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Court of Queen's Bench of Alberta

Citation: Husky Oil Operations Limited v Saipem Canada Inc, 2017 ABQB 489

Date: 20170803

2017 ABQB 489 (CanLII)


Docket: 1501 02780, 1501 02987
Registry: Calgary

Action no. 1501 02780


Between:

Husky Oil Operations Limited

Applicant/Respondent
- and -

Saipem Canada Inc.

Respondent/Applicant

Action no 1501 02987


And between:

Saipem Canada Inc.

Applicant/Respondent
- and -

Sunrise Oil Sands Partnership, BP Canada Energy Group ULC, Husky Oil Sands
Partnership, HOI Resources Limited and Husky Oil Operations Limited

Respondents/Cross Applicants

_______________________________________________________

Reasons for Judgment


of the
Honourable Madam Justice K.M. Horner
_______________________________________________________
Page: 2

I. Introduction
[1] The Applicant, Saipem Canada Inc. (“Saipem”), and the Respondent, Husky Oil
Operations Limited (“Husky”), entered into a contract on November 15, 2010 (the “Contract”)
pursuant to which Saipem was to provide engineering, procurement and construction for the
central processing facilities of what was called the “Sunrise Project”.

2017 ABQB 489 (CanLII)


[2] Saipem’s work on the Sunrise Project continued until March 15, 2015, on which date
Husky purported to terminate the Contract. Saipem’s position is that the termination was
wrongful and constituted repudiation. Husky’s position is that it was Saipem that repudiated the
Contract.
[3] In March 2015, Husky filed an action against Saipem in this Court (the “Husky Action”),
seeking damages in excess of $1.325 billion. Subsequently, Saipem filed an action against Husky
(and later, against the other Cross-Applicants), seeking damages in excess of $800 million (the
“Saipem Action”). Both the Husky Action and the Saipem Action claim delay and increased cost
of construction for the Sunrise Project.
[4] Six months after the filing of the Husky Action, Husky commenced an arbitration
proceeding against Saipem (the “Arbitration”), seeking a $45 million credit to what Husky
claims is a fixed, lump sum price under the Contract. Saipem claims, however, that the Contract
is not for a fixed price, but is instead a cost reimbursable agreement. Husky claims the credit in
respect of what it argues are changes to the scope of work contemplated under the Contract (the
“Disputed Changes”).
[5] Saipem now seeks to stay or enjoin the Arbitration while Husky seeks a partial stay of the
Saipem Action in respect of those matters that are the subject of the Arbitration.

II. The Contract


[6] Both parties acknowledge that the arbitration provisions of the Contract are narrow in
scope. Arbitration is provided for as follows under the heading “GC 30 – Dispute Resolution”
(the “Arbitration Agreement”):
30.1 In the event of a dispute between the parties as to the performance of the
Work or the interpretation, application or administration of the Contract
Documents, the Contractor shall perform the Work as directed by Husky’s
Representative. All disputes between the parties not resolved by the initial
decision of Husky’s Representative, and all disputes arising out of this Contract
and its performance shall be settled in accordance with this GC.
...
30.6 Only those disputes arising out of GC 5.4, 8 or GC 25.2 shall be referred
to and finally resolved by arbitration in accordance with the Arbitration Act of
Alberta (“the “Act”) and the provisions of Schedule “K” – Arbitration Procedures.
30.7 All other disputes shall be resolved by litigation in the courts of the
Province of Alberta, unless the parties mutually agree on an alternate form of
dispute resolution.
[7] The relevant provisions of GC 8 are as follows:
Page: 3

8.1 Husky shall have the right at any time to issue instructions to the
Contractor to do and the Contractor shall do any of the following:
8.1.1 make any revision to the Work, which may include additions,
deletions, substitutions and changes in quality, form, character,
kind, position, dimension, level or line and changes in any method
of construction specified by Husky;

2017 ABQB 489 (CanLII)


8.1.2 revise elements of the Work already completed in accordance
with the Contract;
...
An instruction under GC 8.1 will be given by Husky completing the authorisation
on a Change Form, and issuing such Change Form to the Contractor. Such
instruction will then constitute a Change. On receipt of any such Change, the
Contractor shall proceed immediately as instructed even though the amount of
any adjustment to the amount payable to the Contractor or to Schedule “C” – Key
Milestones and Turnover Schedule not have been determined. [sic]
...
8.18 If the Parties are unable to resolve a dispute arising out of or in connection
with this GC 8, the dispute shall be resolved in accordance with GC 30.

