to the case at bar.

(a) Section 15(1) — Undertaking to File a Defence Is Not a "Step in the Proceedings"

[ 96 ] First, the Receiver resurrects its submission before the chambers judge that undertaking to file a defence may constitute a "step in the proceedings" within the meaning of s. 15(1). This proposed interpretation was explicitly rejected by the chambers judge and not pursued before the Court of Appeal.

[ 97 ] Determining whether a step in the proceedings has been taken requires an objective approach. The court must ask itself whether, on the facts, the party should be held impliedly to have affirmed the correctness of the proceedings and its willingness to go along with a determination by a court of law instead of arbitration (McEwan and Herbst, at § 3:27). A step in the proceedings means "something in the nature of an application to the Court, and not mere talk between solicitors . . . nor the writing of letters" (Larc Developments, at para. 15, citing Ives & Barker v. Willans, [1894] 2 Ch. 478 (C.A.), at p. 484).

[ 98 ] I acknowledge that the Receiver now argues in this Court, for the first time, that requesting the other party's consent to an extension of time to file a defence constitutes a step in the proceedings. Assuming, without deciding, that this submission is properly before our Court, I reject it. In my view, requesting an extension of time cannot be considered a "step". 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 (McEwan and Herbst, at § 3:31). Indeed, the result of an extension "might well be quite to the contrary, and have the effect of removing [the action] entirely from the Court" (Central Investments & Development Corp. v. Miller (1982), 133 D.L.R. (3d) 440 (P.E.I.S.C.), at p. 442).

[ 99 ] I would accordingly conclude, as did the chambers judge, that undertaking to file a defence and/or requesting an extension of time to do so does not constitute a step in the proceedings within the meaning of s. 15(1) of the Arbitration Act.

(b) Section 15(1) — A Court‑Appointed Receiver May Be a "Party" to an Arbitration Agreement

[ 100 ] I now turn to the question of whether the Receiver qualifies as a "party" to the Arbitration Agreements, such that s. 15(1) of the Arbitration Act is engaged.

[ 101 ] I conclude that a court‑appointed receiver may be a party to a debtor's pre‑receivership arbitration agreement through the operation of ordinary contract law. My reasons follow.

[ 102 ] A court‑appointed receiver cannot simultaneously rely on a debtor's contracts to bring civil claims and selectively disregard obligations under those same contracts. The general rule in contract law is that the assignee or successor of a contracting party inherits both its contractual benefits and its contractual burdens. This rule has been articulated by this Court and applied in numerous cases: see, e.g., Parsons, at p. 171; GMAC Commercial Credit Corp. — Canada v. T.C.T. Logistics Inc., 2006 SCC 35, [2006] 2 S.C.R. 123, at para. 19.

[ 103 ] 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 instance, subsidiaries, assignees, trustees and others "claiming through or under" a named party may be bound by that party's agreements (ABN Amro Bank Canada v. Krupp Mak Maschinenbau GmbH (1996), 135 D.L.R. (4th) 130, at p. 132).

[ 104 ] 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. To hold otherwise would permit the Receiver to selectively enforce a debtor's contractual rights while discarding the corresponding obligations. In the instant case, the Receiver's claim for payment would have no cause of action without Petrowest's Main Agreements. 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 of that contract, including the obligation to arbitrate contractual disputes.

[ 105 ] I therefore conclude that a court‑appointed receiver may be a "party" to the debtor's pre‑receivership arbitration agreement within the meaning of s. 15(1) of the Arbitration Act. Contrary to the Court of Appeal's conclusion, the doctrine of separability does not compel a different outcome.

[ 106 ] First, the Court of Appeal confused the doctrine of separability with an alleged right of the Receiver to disclaim the Arbitration Agreements. Separability is a doctrine that allows an arbitration clause to survive a challenge to the validity of the main contract. It does not, however, give a receiver a unilateral right to disclaim an arbitration agreement in the absence of a challenge to the validity of the main contract.

