Bell Canada v. Plan Group Inc.

109 O.R. (3d) 128

2012 ONSC 42

Ontario Superior Court of Justice,

Allen J.

January 4, 2012

Arbitration -- Parties -- Partnership A wound up and dissolved and B acquiring its assets -- B delivering notice of arbitration in A's name -- Arbitration nullity.

Limitations -- Arbitration -- Arbitration clause in commercial agreement containing no language that explicitly excluded or varied operation of Limitations Act -- Clear and express language required in order to contract out of statutory protections -- Limitations Act applying -- Arbitration being statute-barred.

In 1999, the applicant and PGP entered into an agreement to provide Internet services to the Toronto area for five years. The agreement contained an arbitration clause (s. 22.2) which provided that failure to file a notice of arbitration within 12 months after the occurrences supporting a claim constituted an irrevocable waiver of that claim. The agreement ended effective January 31, 2004. PGP was dissolved in 2008, and the respondent PGI acquired all of its partnership interests. PGP delivered a notice of arbitration to the applicant dated December 12, 2005, wherein it alleged that the applicant committed various breaches of the agreement (the "First Arbitration"). The applicant took the position that the first claim and the First Arbitration were nullities as PGP had been dissolved before the commencement of the First Arbitration. PGI then commenced a second arbitration (the "Second Arbitration") on June 15, 2010 which advanced virtually identical claims to those advanced in the First Arbitration. The applicant brought an application to strike the First and Second Arbitration proceedings. PGI brought a motion to stay the application.

Held, the applicant's application should be granted; the respondent's motion should be dismissed.

The First Arbitration was a nullity as it was commenced by a dissolved partnership. The First Arbitration was not being brought on behalf of the former partners of PGP, but by PGI, which acquired a 100 per cent interest in the partnership in circumstances where PGI's former partners retained no continuing interest. The winding up of PGP's affairs was completed simultaneously with the dissolution of the partnership. PGP no longer existed as of August 1, 2008, and nothing remained to be wound up after that date. PGI did not acquire its interest through PGP as assignor. It was the partners that owned undivided interests in "partnership property"; PGP was not capable of owning "partnership property" that could be assigned. [page129]

The claims in the Second Arbitration were statute-barred as having been commenced after the expiry of the limitation periods under the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. The claims were known to PGP before August 2005. The Second Arbitration was commenced about five years later. Section 22.2 of the agreement did not operate to exclude the statutory limitation period. It did not contain any language that explicitly excluded or varied the operation of a Limitations Act. Clear and express language must be used in order to contract out of statutory protections.

It would not be appropriate to stay the applicant's application. Section 7(2), para. 5 of the Arbitration Act, 1991, S.O. 1991, c. 17 gives the court the discretion to refuse a stay if the matter is a proper one for default or summary judgment. That was the case here with respect to both arbitrations.

APPLICATION for an order declaring two arbitrations to be nullities; MOTION by the respondent to stay the application.