III. The Legislation


[8] In addition to the Contract, the parties referred to legislation, primarily to the Arbitration
Act, RSA 2000, c A-43. Sections 6, 7 and 47 of the Arbitration Act are relevant to this
application:
Court Intervention Limited
6 No Court may intervene in matters governed by this Act, except for the
following purposes as provided by this Act:
...
(c) to prevent manifestly unfair or unequal treatment of a party
to an arbitration agreement;
...
Stay
7(1) If a party to an arbitration agreement commenced a proceeding in a court
in respect of a matter in dispute to be submitted to arbitration under the
agreement, the court shall, on the application of another party to the arbitration
agreement, stay the proceeding.
(2) The court may refuse to stay the proceeding in only the following cases:
(a) a party entered into the arbitration agreement while under a
legal incapacity;
(b) the arbitration agreement is invalid;
Page: 4

(c) the subject-matter of the dispute is not capable of being the


subject of arbitration under Alberta law;
(d) the application to stay the proceeding was brought with
undue delay;
(e) the matter in dispute is a proper one for default or summary

2017 ABQB 489 (CanLII)


judgment.
(3) An arbitration of the matter in dispute may be commenced or continued
while the application is before the court.
(4) If the court refuses to stay the proceedings,
(a) no arbitration of the matter in dispute shall be commenced,
and
(b) an arbitration that has been commenced shall not be
continued, and anything done in connection with the arbitration
before the court’s refusal is without effect.
(5) The court may stay the proceeding with respect to the matters in dispute
dealt with in the arbitration agreement and allow the proceeding to continue with
respect to other matters if it finds that:
(a) the agreement deals with only some of the matters in
dispute in respect of which the proceeding was commenced, and
(b) it is reasonable to separate the matters in dispute dealt with
in the agreement from the other matters.
(6) There is no appeal from the court’s decision under this section.
...
Declaration of invalidity of arbitration
47(1) At any stage during or after an arbitration on the application of a party
who has not participated in the arbitration, the court may grant a declaration that
the arbitration is invalid because
...
(b) the arbitration agreement is invalid or has ceased to exist,
...
(d) the arbitration agreement does not apply to the matter in
dispute.
(2) When the court grants the declaration it may also grant an injunction
prohibiting the commencement or continuation of the arbitration.
[9] Saipem also referred to the following provisions of the Judicature Act, RSA 2000, c J-2:
Additional Powers of Court
Page: 5

5(3) For the purpose of removing any doubt, but not so as to restrict the
generality of subsections (1) and (2), it is declared that the Court has the like
jurisdiction and powers that by the laws of England were, on July 15, 1870,
possessed and exercised by the Court of Chancery in England in respect of [...]
(f) preventing the multiplicity of actions, [...]

2017 ABQB 489 (CanLII)


General Jurisdiction
8 The Court in the exercise of its jurisdiction in every proceeding pending
before it has power to grant and shall grant, either absolutely or on any reasonable
terms and conditions that seem just to the Court, all remedies whatsoever to which
any of the parties to the proceeding may appear to be entitled in respect of any
and every legal or equitable claim properly brought forward by them in the
proceeding, so that as far as possible all matters in controversy between the
parties can be completely determined and all multiplicity of legal proceedings
concerning those matters avoided.

IV. Issues
[10] Perhaps not surprisingly, Saipem and Husky articulate the issues on this application
somewhat differently. In its initial brief, Saipem set forth the issues as follows:
46. The determination of both the Saipem Application and the Husky
Application raise the following issues:
(i) Is the Arbitration valid?
(a) Is the Arbitration Agreement invalid or has
it ceased to exist as a result of Husky’s repudiation
of the Arbitration Agreement and attornment to the
jurisdiction of the court?
(b) Are the Purported Changes beyond the
scope of the Arbitration Agreement?
(ii) Regardless of whether the Purported Changes fall within
the scope of matters to be arbitrated, whether the Arbitration
should be stayed pursuant [to] s. 6(c) of the Arbitration Act (as a
result of the unfair and unequal treatment of Saipem should the
Arbitration continue), the Judicature Act and the inherent
jurisdiction of the Court OR whether a partial stay of the Saipem
Action should be refused under s. 7 of the Act and Rule 3.68
(which will be addressed in Saipem’s Reply Brief)?
(iii) Has the limitation period expired with respect to some of
the Purported Changes?