[ 107 ] Second, the Court of Appeal erred in applying the doctrine of separability to permit the Receiver to treat the Arbitration Agreements as having been disclaimed. Properly understood, separability is intended to safeguard arbitration agreements — not imperil them (Uber, at para. 224, per Côté J., dissenting, but not on this point). The purpose of separability is to protect arbitration clauses, not to make them discardable.

[ 108 ] In sum, the Court of Appeal erred in concluding that s. 15 was not engaged because the Receiver was not a "party" to the Arbitration Agreements. As I have just explained, the Receiver may be treated as a party to those agreements within the meaning of s. 15(1). It follows that the stay provision in s. 15(1) is engaged.

(c) Section 15(2) — A Court‑Appointed Receiver Cannot Unilaterally Disclaim an Arbitration Agreement

[ 109 ] I will now address whether a receiver's purported disclaimer of an arbitration agreement renders it "void, inoperative or incapable of being performed" within the meaning of s. 15(2). In my view, a court‑appointed receiver cannot unilaterally disclaim an arbitration agreement to render it void, inoperative or incapable of being performed.

[ 110 ] As I indicated, s. 15(2) should be interpreted narrowly, consistent with the strong legislative preference for the enforcement of arbitration agreements, which is expressed in both the New York Convention and the UNCITRAL Model Law. The sole basis upon which a party may sue to enforce a contract and yet avoid the obligation to arbitrate is that a court has determined the arbitration agreement to be void, inoperative or incapable of being performed. A unilateral disclaimer by the Receiver does not amount to a judicial determination under s. 15(2).

[ 111 ] A contrary interpretation would effectively allow one party to unilaterally negate the parties' bargained‑for choice to resolve their disputes through arbitration. If a receiver could disclaim an arbitration agreement unilaterally, this would undermine the predictability and enforceability of arbitration agreements. This is inconsistent with the pro‑arbitration approach of Canadian courts.

[ 112 ] Preferably, court‑appointed receivers should seek a judicial determination of the enforceability of arbitration agreements by bringing a motion for directions in the supervising court before initiating civil proceedings. The absence of a prior judicial determination does not, however, preclude the court from making such a determination when the receiver has already initiated civil proceedings.

[ 113 ] I recognize that the Court of Appeal came to the opposite conclusion, relying on the doctrine of separability to support the view that a receiver may disclaim an arbitration agreement. But, as I have explained, the doctrine of separability does not permit a party to unilaterally disclaim an otherwise valid arbitration agreement. Only a court can make a finding that an arbitration agreement is inoperative or incapable of being performed.

(d) Section 15(2) — A Court May Find an Arbitration Agreement "Inoperative" Due to Insolvency Proceedings

[ 114 ] The remaining question is whether s. 15(2) of the Arbitration Act authorizes a court to find an arbitration agreement inoperative due to court‑ordered receivership proceedings.

[ 115 ] I conclude that it does. My reasons follow.

[ 116 ] The language of s. 15(2) is clear: the court must grant a stay "unless it determines that the arbitration agreement is void, inoperative or incapable of being performed". The phrase "void, inoperative or incapable of being performed" must be interpreted in accordance with its textual, contextual and purposive meaning.

[ 117 ] 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". Notwithstanding this generally narrow interpretation, these terms encompass situations where an otherwise valid arbitration agreement cannot be enforced for compelling reasons.

[ 118 ] 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.

[ 119 ] The term "inoperative" has no universal common law definition (D. Joseph, Jurisdiction and Arbitration Agreements and Their Enforcement (2nd ed. 2010), at p. 152; C. B. Lamm and J. K. Sharpe, "Inoperative Arbitration Agreements Under the New York Convention", in E. Gaillard, D. Di Pietro and N. Leleu-Knobil, eds., Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice (2008), 297, at pp. 300‑01). Possible reasons for finding an arbitration agreement inoperative include frustration, discharge by breach, waiver, or a subsequent agreement between the parties (Lamm and Sharpe, at pp. 301‑02).

[ 120 ] 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.