Cases referred to BMF Trading v. Abraxis Holdings Ltd., [2000] B.C.J. No. 2356, 2000 BCSC 1691, 101 A.C.W.S. (3d) 162, [2000] B.C.T.C. 894; Cindex Distributors Registered v. Black Wiping Products Ltd. (1978), 1978 1688 (ON CA), 22 O.R. (2d) 208, [1978] O.J. No. 3642, 93 D.L.R. (3d) 158 (C.A.), distd Dell Computer Corp. v. Union des Consommateurs, [2007] 2 S.C.R. 801, [2007] S.C.J. No. 34, 2007 SCC 34, 284 D.L.R. (4th) 577, 366 N.R. 1, J.E. 2007-1426, 34 B.L.R. (4th) 155, 44 C.P.C. (6th) 205, 158 A.C.W.S. (3d) 870, EYB 2007-121973; Oakville Storage & Forwarders Ltd. v. Canadian National Railway (1991), 1991 7334 (ON CA), 3 O.R. (3d) 1, [1991] O.J. No. 536, 80 D.L.R. (4th) 675, 46 O.A.C. 292, 26 A.C.W.S. (3d) 1358 (C.A.), consd Other cases referred to Allen v. Howard Scott ("Pete") McMaster Trust (Trustee of), [2011] O.J. No. 287, 2011 ONSC 584; Armstrong v. Northern Eyes Inc. (2000), 2000 29047 (ON SCDC), 48 O.R. (3d) 442, [2000] O.J. No. 1594, 133 O.A.C. 366, 8 B.L.R. (3d) 46, 96 A.C.W.S. (3d) 919; Babcock and Wilcock Canada Ltd. v. Agrium Inc., [2005] A.J. No. 171, 2005 ABCA 82, 39 Alta. L.R. (4th) 197, 363 A.R. 103, 3 B.L.R. (4th) 262, 42 C.L.R. (3d) 197, 11 C.P.C. (6th) 108, 137 A.C.W.S. (3d) 238, 343 W.A.C. 103; Bell Canada v. The Plan Group (2009), 96 O.R. (3d) 81, [2009] O.J. No. 2829, 2009 ONCA 548, 252 O.A.C. 71, 81 C.L.R. (3d) 9, 62 B.L.R. (4th) 157, 179 A.C.W.S. (3d) 40, revg [2008] O.J. No. 1633, 71 C.L.R. (3d) 205, 167 A.C.W.S. (3d) 855 (S.C.J.); Canadian National Railway Co. v. Lovat Tunnel Equipment Inc., 1999 3751 (ON CA), [1999] O.J. No. 2498, 174 D.L.R. (4th) 385, 122 O.A.C. 171, 37 C.P.C. (4th) 13, 89 A.C.W.S. (3d) 486 (C.A.); Chanore Property Inc. v. ING Insurance Co. of Canada, [2010] O.J. No. 3880, 2010 ONSC 4152, 94 C.L.R. (3d) 223, [2011] I.L.R. I- 5061; Kingsberry Properties (Re), [1997] O.J. No. 5352, 51 O.T.C. 252, 3 C.B.R. (4th) 124, 76 A.C.W.S. (3d) 480 (Gen. Div.); Kucor Construction & Developments & Associates v. Canada Life Assurance Co. (1998), 1998 4236 (ON CA), 41 O.R. (3d) 577, [1998] O.J. No. 4733, 167 D.L.R. (4th) 272, 114 O.A.C. 201, 43 B.L.R. (2d) 136, 21 R.P.R. (3d) 187, 83 A.C.W.S. (3d) 852 (C.A.); Molson Brewery B.C. Ltd. v. Canada, 2001 22132 (FC), [2001] F.C.J. No. 87, 199 F.T.R. 210, 103 A.C.W.S. (3d) 323 (T.D.); NFC Acquisition L.P. v. Centennial 2000 Inc., [2011] O.J. No. 158, 2011 ONCA 43, 78 B.L.R. (4th) 11; Silver Spoon Developments Ltd. v. Botham Holdings Ltd. (Trustee of), [2008] B.C.J. No. 1859, 2008 BCSC 1317, 13 P.P.S.A.C. (3d) 257, 51 B.L.R. (4th) 222, 299 D.L.R. (4th) 519, 169 A.C.W.S. (3d) 664; Simard v. Financial Credit Bureau Services Ltd., 1982 4156 (NB KB), [1982] N.B.J. No. 337, 42 N.B.R. (2d) 416, 110 A.P.R. 416 (Q.B.); Starrs v. Cosgrave Brewing and Malting Co. of Toronto (1886), 1886 8 (SCC), 12 S.C.R. 571, [1886] S.C.J. No. 21; Steenerson v. Bank of Toronto, 1922 230 (SK KB), [1922] 3 W.W.R. 922 (Sask. Dist. Ct.); Suncor Energy Products Inc. v. Howe-Baker Engineers Ltd., [2010] A.J. No. 618, 2010 ABQB 310, 32 Alta. L.R. (5th) 390, 492 A.R. 288; [page130] Swale Investments Ltd. v. National Bank of Greece (Canada), [1998] O.J. No. 5383, 85 A.C.W.S. (3d) 295 (C.A.), affg 1997 12439 (ON SC), [1997] O.J. No. 4997, 37 B.L.R. (2d) 324, 51 O.T.C. 144, 18 C.P.C. (4th) 266, 76 A.C.W.S. (3d) 71 (Gen. Div.); Venneri v. TD General Insurance Co., 2006 31306 (ON SC), [2006] O.J. No. 3630, 42 C.C.L.I. (4th) 108, 151 A.C.W.S. (3d) 118 (S.C.J.) Statutes referred to Arbitration Act, 1991, S.O. 1991, c. 17, ss. 7(1), (2), para. 5 Courts of Justice Act, R.S.O. 1990, c. C.43, s. 106 Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, ss. 4, 22 [as am.], (1), (2), (6) [as am.], 24(1) [as am.] Partnerships Act, R.S.O. 1990, c. P.5, ss. 21(1), 38 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 8.01, 20.04(4) Authorities referred to Manzer, Alison R., A Practical Guide to Canadian Partnership Law, looseleaf (Aurora, Ont.: Canada Law Book, 2010)

Andrea Burke and James Bunting, for applicant. Neal Smitheman and Antonio Di Domenico, for respondent.

ALLEN J.: --

Background and Overview

[1] Before the court in this proceeding are an application by Bell Canada ("Bell") and a motion by Plan Group Inc. ("PGI"). Bell seeks an order that two arbitrations, one brought by the Plan Group Partnership ("PGP") and the other by Plan Group Inc. ("PGI"), should not proceed. PGI brings a motion to stay Bell's application on the basis it is within the jurisdiction of the arbitral tribunal to dispose of the matters raised in Bell's application.