[11] For its part, Husky frames the issues as follows in its brief:
Page: 6

51. Saipem’s application raises a preliminary, threshold issue as to whether


the application should be referred to the arbitrator pursuant to the general rule in
Dell... The threshold issue can be addressed as follows:
A. Does the general rule in Dell require that Saipem’s
jurisdictional challenges be referred to the arbitrator?

2017 ABQB 489 (CanLII)


B. Do any of Saipem’s challenges to the arbitrator’s
jurisdiction fall within the scope of the exception to the general
rule requiring jurisdictional challenges to be ruled on by the
arbitrator?
52. If this Court declines to refer this application to the arbitrator, Husky
submits that the substantive issues raised by Saipem’s application are as follows:
A. Is the Arbitration in relation to GC 8?
B. Did Husky waive its contractual right to arbitrate the
Disputed Change Orders?
C. Did the arbitration clause become invalid or cease to exist?
D. Would the Arbitration involve manifestly unfair or unequal
treatment of Saipem?
E. Is the Arbitration barred by the Limitations Act?
53. The cross-application responds to Saipem’s assertion that the arbitration
and litigation relate to the same matters, and need not be decided unless this Court
accepts that position, which is disputed by Husky. The cross-application raises the
following issues:
A. Is a partial stay of the Saipem Action required in order for
the Arbitration to proceed?
B. Should a partial or total stay of the Saipem Action be
granted under s. 7 of the Arbitration Act?
[12] There is considerable overlap between these two articulations. In my view, several of
Saipem’s arguments are, in essence, jurisdictional challenges to the arbitration. Accordingly,
those questions must be considered within the context of this Court’s authority to determine such
questions or, conversely, its obligation to refer those questions to the arbitrator for determination
at first instance.
[13] Thus, the issues as I see them are as follows:
1. Has the Arbitration Agreement become invalid because Husky repudiated the
Contract?
2. Has Husky waived its right to arbitration by attorning to the jurisdiction of this Court?
3. Are the claims contemplated in the Arbitration within the scope of the Arbitration
Agreement?
4. Are the claims contemplated in the Arbitration limitation-barred?
5. Would the Arbitration result in unfair and unequal treatment of Saipem such that the
Arbitration should be stayed?
Page: 7

6. Should a stay of all or part of the Saipem Action be granted?

V. Analysis
[14] As alluded to above, before the issues raised by Saipem can be addressed, I must consider
whether this Court has the authority to do so or must refer those issues to arbitration.

2017 ABQB 489 (CanLII)


[15] Husky argues that, subject to certain limited exceptions, this Court must refer issues
arising out of an arbitration agreement to the arbitrator. It relies on the following passage from
the Supreme Court of Canada’s decision in Dell Computer Corp v Union des consommateurs,
2007 SCC 34 at paras 84-86:
First of all, I would lay down a general rule that in any case involving an
arbitration clause, a challenge to the arbitrator’s jurisdiction must be resolved first
by the arbitrator. A court should depart from the rule of systemic referral to
arbitration only if the challenge to the arbitrator’s jurisdiction is based solely on a
question of law. This exception is justified by the courts’ expertise in resolving
such questions, by the fact that the court is the forum to which the parties apply
first when requesting referral and by the rule that an arbitrator’s decision
regarding his or her jurisdiction can be reviewed by a court. It allows a legal
argument relating to the arbitrator’s jurisdiction to be resolved once and for all,
and also allows the parties to avoid duplication of a strictly legal debate. In
addition, the danger that a party will obstruct the process by manipulating
procedural rules will be reduced, since the court must not, in ruling on the
arbitrator’s jurisdiction, consider the facts leading to the application of the
arbitration clause.
If the challenge requires the production and review of factual evidence, the court
should normally refer the case to arbitration, as arbitrators have, for this purpose,
the same resources and expertise as courts. Where questions of mixed law and
fact are concerned, the court hearing the referral application must refer the case to
arbitration unless the questions of fact require only superfic ial consideration of
the documentary evidence in the record.
Before departing from the general rule of referral, the court must be satisfied that
the challenge to the arbitrator’s jurisdiction is not a delaying tactic and that it will
not unduly impair the conduct of the arbitration proceeding. This means that even
when considering one of the exceptions, the court might decide that to allow the
arbitrator to rule first on his or her competence would be best for the arbitration
process.
[16] Husky also referred to the Court of Appeal’s comments in Epcor Power LP v Petrobank
Energy & Resources Ltd, 2010 ABCA 378, 499 AR 193 at paras 16 and 18-20:
As a matter of law and policy, the role of the courts in relation to arbitration has
been one of non-intervention. The objective of arbitration legislation and the
jurisprudence interpreting it is to promote adherence to agreements, efficiency
and fairness and to lend credibility to an important dispute resolution process.
Courts are instructed to be mindful of this overarching purpose in any exercise of
discretion. The discretion seems to be framed in the negative, as one “not to
Page: 8