[ 121 ] 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 (see D. Schramm, E. Geisinger and P. Pinsolle, "Article II", in H. Kronke et al., eds., Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention (2010), 37, at p. 128; S. Kröll, "The 'Incapable of Being Performed' Exception in Article II(3) of the New York Convention", in Gaillard, Di Pietro and Leleu‑Knobil, eds., Enforcement of Arbitration Agreements and International Arbitral Awards (2008), 323, at pp. 328‑29).

[ 122 ] 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.

[ 123 ] 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.

[ 124 ] 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 (Orphan Well Association v. Grant Thornton Ltd., 2019 SCC 5, [2019] 1 S.C.R. 150, at para. 66).

[ 125 ] 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 (see GMAC, at para. 37; Endean v. British Columbia, 2016 SCC 42, [2016] 2 S.C.R. 162, at para. 28). Further, under s. 243(1)(c) of the BIA, a court may appoint a receiver to "take any other 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 (see Canada (Minister of Indian Affairs and Northern Development) v. Curragh Inc. (1994), 114 D.L.R. (4th) 176, at p. 179; Third Eye Capital Corporation v. Dianor Resources Inc., 2019 ONCA 508, 435 D.L.R. (4th) 416, at para. 59).

[ 126 ] 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. To hold otherwise would reduce courts to passive bystanders, unable to promote the efficient resolution of insolvency proceedings by consolidating related claims in a single judicial proceeding.

[ 127 ] I therefore conclude that ss. 183(1) and 243(1)(c) of the BIA provide courts with the statutory jurisdiction to find an arbitration agreement inoperative in the context of court‑ordered receivership proceedings.

[ 128 ] I wish to be clear that this conclusion rests on the broad statutory jurisdiction of superior courts under the BIA, not on inherent jurisdiction. As I have noted, inherent jurisdiction must be considered only after statutory jurisdiction is determined to be unavailable. In the circumstances, it is appropriate to rely on the broad statutory basis provided by the BIA rather than the more limited and last‑resort remedy of inherent jurisdiction.

[ 129 ] I must also address the question of whether there is a conflict between the provincial Arbitration Act and the federal BIA that gives rise to paramountcy concerns. There is not. Federal paramountcy is triggered only where there is an "impossibility of dual compliance" or where the provincial law "frustrates the purpose of the federal legislation" (Alberta (Attorney General) v. Moloney, at para. 18). Here, there is no conflict between the Arbitration Act and the BIA that would engage the doctrine of federal paramountcy.

[ 130 ] Section 15(2) of the Arbitration Act is not frustrated by the BIA. Indeed, s. 72(1) of the BIA expressly provides that it does not abrogate or supersede substantive provisions of other laws that are not in conflict with it. The Arbitration Act and the BIA can thus operate alongside each other in the receivership context.

[ 131 ] While a court may rely on the BIA as a basis for finding an arbitration agreement inoperative under s. 15(2) of the Arbitration Act, the court's power to do so is subject to important limits. The party seeking to avoid arbitration must establish on a balance of probabilities that enforcing the arbitration agreement would compromise the orderly and efficient resolution of the receivership.

[ 132 ] I wish to add one observation here. Courts have sometimes addressed the issue of whether provincial arbitration legislation could be overridden by invoking the court's "inherent jurisdiction" under the BIA (see, e.g., the chambers judge's decision). Given the statutory jurisdiction that the BIA confers on courts, there is no need to rely on inherent jurisdiction. Indeed, as I indicated, inherent jurisdiction is a power to be invoked as a last resort, i.e., only after a court determines that it lacks the requisite statutory jurisdiction.