Bell's application

[2] In 1999, the applicant, Bell Canada ("Bell"), and the Plan Group Partnership ("PGP") entered into an alliance agreement (the "Agreement"), whereby the parties agreed to provide Internet services to the Toronto area for five years. The Agreement ended effective January 31, 2004. The Agreement contained an arbitration clause at s. 22.2 which in its relevant part provided:

22.2 Bell and PG [the Plan Group Partnership] will settle by arbitration any dispute arising out of or related to this Agreement or any subcontract that is not finally resolved pursuant to Section 21.1 hereof. A single arbitrator will conduct the arbitration under the Arbitration Act, 1991 (Ontario) and the then-current rules of the Arbitration and Mediation Institute of Ontario Inc. [now the ADR Institute] Bell and PG [the Plan Group Partnership] will [page131] select the arbitrator from a panel of persons knowledgeable in business information and the construction industry. The decision and award of the arbitrator will be final and binding and the award so rendered may be entered into any court having jurisdiction thereof. The arbitration will be held in Toronto, Ontario. The arbitrator will not be empowered to award punitive damages to either Party. Failure to file a notice of arbitration within 12 months after the occurrences supporting a claim constitutes an irrevocable waiver of that claim. (Emphasis added)

[3] As will be discussed below, PGP was dissolved in 2008 with the corporate partner Plan Group Inc. ("PGI") acquiring all of the PGP partnership interests. It is therefore PGI that responds to Bell's application herein and that brings a motion to stay the application. PGI's motion will be addressed more fully below.

[4] PGP delivered a notice of arbitration (a Notice Demanding Arbitration) to Bell by correspondence dated December 12, 2005 wherein PGP alleged Bell committed various breaches of the Agreement. PGP did not file a notice of arbitration with the ADR Institute (the "Institute"), referred to in the Agreement.

[5] Bell alerted PGP that based on its interpretation of the Institute's procedural rules, PGP had not properly commenced the arbitration. The relevant rules governing the commencement of an arbitration are as follows:

11. Arbitration under Agreement

Where a dispute falls under an arbitration clause or agreement, a party as claimant may submit that dispute to arbitration by delivering a written Notice of Request to Arbitrate to each respondent . . . and to the Institute. . . . . .

13. Commencement Date

The arbitration is deemed to have commenced when a Notice of Request to Arbitrate or a Notice of Submission to Arbitration has been filed with the Institute and the initial filing fee has been paid. The Institute shall notify the parties when an arbitration has been commenced and shall deliver to them a Notice of Commencement of Arbitration. (Emphasis added)

[6] PGP disputed Bell's interpretation of the Institute rules and brought the matter before the Divisional Court, which held that PGP was not required to file a Notice of Request to Arbitrate with the Institute. The Court of Appeal, by decision dated July 7, 2009, cited as Bell Canada v. The Plan Group (2009), 2009 ONCA 548, 96 O.R. (3d) 81, [2009] O.J. No. 2829 (C.A.), reversed the lower court decision [[2008] O.J. No. 1633, 71 C.L.R. (3d) 205 (S.C.J.)] holding that to commence an arbitration under the Agreement a party is required to file a Notice of Request for Arbitration with the Institute. PGP did not seek to appeal that decision. [page132]

[7] This application before this court concerns two arbitrations, both of which for different reasons Bell argues should not have been commenced.

[8] Counsel for PGP filed a Notice of Request to Arbitrate with the Institute seeking to refer the dispute for arbitration pursuant to s. 22.2 of the Agreement (the "First Arbitration"). The Notice to Request to Arbitrate names "The Plan Group" as the claimant. Bell initially planned to challenge the First Arbitration under the waiver clause in s. 22.2 of the Agreement since that proceeding, commenced in September 2009, was well in excess of 12 months after the occurrences giving rise to the claims, as provided in the waiver clause.

[9] Shortly before the February 26, 2010 due date for Bell to file its defence in the First Arbitration, Bell found what it believed was a more fundamental basis to challenge the First Arbitration. An Ontario Ministry of Government Services search conducted on February 24, 2010 disclosed that the registration of the business name "The Plan Group" was intentionally cancelled on August 1, 2008. On February 24 and 26, 2010, Bell, through correspondence, advised counsel for PGP it had learned that PGP had been dissolved and ceased to exist before the commencement of the First Arbitration and, as such, the first claim and First Arbitration were nullities. Bell requested that no further steps should be taken in the arbitration.

[10] Counsel, now for PGI, responded by letter dated February 26, 2010 that the Plan Group Partnership ("PGP") is a proper claimant in the arbitration and by letter dated June 11, 2010 declared "the Plan Group Partnership remains extant for the purpose of pursuing the claims that arose from the partnership business".

[11] Bell seeks an order declaring the First Arbitration is a nullity.