refer”, a distinction intended to emphasize the legislative preference for


arbitration.
...
Section 6 of the Arbitration Act ... sets out when a court may intervene in matters
governed by the Act. The starting point is non-intervention, subject to a stated list

2017 ABQB 489 (CanLII)


of fairly narrow and discrete exemptions to be interpreted in accordance with the
expressed legislative purpose.
In Dell, the Supreme Court of Canada considered this interplay and set out
general principles governing it: (1) As a general rule in any case involving an
arbitration clause, a challenge to the arbitrator’s jurisdiction must be resolved first
by the arbitrator. (2) A court should depart from the rule of systematic referral to
arbitration only if the challenge to the arbitrator’s jurisdiction is based solely on a
question of law. (3) If the challenge requires the production and review of factual
evidence, the court should normally refer the case to arbitration as arbitrators have
for this purpose the same resources and expertise as courts. (4) Where questions
of mixed law and fact are concerned, the court hearing the referral application
must refer the case to arbitration unless the questions of fact require only
superficial consideration of the documentary evidence in the record. (5) Even
when considering one of the exceptions, the court might decide that to allow the
arbitrator to rule first on his or her competence would be best for the arbitration
process. [Emphasis in Epcor.]
It is apparent from the language employed by the Supreme Court of Canada that
the discretion available to not refer a matter to arbitration is circumscribed, and
applies to narrow circumstances: only on a pure question of law alone that can be
readily resolved on superficial material and will expeditiously dispose of the
entire dispute between the parties. Even if the court can resolve an issue itself, it
may still choose not to do so and instead refer the matter to arbitration.
[17] In addition, Husky cites s. 17(1) of the Arbitration Act, which provides:
17(1) An arbitral tribunal may rule on its own jurisdiction to conduct the
arbitration and may in that connection rule on objections with respect to the
existence or validity of the arbitration agreement.
[18] In the recent case of Toyota Tsusho Wheatland Inc v Encana Corp, 2016 ABQB 209,
84 CPC (7th ) 360 at para 82, Strekaf J., as she then was, quoted the statement that “...for a court
to have any jurisdiction respecting the arbitration process, it must be found in the relevant
Arbitration Act, and not in any other Act or rule governing court procedure”.
[19] For its part, Saipem argues that this Court has exclusive or concurrent jurisdiction over
all of the issues raised and that it is appropriate for the Court to exercise jurisdiction for the
reasons discussed below. It refers to the Supreme Court of Canada’s decision in Seidel v TELUS
Communications Inc, 2011 SCC 15, 1 SCR 531 at para 29 for the proposition that the court
should determine disputes about an arbitrator’s jurisdiction where the issue is either (a) a
question of pure law or (b) a question of mixed law and fact in respect of which the facts can be
determined on a basic evidentiary record. This, it argues, is the situation before me.
Page: 9

1. Has the Arbitration Agreement become invalid because Husky repudiated the
Contract?
[20] Saipem argues that the Arbitration Agreement has become invalid or ceased to exist as a
result of Husky’s repudiation of the Contract. It cites a number of cases in which the courts have
found repudiation of an arbitration agreement.