(e) Conclusion on Section 15

[ 157 ] In sum, a proper interpretation of s. 15 of the Arbitration Act leads to the following conclusions:

• The chambers judge was correct that undertaking to file a defence without invoking the rules of court is not a "step in the proceedings" within the meaning of s. 15(1);
• The chambers judge was correct that a court‑appointed receiver may be a "party" to a debtor's pre‑existing arbitration agreement within the meaning of s. 15(1);
• The Court of Appeal erred in holding that a court‑appointed receiver may disclaim an arbitration agreement and thereby render it "void, inoperative or incapable of being performed" within the meaning of s. 15(2); and
• The chambers judge was correct that she had the authority to find an arbitration agreement inoperative in light of bankruptcy and insolvency proceedings. This power arises from the broad statutory jurisdiction accorded to superior courts in bankruptcy and insolvency matters by ss. 183 and 243 of the BIA. A court may find an arbitration agreement inoperative where the arbitral proceedings bargained for by the parties would compromise the orderly and efficient resolution of a court‑ordered receivership.

[ 158 ] In light of these interpretive conclusions, I now apply the two‑part stay analysis under s. 15 of the Arbitration Act to the facts of the case at bar.

E. Application of Section 15 of the Arbitration Act

(1) Technical Prerequisites: Section 15 Is Engaged

[ 159 ] At the first stage of the stay analysis, the party seeking to rely on the arbitration agreement must establish an arguable case that all the technical prerequisites contemplated in s. 15(1) are met.

[ 160 ] There is no dispute that two of the technical prerequisites are met in this case: the Arbitration Agreements exist, and the impugned civil proceedings are in respect of a contractual dispute covered by them.

[ 161 ] I conclude that Peace River has also established an arguable case that the remaining technical prerequisites are met: (a) the Receiver is a "party" to the Arbitration Agreements, contrary to the Court of Appeal's conclusion; and (b) Peace River did not take a "step in the proceedings".

(a) The Receiver Is a "Party" to the Arbitration Agreements

[ 162 ] It is at least arguable that the Receiver is a party to the Arbitration Agreements. I say this for the following reasons.

[ 163 ] First, the Receiver would have no cause of action to assert without Petrowest or the Petrowest Affiliates. The Court of Appeal recognized that "nominally, the claims remain those of Petrowest and its affiliates" (para. 43). In other words, the Receiver stepped into their shoes by initiating a civil claim on their behalf. Similarly to an assignee or a trustee in bankruptcy, the Receiver arguably took on Petrowest's contractual obligations when it relied on Petrowest's rights under the Main Agreements. This includes the obligation to arbitrate disputes arising under those agreements (Petro‑Canada v. 366084 Ontario Ltd. (1995), 25 B.L.R. (2d) 19, at para. 19).

[ 164 ] Second, contrary to the submissions of both Peace River and the Receiver, the distinction between a trustee in bankruptcy and a receiver is immaterial here. Under para. 3(j) of the Receivership Order, the Receiver is authorized to bring a civil claim on behalf of Petrowest and the Petrowest Affiliates by relying on the Main Agreements. Doing so is arguably sufficient to bind the Receiver, as a matter of contract law, to the obligations in those agreements, including the Arbitration Agreements.

[ 165 ] Third, contrary to the Receiver's submission, it did not need to "adopt" or "perform" the contracts to become a party. A receiver's obligation to either adopt or disclaim arises only in respect of executory contracts. Here, the parties agree that there are no remaining obligations for the Receiver to perform. Further inquiry into adoption or performance is not only unnecessary but would also be inconsistent with the rationale of preventing parties from selectively enforcing contracts while avoiding corresponding burdens.

[ 166 ] Fourth, contrary to the Court of Appeal's conclusion, disclaimer and separability do not affect the Receiver's status as a party to the Arbitration Agreements. As noted, the Receiver concedes that it never disclaimed the Main Agreements or the Arbitration Agreements.

[ 167 ] Even setting this concession aside, I am of the view that the Court of Appeal misapplied the doctrine of separability. Separability does not apply absent a challenge to the validity of the main contract or of the arbitration agreement itself (Uber, at para. 224, per Côté J., dissenting, but not on this point). No issue is taken in this case with the validity of the Main Agreements or the Arbitration Agreements.

[ 168 ] I would add that the Court of Appeal's approach to separability would undermine the central purpose of the Arbitration Act. In essence, the Court of Appeal held that receivers are permitted to revoke arbitration agreements unilaterally, without any judicial inquiry into their validity or enforceability. But separability is intended to safeguard arbitration agreements, not imperil them (see Uber, at para. 224).