[12] On June 14, 2010, counsel for PGI delivered two letters to counsel for Bell. One letter set out proposed amendments to the first claim stating that Plan Group Inc. ("PGI") had acquired all the interests of the other partner in PGP. The second letter indicated a further arbitration was filed with PGI as the claimant (the "Second Arbitration") which proceeding was deemed by the Institute to have been commenced on June 15, 2010.

[13] PGI's position with respect to the Second Arbitration is that PGI, having acquired ownership of all interests of PGP, including the claims against Bell, is a legal entity with the legal capacity to arbitrate the claims against Bell.

[14] The Second Arbitration advances virtually identical claims to those raised in the First Arbitration. It is Bell's position that [page133] the claims raised in the Second Arbitration are barred as having been brought outside the statutory limitation periods and hence the right to arbitrate has been extinguished.

[15] PGI argues the intention of the waiver in s. 22.2 of the Agreement is to vary or exclude the application of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, as amended, as permitted by s. 22(6) of the Act, with the result that the claims in the Second Arbitration are not barred.

[16] Bell seeks an order declaring the claims in the Second Arbitration statute-barred.

PGI's motion to stay

[17] PGI relies on the court's jurisdiction under s. 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, and s. 7(1) of the Arbitration Act, 1991, S.O. 1991, c. 17, as amended. In support of its view, the court should stay the application, PGI points to the mandatory language in s. 7(1) which provides that on a motion brought by one party to an arbitration agreement, the court shall stay a court proceeding that has been commenced before it by the other party in respect of a matter to be submitted to arbitration.

[18] PGI's position is that none of the limiting conditions set out in s. 7(2) of the Arbitration Act, 1991, which permit the court to refuse a stay, apply to the matter before this court.

[19] Bell argues one of the circumstances that permits the court to refuse a stay does apply -- that is, the exception under s. 7(2), para. 5, which provides a stay may be refused if the matter is a proper one for default or summary judgment.

The Parties' Arguments and the Court's Analysis

[20] The issues and facts underlying Bell's application and PGI's motion are substantially intertwined. Since the bulk of the court's consideration is taken up on Bell's application, it is reasonable to first address the issues on the application followed by the issues raised on the motion to stay.

Bell's application

The First Arbitration

[21] Bell argues an action commenced by a dissolved entity or partnership is a nullity. It cites a number of cases for that proposition.

[22] In Swale Investments, infra, the plaintiff corporation was dissolved and subsequently revived under the Corporations Act. The court dismissed the action of the plaintiff because in the [page134] period between the dissolution of the corporation and its revival, a limitation period expired barring the claim. The court held (Swale Investments Ltd. v. National Bank of Greece (Canada), 1997 12439 (ON SC), [1997] O.J. No. 4997, 37 B.L.R. (2d) 324 (Gen. Div.), at paras. 12 and 13, affd [1998] O.J. No. 5383, 85 A.C.W.S. (3d) 295 (C.A.)):

In my view, the plaintiff corporation having been dissolved and not having been revived, has no legal existence. Section 241(5) merely provides that the corporation, upon revival, has all the rights and privileges and liabilities it would have had if it had not been dissolved. This does not mean that upon revival its legal position is restored retroactively.

Swale ceased to exist as at November 3, 1993, the date of dissolution. When the statement of claim was issued on September 3, 1996, it prima facie was not an entity capable of suit. As a result, the action commenced on that date was a nullity.

[23] Swale Investments involves the lack of capacity of a corporate entity on dissolution. Other cases advance the same principle in relation to a partnership. Simard, Levesque, infra, concerns a claim by a partnership of accountants against a former client of the partnership in relation to an unpaid account. At the time the action was commenced, the partnership had been dissolved. In dismissing the action, the court held (Simard v. Financial Credit Bureau Services Ltd., 1982 4156 (NB KB), [1982] N.B.J. No. 337, 42 N.B.R. (2d) 416 (Q.B.), at paras. 12-14):

As indicated earlier, however, the evidence established that the partnership known as "Simard, Levesque, Nadeau and Landry" was in fact dissolved as a partnership in 1977 and that, in addition, the other partners in fact assigned any interest they may have had in the account receivable relating to the defendant to Raymond Levesque in view of the fact the defendant was supposedly a client of the latter. In my view, therefore, the "partnership" as such had no status and no claim vis à vis the defendant at the time of the trial of this matter.

[24] The court went on to observe that only Levesque could have brought a claim against the defendant because the partnership had assigned all interests in the partnership to him but he was however not a party to the action.

[25] PGI advances the position that a dissolved partnership remains in existence for the purpose of pursuing claims that arose before the dissolution of the partnership. I agree with Bell that the law does not support PGI's position.