2017 ABQB 489 (CanLII)


[21] Husky notes that the Contract contained the following clause indicating that certain
provisions would survive termination:
34.14 All provisions of this Contract which expressly or by their nature are
continuing, including this provision and any termination provisions, any warranty,
insurance, indemnity, confidentiality, intellectual property and licensing
provisions, and any dispute resolution provisions; any provisions which are the
subject of any breach of non-compliance prior to such termination or which
determine any liability arising therefrom; as well as any provisions required to
interpret or give effect to any such provisions, each shall survive expiration or
termination of this Contract.
[22] Husky also asserts that the Arbitration Agreement is severable from the Contract and
cites s. 17(3) of the Arbitration Act, which provides:
(3) If the arbitration agreement forms part of another agreement, it shall, for
the purposes of a ruling on jurisdiction, be treated as an independent agreement
that may survive even if the other agreement is found to be invalid.
[23] Whether the above legislative and contractual provisions apply to the Arbitration
Agreement is a question of contractual interpretation. The Court of Appeal recently confirmed in
Hole v Hole, 2016 ABCA 34 at para 30 that interpretation of a contract is an issue of mixed fact
and law:
Contractual interpretation is a question of mixed fact and law that involves the
application of interpretive principles to the words of a written contract considered
in the light of the factual matrix: Creston Moly Corp. v. Sattva Capital Corp.,
2014 SCC 53 (S.C.C.) at para 50, [2014] 2 S.C.R. 633 (S.C.C.).
[24] This Court has discretion “not to refer” matters to arbitration if they are pure questions of
law or can be decided on a basic evidentiary record. I find that the effect on the Arbitration
Agreement of repudiation of the Contract, by whichever party, is not a pure question of law and
requires more detailed evidence than is presently before me. Accordingly, I find that this issue
properly should be referred to arbitration.
2. Has Husky waived its right to arbitration by attorning to the jurisdiction of this
Court?
[25] Saipem makes the related argument that Husky has waived its right to arbitration by
attorning to the jurisdiction of this Court. It refers to Lafarge Canada Inc v Edmonton (City),
2015 ABQB 56, 611 AR 87, where this Court stated at para 37:
The court of course retains a supervisory role in determining whether the
arbitration agreement is valid and the matter in dispute is subject to arbitration
(per s 6 and s 7(1) of the Arbitration Act). This can include a determination of
Page: 10

whether the parties have, by their conduct repudiated the agreement and attorned
to the jurisdiction of the court.
[26] Saipem asserts that Husky has attorned to the jurisdiction of this Court through various
actions, including failing to raise the issue of arbitration or to object to litigation, accepting
service of the Saipem Action and asking that no steps be taken therein without notice, endorsing
a Consent Order in the Saipem Action and asking for an extension of time to file a defence to the

2017 ABQB 489 (CanLII)


Saipem Action. In particular, Saipem alleges that Husky has communicated a clear intention not
to be bound by the Arbitration Agreement by filing the Husky Action in respect of the same
claims in the Arbitration. Saipem argues that all of this is obvious from the pleadings and the
basic evidentiary record currently before me and, accordingly, may be determined by this Court
rather than referred to the Arbitration.
[27] Husky denies that it has waived its right to arbitration or that it has attorned to this
Court’s jurisdiction. It argues that the issues in the Arbitration and in the Husky Action are
different and that the claims advanced in the Arbitration were expressly reserved out of the
Husky Action.
[28] Further, it states that there is no evidence before me on this application in respect of the
nature of the various claims and that much more than a superficial review of the pleadings would
be required to ascertain the nature of those claims. Husky’s position is that, therefore, any such
determination must be referred to the Arbitration.
[29] Contrary to Saipem’s submission, it is not obvious to me on the record in this application
that Husky has attorned to the jurisdiction of this Court such that the Arbitration should not
proceed. In my view, the nature of Husky’s claims must be determined by the arbitrator.
Accordingly, to the extent that Saipem’s attornment argument rests on that issue, it should be
referred to arbitration.
3. Are the claims contemplated in the Arbitration within the scope of the
Arbitration Agreement?
[30] The parties agree that the Arbitration Agreement is very narrow. Saipem asserts that the
Disputed Changes are beyond its scope for two reasons. First, it argues that the Disputed
Changes are not “Changes” as defined in GC 8 as they were not issued in accordance with the
procedure set out in the Contract. Second, it argues that some of the Disputed Changes pertain to
rework and delay, which are dealt with in sections of the Contract other than GC 8. Accordingly,
Saipem’s position is that the Disputed Changes are not arbitrable.
[31] Husky argues that the Disputed Changes advance claims in relation to GC 8 that should
be resolved by arbitration. It asserts that the broad language of GC 8.18 captures any dispute as
to whether a change was made in accordance with the procedure in GC 8 and that the compliance
of the Disputed Changes with GC 8 is one of the issues covered by the Arbitration Agreement.
[32] In my view, the issue of whether the Disputed Changes comply with GC 8 and, as such,
are matters to be resolved by arbitration is a question of the arbitrator’s jurisdiction which the
case law indicates is to be resolved at first instance by the arbitrator.
4. Are the claims contemplated in the Arbitration limitation-barred?
[33] Saipem argues that some of the Disputed Changes are limitation-barred because the
“injury” underlying those claims arose more than two years before the Arbitration was
Page: 11