[ 169 ] Finally, I emphasize the low arguable case threshold applicable at the first stage of the s. 15 analysis. I recognize that receivership is a flexible remedy which may require interfering with the contractual rights of third parties in certain circumstances. However, accepting the Receiver's position at this stage of the s. 15 analysis would permit all court‑appointed receivers to avoid pre‑receivership arbitration agreements simply by initiating civil proceedings on the debtor's behalf. This would, in effect, eliminate the presumptive enforceability of arbitration agreements in the insolvency context, contrary to the principles of party autonomy and the pro‑arbitration stance adopted in Canadian law.

(b) Peace River Did Not Take a "Step in the Proceedings"

[ 170 ] The Receiver has not identified a reviewable error in the chambers judge's finding that Peace River did not take a step in the proceedings. That finding was not challenged before the Court of Appeal. As such, it is not properly before this Court. Even if it were, I see no basis to question the chambers judge's reasoning. She correctly held that undertaking to file a defence without invoking the rules of court is not a step in the proceedings (see paras. 96‑99 above).

[ 171 ] Accordingly, s. 15 of the Arbitration Act is engaged. I must therefore grant a stay in favour of arbitration unless I find the Arbitration Agreements to be "void, inoperative or incapable of being performed" under s. 15(2).

(2) Statutory Exceptions: The Arbitration Agreements Are "Inoperative" Under Section 15(2)

[ 172 ] At the second stage of the s. 15 framework, the burden shifts to the party seeking to avoid arbitration to establish on a balance of probabilities that the arbitration agreement at issue is void, inoperative, or incapable of being performed within the meaning of s. 15(2), as explained above.

[ 173 ] I conclude that the Receiver has established that the Arbitration Agreements are inoperative. Stated differently, the arbitral processes contemplated in the Arbitration Agreements would compromise the orderly and efficient resolution of the receivership, contrary to the objectives of the BIA. Further, while recognizing the importance of party autonomy and freedom of contract, referral to arbitration in the unique circumstances of the instant case would jeopardize the Receiver's ability to maximize recovery for the creditors and to allow Petrowest and its affiliates to move forward with certainty.

(a) Effect of Arbitration on the Integrity of the Insolvency Proceedings

[ 174 ] The inexpediency of the multiple overlapping arbitral proceedings contemplated in the Arbitration Agreements, as compared to a single judicial process, is the determinative factor in this case. In these circumstances, I conclude that enforcing the Arbitration Agreements would compromise the orderly and efficient resolution of the receivership proceedings.

[ 175 ] The Receiver's affidavit evidence outlines the chaotic arbitral processes that would result if this Court were to grant a stay under s. 15 of the Arbitration Act. First, the Receiver would need to participate in and fund at least four different arbitrations involving "seven different sets of counterparties" (A.R., vol. XI, at p. 2895). The funding for these proceedings would necessarily come from the receivership estate, thereby reducing the funds available for distribution to creditors. Second, the four separate arbitrations would involve complicated questions about consolidation and would potentially require the application of different rules and the appointment of different arbitrators. Third, there would be a significant risk of inconsistent decisions resulting from the multiple arbitral processes.

[ 176 ] The inefficient and protracted nature of the contemplated arbitral processes would plainly compromise the integrity of the receivership proceedings. I acknowledge the chambers judge's finding that arbitration would not "derail" the insolvency proceedings (para. 51). However, this must be read alongside her finding that "the significant cost and delay inherent in the multiple [arbitral] proceedings" would be "detrimental to all parties" (para. 60).

[ 177 ] In light of the foregoing, I see no basis on which to interfere with the following factual findings made by the chambers judge:

• the parties agreed that declining the requested stay "would promote the efficient and inexpensive resolution of their dispute", and no one suggested that the issues were "not appropriate for judicial determination" (para. 56);
• there was "no evidence" of any "realistic likelihood" that the parties would agree to streamline the arbitral proceedings through consolidation, notwithstanding their ability to do so (para. 57); and
• a single judicial process would "be faster and less expensive than four arbitrations and a possible court case" (para. 56).