[26] Rule 8.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 permits a court proceeding to be brought in the name of the partnership where it is being brought by ". . . two or more persons as partners". However, a partnership is not a legal entity with the capacity to sue [page135] (Kucor Construction & Developments & Associates v. Canada Life Assurance Co. (1998), 1998 4236 (ON CA), 41 O.R. (3d) 577, [1998] O.J. No. 4733 (C.A.), at paras. 26 and 28-29). There is no question the First Arbitration is not being brought on behalf of former partners of PGP but by PGI, which acquired a 100 per cent interest in the partnership in circumstances where PGI's former partner retained no continuing interest.

[27] Surviving partners have a limited authority to act in relation to the partnership's business interests after dissolution. I agree with Bell's position on the application of s. 38 of the Partnerships Act, R.S.O. 1990, c. P.5, as amended, to the facts before me. Section 38 gives continuing authority to the former partners to bind the partnership following dissolution for the limited purpose of winding up the affairs of the partnership. PGI asserts that pursuant to s. 38, PGI as the surviving partner in the partnership, as a function of winding up the remaining affairs of the partnership, has the capacity to pursue the claims in the arbitration commenced by PGP before the dissolution.

[28] Bell raised a critical factor that distinguishes the circumstances of PGP from the situation of a former partner seeking to bring to completion the outstanding affairs of the partnership after the partnership has been dissolved. There has to be some interest, claim, property or asset remaining after dissolution that is required to be wound up by the former partner. Bell cites a Supreme Court of Canada decision to support the proposition that the sole function of the surviving partner post-dissolution is to wind up partnership affairs. The court held (Starrs v. Cosgrave Brewing and Malting Co. of Toronto (1886), 1886 8 (SCC), 12 S.C.R. 571, [1886] S.C.J. No. 21, at para. 4):

On dissolution, each one of the partners has a perfect right to require, and through equity to compel, a final settlement and adjustment of all questions and all property. On dissolution the power and authority of the surviving partners is for the purpose of winding up and no further; it is an incident to the contract of partnership that the surviving partners should collect the assets and wind up the business of the firm, and after dissolution of the firm the authority of each partner to bind the firm continues only so far as is necessary to settle and liquidate existing demands, and to complete transactions begun but unfinished at the time of the dissolution, and not otherwise. (Emphasis added)

[29] In the case before this court, the winding up of PGP's affairs was completed simultaneously with the dissolution of the partnership. That is to say, all interests in the partnership, all litigation claims, business assets and operations and liabilities were transferred to PGI at the time of dissolution. The evidence is irrefutable that PGP no longer existed as of August 1, 2008 and nothing remained to be wound up after that date. The following facts support that view: [page136]

• The PGP partnership agreement contemplates the occurrence of winding up activities in circumstances other than those that have occurred with PGP, i.e., other than when one partner acquires the totality of the other partners' interests in the partnership.

• The 2008 final audited financial statements of PGP state "that as a result of the transfer, the partnership ceased to exist as a separate entity and, effective that date, the assets, liabilities, revenues and expenses of the partnership presented in these financial statements will be carried on under Plan Group Inc., which will have a fiscal year-end of July".

• PGI cites BMF Trading, infra, as authority for its position that PGP retained the authority after dissolution to commence the First Arbitration. As Bell has pointed out, the facts in that case are clearly distinguishable from the facts before me, the critical difference being that the claims brought on behalf of the dissolved partnership in BMF Trading remained the property of the partnership, such claims being brought for the purpose of winding up the affairs of the partnership. The distinguishing facts of that case are reflected in the following passage (BMF Trading v. Abraxis Holdings Ltd., [2000] B.C.J. No. 2356, 2000 BCSC 1691, at para. 45):

I find that the subject matter of the action falls within s. 41(1), as it relates to matters necessary to wind up the affairs of the partnership and to complete transactions begun prior to dissolution. The accounting of the partnership dealings is inevitably kept open after dissolution to permit such steps to be taken, even if they arise in part due to matters which occur some time after the dissolution: Basham v. Harbottle, [1999] B.C.J. No. 1113 (C.A.) at paras. 20-26. This conclusion is supported by Mr. Williams' evidence that after the trading ban in December 1989, the BMF partners attempted to wrap up the affairs of BMF and realize on those assets which they could. In particular, he said they focused on pursuing the outstanding litigation, and while they went their separate ways, they relied on each other when they needed help with respect to the court cases.

[30] PGI also cites Cindex Distributors, infra, which I find is also distinguishable. In that case, a proceeding was brought and properly constituted before the dissolution of the partnership. Unlike the situation in the case before me, the partnership in Cindex Distributors existed at the time the action was commenced and became a nullity subsequently when one of the partners withdrew. The court allowed an amendment to the proceedings to remove the partnership as plaintiff and to substitute [page137] the names of the individual partner (Cindex Distributors Registered v. Black Wiping Products Ltd. (1978), 1978 1688 (ON CA), 22 O.R. (2d) 208, [1978] O.J. No. 3642 (C.A.), at paras. 9-10).

[31] PGI advances the principles of the law of assignment to support its position that PGI retained the partnership's interest in the claim against Bell after dissolution. PGI argues that because Bell was not given notice of the other partner's assignment of its partnership interest to PGI, under the Agreement, PGP retained legal title to the claims against Bell which according to PGI's argument, required that the claims be brought on behalf of the partnership as assignor of the claims.

[32] As Bell points out, that argument is defeated by the basic tenets of partnership law as set down under the Partnerships Act. PGI's position presumes that a partnership is capable of holding legal title to "partnership property", such as legal claims. Section 21(1) of the Partnerships Act, as interpreted and applied by judicial authorities and commented upon by texts on partnership law, establishes that it is the partners and not the partnership that must hold and apply "partnership property" (Molson Brewery B.C. Ltd. v. Canada, 2001 22132 (FC), [2001] F.C.J. No. 87, 199 F.T.R. 210 (T.D.) at para. 12; Steenerson v. Bank of Toronto, 1922 230 (SK KB), [1922] 3 W.W.R. 922 (Sask. Dist. Ct.), at p. 925 W.W.R.; and Alison R. Manzer, A Practical Guide to Canadian Partnership Law, looseleaf (Aurora, Ont: Canada Law Book, 2010), at 4.750- 4.1020 and 4.830 and 4.493).

[33] On cross-examination of Jack Bernstein, a solicitor with the firm previously retained to advise PGP, provided evidence about PGP and the partnership interests. He stated that it was the partners that owned undivided interests in "partnership property" and that the partners' respective interests were proportionate to their percentage interests in the partnership. Bell cited judicial authority to support its position PGP was not capable of owning "partnership property" that could be assigned to PGI (Silver Spoon Developments Ltd. v. Botham Holdings Ltd. (Trustee of), [2008] B.C.J. No. 1859, 2008 BCSC 1317, at para. 29; and Kingsberry Properties (Re), [1997] O.J. No. 5352, 3 C.B.R. (4th) 124, 51 O.T.C. 252 (Gen Div.)). The fact is that the other partner assigned the entirety of its share of the partnership interest, including the claims against Bell, to PGI on dissolution giving PGI a 100 per cent interest. Thus, PGI did not acquire its 100 per cent interest through PGP as assignor.

[34] For all the reasons discussed, I find the law and facts of this case overwhelmingly support Bell's position that the First Arbitration is a nullity and the first claim improperly commenced before the Institute. [page138]

The Second Arbitration

[35] It is not disputed that the claims raised in the Second Arbitration are substantially identical to the claims in the First Arbitration. It appears that PGI commenced the Second Arbitration on the basis that in its capacity as a corporate entity it would have the capacity to commence proceedings. The perspective behind this view is that since PGI acquired a 100 per cent interest in the partnership, including the claims against Bell, it would have the capacity to arbitrate those claims.

[36] Bell argues the claims in the Second Arbitration are statute-barred as having been commenced after the expiry of the limitation periods under the Limitations Act, 2002. The claims were known to PGP before August 2005, when it notified Bell of its claims and, as such, the Second Claim was commenced about five years later, on June 15, 2010. According to Bell's argument:

• the claims in the Second Claim had arisen and been discovered by August 2005 at the latest;

• pursuant to s. 4 of the Limitations Act, 2002, any claims raised in the Second Claim that arose on or after January 2004 are subject to the two-year limitation period;

• pursuant to s. 24(1) of the Limitations Act, 2002, any claims in the Second Arbitration that arose on or before December 31, 2003 are subject to a six-year limitation period and expired at the latest on December 31, 2009.

[37] PGI's materials contain arguments with respect to the waiver under s. 22.2 although it is not on that basis that Bell brings its application. I understand this is due to the fact that Bell only recently informed PGI it was basing its limitation argument on the statutory limitation rather than the waiver clause. I do agree with Bell that much of what PGI argues on the waiver is not relevant to Bell's application as it relates to the Second Arbitration. PGI's argument about whether the statutory limitation is operative given the existence of the waiver clause is a pertinent consideration.

[38] Citing s. 22 of the Limitations Act, 2002, PGI argues the limitation periods do not apply to exclude the Second Arbitration. Section 22(1) provides the limitation period under the Act applies in spite of any agreement to vary. Section 22(2) provides subsection (1) does not apply to an agreement made before this Act came into force (January 1, 2004). Section 22(2) was amended subsequently to make an exception for business [page139] agreements. In a business context, then, agreements made to allow a claim to be brought within a period different than provided under the Limitations Act, 2002 have been held to be enforceable by the courts (Chanore Property Inc. v. ING Insurance Co. of Canada, [2010] O.J. No. 3880, 2010 ONSC 4152, 94 C.L.R. (3d) 223, at paras. 60 and 63-66; Venneri v. TD General Insurance Co., 2006 31306 (ON SC), [2006] O.J. No. 3630, 42 C.C.L.I. (4th) 108 (S.C.J.), at paras. 25 and 33-34; and NFC Acquisition L.P. v. Centennial 2000 Inc., [2011] O.J. No. 158, 2011 ONCA 43, 78 B.L.R. (4th) 11).