[ 178 ] Accordingly, expediency and efficiency concerns militate strongly in favour of a finding that the enforcement of the Arbitration Agreements would compromise the objects of the BIA and that the Agreements are therefore inoperative under s. 15(2) of the Arbitration Act.

(b) Relative Prejudice to the Parties From the Referral of the Dispute to Arbitration

[ 179 ] I agree with the chambers judge that Peace River has failed to show any prejudice it would suffer if the Arbitration Agreements were not enforced (para. 58). To the contrary, as already indicated, it conceded that a single judicial proceeding would be the most efficient and cost‑effective route. This supports my view that enforcing the Arbitration Agreements would compromise the receivership proceedings.

(c) Urgency of Resolving the Dispute

[ 180 ] As noted, the parties agree that proceeding through the courts is the more expeditious option. I see no basis for interfering with the chambers judge's finding that "[i]t will not be possible to distribute the proceeds" of the property of Petrowest and the Petrowest Affiliates to their creditors "until these disputes are resolved" (para. 60). This urgency further militates in favour of finding the Arbitration Agreements inoperative.

(d) Applicability of a Stay of Proceedings Under Bankruptcy or Insolvency Law

[ 181 ] In light of the foregoing, it is unnecessary to consider the effect of the stay of proceedings under the Receivership Order on the enforceability of the Arbitration Agreements.

[ 182 ] Finally, I have had the benefit of reading my colleague's reasons. His view that the analysis should start with the terms of the Receivership Order is a sensible one. Further, it cannot be said that his interpretation of the terms of the Receivership Order is without merit. However, in the particular circumstances of this case, I would decline to resolve the appeal on this basis. I say this for two reasons.

[ 183 ] First, the argument that the combined effect of paras. 3(c), 3(f) and 3(j) authorizes the Receiver to proceed in court despite the Arbitration Agreements was not squarely before the Court. While the parties made some submissions on the interpretation of the terms of the Receivership Order, for instance about the scope of the Receiver's power to cease to perform the debtors' contracts under para. 3(c), these submissions were not directed at establishing that the Receivership Order itself authorized the Receiver to disclaim the Arbitration Agreements and to sue in court.

[ 184 ] Second, resolving the question of the proper interpretation of the terms of the Receivership Order would have no impact on the disposition of the appeal. My colleague and I agree that the separability doctrine, as relied upon by the Court of Appeal, has no application here. We also share the view that the Arbitration Agreements are inoperative. Ultimately, whether they are inoperative because of the terms of the Receivership Order or because of the statutory jurisdiction conferred by the BIA, the result is the same.

[ 185 ] Given that the interpretation of the terms of the Receivership Order was not fully argued by the parties and that the appeal can be resolved without addressing this issue, it is prudent to leave it to another day.

(3) Conclusion on Section 15

[ 186 ] I agree with the courts below that Peace River's application for a stay of proceedings under s. 15 of the Arbitration Act must be dismissed.

[ 187 ] The prerequisites for a mandatory stay in s. 15(1) are met. However, enforcing the Arbitration Agreements would compromise the orderly and efficient resolution of the receivership, contrary to the purposes of the BIA.

[ 188 ] Accordingly, the Arbitration Agreements are inoperative within the meaning of s. 15(2).

VII. Disposition

[ 189 ] For the foregoing reasons, I would dismiss the appeal with costs throughout. In the result, the civil claim of Petrowest and the Petrowest Affiliates may proceed in the Supreme Court of British Columbia.

Concurring Reasons

The reasons of Karakatsanis, Brown, Martin and Jamal JJ. were delivered by

Jamal J. —

[ 190 ] I have had the benefit of reading the reasons of my colleague Justice Côté. I agree with my colleague that Peace River's application for a stay of proceedings under s. 15 of the Arbitration Act, R.S.B.C. 1996, c. 55, should be dismissed, and thus the appeal should be dismissed, because the Arbitration Agreements are inoperative under s. 15(2) of the Arbitration Act.