[39] Looking at s. 22.2 of the Agreement, PGI argues the 12- month limitation period is inconsistent with the six-year limitation period provided under the predecessor to the Limitations Act, 2002 and inconsistent with the two-year limitation period provided under the Limitations Act, 2002. The Agreement was made in 1999. PGI submits the language in s. 22.2 of the Agreement clearly intends that the six-year limitation not apply.

[40] Bell raises a persuasive argument on the legal question raised by PGI. What language is required to be set out in a business agreement to vary or exclude the operation of the statutory limitation period? Section 22.2 of the Agreement does not contain any language that explicitly excludes or varies the operation of a Limitations Act or that in that vein refers more broadly to statutory rights and obligations. Relying on an Ontario Court of Appeal decision, Bell advances the proposition that clear and express language must be used in order to contract out of statutory protections.

[41] In Oakville Storage, infra, the court held (Oakville Storage & Forwarders Ltd. v. Canadian National Railway (1991), 1991 7334 (ON CA), 3 O.R. (3d) 1, [1991] O.J. No. 536 (C.A.), at para. 43):

The same clarity of language is demanded when seeking to avoid a statutory obligation. In Hunter Engineering Co. v. Syncrude Canada Ltd., 1989 129 (SCC), [1989] 1 S.C.R. 426, 35 B.C.L.R. (2d) 145, 57 D.L.R. (4th) 321, 92 N.R. 1, [1989] 3 W.W.R. 385, at 449-50 S.CR., Dickson C.J.C. commented

Hunter U.S.'s argument is that the very presence of the express warranty renders the statutory warranty inapplicable. Again, this cannot be the correct position. The mere presence of an express warranty in the contract does not mean that the statutory warranties are inconsistent. If one wishes to contract out of statutory protections, this must be done by clear and direct language, particularly where the parties are two large, commercially sophisticated companies. This seems to be well-established in the case law, as Eberle J. makes clear in Chabot v. Ford Motor Co. of Canada Ltd. (1982), 1982 2051 (ON SC), 138 D.L.R. (3d) 417 (Ont. H.C.)[.] (Emphasis added)

[42] PGI submits that Oakville Storage involves a warranty and not a limitation period and is distinguishable for that reason. Oakville Storage, I think, stands for a broader principle [page140] than its application to a warranty. That case provides guidance for parties involved in negotiating agreements in a commercial context and crafting clauses that seek to oust the effect of a statutory protection in favour of terms that are inconsistent with the statute.

[43] Under s. 22.2 of the Agreement, a perspective claimant agrees not to insist on their right to bring a claim if they fail to make a claim within the 12-month period. Section 22.2 does not refer to the statutory limitation period or provide it is being excluded or varied. It does not alert the perspective claimant they are forgoing a statutory right to a longer period within which to make a claim. As Oakville Storage makes clear, it would reasonably be within the repertoire of sophisticated commercial parties, such as exist in the case before me, to have drafted an agreement with clear language expressing the intention to exclude or vary the application of the statutory protection.

[44] For those reasons, I am drawn to accept Bell's view that the Limitations Act, 2002 precludes the claims in the Second Arbitration, and s. 22 of the Act and s. 22.2 of the Agreement do not operate to exclude or vary the statutory protection.

PGI's motion to stay

[45] PGI argues the court ought to stay Bell's application on the basis the issues it raises are within the jurisdiction of the arbitral tribunal to hear.

[46] Section 7(1) of the Arbitration Act, 1991 provides that if a party to an arbitration agreement commences a court proceeding pertaining to a matter to be brought to arbitration under the agreement, the court where the proceeding is commenced shall, on motion by the other party, stay the proceeding. Section 7(2) sets out the limited circumstances where a court may refuse to grant a stay.

[47] Bell argues that the exception under s. 7(2), para. 5 applies to permit the court the discretion to refuse the stay. That subparagraph allows a stay of the proceedings if the matter is a proper one for default or summary judgment.

[48] PGI cites cases that reflect the shift by the courts in favour of arbitration (Canadian National Railway Co. v. Lovat Tunnel Equipment Inc., 1999 3751 (ON CA), [1999] O.J. No. 2498, 174 D.L.R. (4th) 385 (C.A.), at para. 20; and Armstrong v. Northern Eyes Inc. (2000), 2000 29047 (ON SCDC), 48 O.R. (3d) 442, [2000] O.J. No. 1594 (Div. Ct.), at para. 25). The courts have held that the court's discretion under s. 7(2) to make exceptions to the general rule ought to be exercised sparingly (Allen v. Howard Scott ("Pete") McMaster Trust (Trustee of), [2011] O.J. No. 287, 2011 ONSC 584, at para. 32). [page141]

[49] PGI submits s. 17 of the Arbitration Act, 1991 allows the tribunal the jurisdiction to determine whether the First Arbitration is a nullity and whether the claims in the Second Arbitration are time-barred under the Limitations Act, 2002.

The First Arbitration

[50] In its argument seeking a stay, PGI persists in its view that PGP has continued to exist and has the legal capacity for the purposes of bringing its claim against Bell. PGI submits the circumstances of the long history of the matter in arbitral process, the legal questions around the non-registration of the partnership business name and the winding up of the partnership raise complex facts and issues that do not present the clearest and simplest of cases. As such, the matter is in PGI's view appropriate for a stay and a referral to be heard by an arbitrator.

[51] Bell submits the question raised in the application in relation to the First Arbitration is whether the First Arbitration exists at all. As set out at some length above, Bell's position is that the First Arbitration is a nullity as having been brought by an entity that did not exist at the time the arbitration was commenced.

[52] Bell relies on Dell Computer, infra, for the proposition that issues pertaining to the jurisdiction of an arbitrator should be referred to the arbitral tribunal unless the challenge to the arbitrator's status rests solely on a question of law or involves a question of mixed fact and law where questions of mixed law require only superficial consideration of the documentary record (Dell Computer Corp. v. Union des Consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801, [2007] S.C.J. No. 34, at paras. 84 and 85).

[53] The ruling in Dell Computers dovetails with the considerations raised by the exception under s. 7(2), para. 5 as to whether the issues in the First Arbitration can be appropriately decided by way of summary judgment. Rule 20.04(4) of the Rules of Civil Procedure provides that a motions court can make a determination where the only genuine issue before the court is a question of law.

[54] I agree with Bell that the question whether the First Arbitration is a nullity is in essence a question of law that can, as has been seen above, be determined through application of the law with limited reference to undisputed facts on the record. There are no genuine issues requiring a trial and accordingly the issue to be determined fits within the exception under the Arbitration Act, 1991, s. 7(2), para. 5 as a matter appropriate for summary judgment where a stay need not be ordered. [page142]

The Second Arbitration

[55] PGI cites Allen v. Howard Scott ("Pete") McMaster, supra, as authority for its view that the arbitrator has jurisdiction under s. 17 of the Arbitration Act, 1991 to decide whether claims are barred. In that case, the plaintiff was an equity partner in a law firm who left the firm and was entitled on departure to a share of the partnership's net income. He brought an action disputing the amount owing to him. The partnership agreement provided all disputes be referred to arbitration. The defendant trust brought a motion for an order staying the action by the plaintiff. The court determined that s. 17 is broad enough to give the arbitrator the jurisdiction to decide whether the partnership's claim was time-barred.

[56] Bell takes the position that whether the Second Arbitration is barred by the Limitations Act, 2002 can be disposed of by applying the law to the straightforward facts:

• the Second Arbitration was commenced on June 14, 2010;

• the claims in the Second Arbitration claim are identical to the claims raised in a draft Notice Demanding Arbitration delivered to Bell on August 1, 2005.

[57] Bell points out, and I agree, that limited reference to the evidentiary record is required for a judge to arrive at the determination that the claims in the Second Arbitration are precluded as being brought outside the limitation period.

[58] As well, the question posed by PGI as to whether s. 22 of the Limitations Act, 2002 and s. 22.2 of the Agreement operate to preclude the application of the applicable statutory limitation period, I find, are based in the law and can also be determined by a judge since it simply requires an inquiry into contractual interpretation.

[59] I find a stay of the Second Arbitration is not appropriate as pursuant to the exception this is an appropriate matter for summary judgment. There are no genuine issues requiring a trial.

Conclusion

[60] Bell cites authority for the proposition that it is appropriate for a court to make an order striking the arbitration proceeding on the basis that there are no claims to arbitrate where an arbitration was not commenced properly or the claims sought to be arbitrated expired as being brought outside [page143] the limitation periods (Babcock and Wilcock Canada Ltd. v. Agrium Inc., 2005 ABCA 82, [2005] A.J. No. 171, 363 A.R. 103, 343 W.A.C. 103 (C.A.), at para. 11; and Suncor Energy Products Inc. v. Howe-Baker Engineers Ltd., [2010] A.J. No. 618, 2010 ABQB 310, at paras. 59 and 60).

[61] I find it is appropriate to make an order striking both the First and Second Arbitration proceedings.

Costs

[62] The parties are encouraged to settle costs of the application and motion. If they do not succeed, they shall deliver brief written submissions (three pages or less, bound and tabbed) on costs and a costs outline within 30 days of this order, with an additional seven days for reply, if any. Counsel shall promptly advise the court if they settle costs.

Order

[63] Order accordingly.

Application granted; motion dismissed.