[ 191 ] My point of departure from my colleague concerns the primary basis for finding the Arbitration Agreements to be inoperative. In my view, by suing in court to collect the accounts receivable allegedly owing, as authorized under the Receivership Order, the Receiver disclaimed the Arbitration Agreements. The Arbitration Agreements were thereby rendered inoperative. The analysis should start with the terms of the Receivership Order itself.

[ 192 ] Several provisions of the Receivership Order authorized the Receiver to sue in court to collect the accounts receivable allegedly owing and to disclaim the Arbitration Agreements, thus effectively rendering them inoperative:

• The Receivership Order authorized the Receiver to sue to collect the accounts receivable that Peace River allegedly owed Petrowest. Paragraph 3(f) of the Order authorized the Receiver "to receive and collect all monies and accounts now owed or hereafter owing to the Debtors [i.e., Petrowest] and to exercise all remedies of the Debtors in collecting such monies". Paragraph 3(j) of the Order similarly authorized the Receiver "to initiate, prosecute and continue the prosecution of any and all proceedings with respect to the Property [i.e., Petrowest's property, assets, and undertakings], including all proceeds thereof".
• The Receivership Order authorized the Receiver to disclaim the Arbitration Agreements. Paragraph 3(c) of the Order authorized the Receiver to "cease to perform any contracts of the Debtors". An arbitration agreement is a contractual right of a party to have a claim referred to arbitration to the exclusion of the courts (see Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801, at para. 55; Seidel v. TELUS Communications Inc., 2011 SCC 15, [2011] 1 S.C.R. 531, at para. 26). As a contractual right, an arbitration agreement "could be disclaimed pursuant to" para. 3(c) of the Receivership Order.

[ 193 ] In my view, the combined effect of paras. 3(c), 3(f), and 3(j) of the Receivership Order is to authorize the Receiver to disclaim the Arbitration Agreements and to sue in court for amounts owing to the Debtors. These provisions authorize the Receiver to sue, either in court or before an arbitrator, at the Receiver's election, based on what will best promote the orderly and efficient resolution of the receivership under the BIA. The legal effect of the Receiver suing in court and not before an arbitrator was undoubtedly to disclaim reliance on the Arbitration Agreements.

[ 194 ] This interpretation of the Receivership Order does not rely on the arbitration doctrine of separability. The separability doctrine is recognized, for example, in s. 17(2) of the Ontario Arbitration Act, 1991, S.O. 1991, c. 17, and provides that, for the purposes of ruling on arbitral jurisdiction, an arbitration agreement "shall . . . be treated as an independent agreement that may survive" the main contract. A disclaimer does not involve the separability doctrine, which is concerned with the independence of arbitration agreements for the limited purpose of ruling on arbitral jurisdiction. The separability doctrine has no application here, as Justice Côté and I agree. Instead, it is the terms of the Receivership Order that authorized the disclaimer of the Arbitration Agreements.

[ 195 ] I also disagree with my colleague's view that reliance on the terms of the Receivership Order is precluded by Petrowest and the Receiver's position before the Court of Appeal and this Court that the Receiver "has not expressly disclaimed" the Arbitration Agreements (para. 122, citing R.F., at para. 102, and A.F., Appendix B, at paras. 3 and 13). In my view, the legal effect of the Receiver suing in court, as authorized by the Receivership Order, was to disclaim the Arbitration Agreements, regardless of the Receiver's subjective characterization of its actions. The legal effect of an act cannot be altered by the actor's characterization of it.

[ 196 ] I also disagree with my colleague's claim that this Court should not interpret the Receivership Order because this issue "was not squarely before the Court" and "was not fully argued by the parties" (Côté J.'s reasons, at paras. 183 and 185). The interpretation of the Receivership Order was amply debated before the Court, both in written submissions and during the oral hearing. The Receiver itself recognized that "the Receivership Order's authority to cease to perform contracts does extend to the Arbitration Agreements" (R.F., at para. 102). Although neither party framed the issue precisely as I have done here, courts are not restricted to the legal arguments advanced by parties but can develop the law in a manner that addresses the issues before them.

[ 197 ] To be clear, I am not suggesting that a receiver can unilaterally "revoke" an otherwise valid arbitration agreement. I agree with my colleague that "[o]nly a court can make a finding that an arbitration agreement is inoperative or incapable of being performed" (para. 6). However, the courts' exclusive power to declare an arbitration agreement inoperative is distinct from the question of whether the courts ought to recognize and give effect to the legal consequences of the Receiver's court-authorized actions, as set out in the Receivership Order. In my view, the terms of the Receivership Order authorized the Receiver to disclaim the Arbitration Agreements and to sue in court, and the legal effect of the Receiver's court action was to render the Arbitration Agreements inoperative.

[ 198 ] To the extent that the Receivership Order did not authorize the Receiver to sue in court, I otherwise agree with my colleague's reasons for concluding that ss. 183 and 243 of the Bankruptcy and Insolvency Act provided a statutory basis for the chambers judge to declare the Arbitration Agreements inoperative and to dismiss the stay application. As my colleague explains, in this case, requiring arbitration of the Receiver's collection action would compromise the orderly and efficient resolution of the receivership.

[ 199 ] I would dismiss the appeal with costs throughout.

Appendix — Arbitration Agreements

Partnership Agreement

32. SETTLEMENT OF PARTNERSHIP DISPUTES

32.6 If the Management Committee does not elect to proceed with mediation, or if the Management Committee is unable to agree with the mediator's decision, the Dispute shall be finally and exclusively settled by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce ("ICC"). The arbitration proceeding shall take place in Vancouver, British Columbia. The arbitration shall be conducted in English. The arbitral tribunal shall consist of three (3) arbitrators appointed by the ICC in accordance with its rules.

Guarantee

12. This Guarantee shall be governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein. Any dispute arising out of or in connection with this Guarantee shall be finally and exclusively settled by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce ("ICC"). The seat, or legal place, of arbitration shall be Vancouver, British Columbia, and the proceedings shall be conducted in English. The arbitral tribunal shall consist of three (3) arbitrators.

Purchase Order

CLAUSE 19 — SETTLEMENT OF DISPUTES

. . . In the event that the parties are unable to resolve a Dispute within 7 days, either party shall be entitled to require that the Dispute is submitted to binding arbitration to be finally resolved. If a Dispute is submitted to arbitration, such arbitration shall be conducted pursuant to the arbitration provisions in Schedule D (Supplementary Conditions).

Minor Works/Services Subcontract

16. DISPUTE RESOLUTION

16.2 Dispute Resolution — Subcontract

(e) Arbitration: If either (1) the Parties do not agree that such Dispute should be referred to mediation within 10 days following the Target Dispute Resolution Date, or (2) the Dispute is not completely resolved by agreement between the Parties within 14 days of the appointment of a mediator or within 5 days following the conclusion of the mediation, then such Dispute shall be submitted to arbitration in accordance with the provisions of Schedule D (Supplementary Conditions) herein.

Appeal dismissed with costs throughout.

Solicitors for the appellants: Burnet, Duckworth & Palmer, Calgary.

Solicitors for the respondents: Bennett Jones, Calgary.

Solicitors for the intervener the Canadian Commercial Arbitration Center: Spiegel Sohmer inc., Montréal.

Solicitors for the intervener Arbitration Place: Lerners, Toronto.

Solicitors for the intervener the Chartered Institute of Arbitrators (Canada) Inc.: Baker & McKenzie, Toronto.

Solicitors for the intervener the Insolvency Institute of Canada: Fasken Martineau DuMoulin, Vancouver.

Solicitor for the intervener the Canadian Federation of Independent Business: Canadian Federation of Independent Business, Ottawa.

[^1]: The Arbitration Agreements are reproduced in an appendix to these reasons.