commenced on September 14, 2015. It asserts that determination of the limitation period is a
threshold issue that must be decided by the Court rather than the arbitrator and cites Suncor
Energy Products Inc v Howe-Baker Engineers Ltd, 2010 ABQB 310, 492 AR 288 at para 18:
...the application [to determine the limitation issue] is not a question regarding the
jurisdiction of an arbitrator, but rather a question of whether there is an arbitration
within which the arbitrator may or may not exercise a jurisdiction.

2017 ABQB 489 (CanLII)


[34] I note, however, that the Court in Suncor characterized the limitation issue as a question
of pure law, saying at para 17:
While an arbitration panel may well have the jurisdiction to determine whether
the arbitration has been commenced within the applicable time period, the issue is
a pure question of law: Did the limitation period for commencing an arbitration
expire prior to Howe-Baker purporting to commence the proceedings?
[35] As Saipem acknowledges in its brief, the application of limitation periods is a question of
mixed law and fact. Nevertheless, Saipem asserts that the facts necessary to determine this issue
are ascertainable on the basic evidentiary record presently before this Court.
[36] Husky’s position is that the change orders were issued in accordance with the Contract
and that the Arbitration was commenced within two years of that issuance. It argues in its brief
that the injury contemplated in the Arbitration is Saipem’s refusal to agree to the Disputed
Changes and that the evidence presently before this Court is not sufficient to show that Husky
knew of this injury before the change orders were issued. Husky also asserts that Saipem’s
limitations argument does not apply to all of the Disputed Changes. Its position is that the Court
should avoid splitting up the Disputed Changes and should instead refer all of them to
arbitration.
[37] In my view, determining whether any of the Disputed Changes is limitation-barred
requires factual determinations that go beyond what can be made on the evidence before me. I
am satisfied that an arbitrator has jurisdiction to consider limitations issues and that, in this case,
it is appropriate for the matter to be referred.
5. Would the Arbitration result in unfair and unequal treatment of Saipem such
that the Arbitration should be stayed?
[38] Saipem argues that the Arbitration should be stayed pursuant to s. 6(c) of the Arbitration
Act because its continuation would be unfair and would result in unequal treatment of Saipem.
The grounds for this alleged unfairness are listed as follows in Saipem’s brief:
(i) the [Disputed Changes] submitted for arbitration cannot be decided in
isolation of the wider issues in the lawsuits;
(ii) Saipem would be impaired in wholly defending the [Disputed Changes] in
an arbitration as a result of the arbitral tribunal’s limited jurisdiction to
decide only whether the [Disputed Changes] are “changes” under GC 8 of
the Contract;
(iii) continuation of the Arbitration would clearly lead to a multiplicity of
proceedings given that Husky has sued for the very same issues it also
seeks to arbitrate;
Page: 12

(iv) given that the issues are identical and overlapping there is a real risk of
inconsistent findings and certainty of duplicative and increased cost and
increased costs. The filing of the Arbitration has already resulted in
increased costs and delay in the Actions;
(v) all of the parties in the Actions are not subject to the Arbitration and issues
decided in the Arbitration would have to be re-litigated in the Actions with

2017 ABQB 489 (CanLII)


those additional parties; and
(vi) an arbitration to adjust a “fixed, lump sum contract price” would either
bind Saipem on the issue of the payment mechanism being a fixed price
agreement or will be an entirely wasted effort and expense if it is
ultimately determined in the Actions that the payment mechanism of the
Contract was not fixed but cost reimbursable.
[39] The substance of Saipem’s argument is two-fold. It argues, first, that the issues in the
Arbitration and in the Husky Action overlap and, second, that there are parties to the Husky
Action and the Saipem Action who would not be involved in, and therefore would not be bound
by, the Arbitration. It asserts that these two factors lead to the possibility of a multiplicity of
proceedings and of inconsistent findings.
[40] Saipem relies on the Court of Appeal’s judgment in New Era Nutrition Inc v Balance
Bar Co, 2004 ABCA 280, 357 AR 184 and on several subsequent cases citing that judgment. In
particular, Saipem refers to these comments at paras 42-3 of New Era:
Subsection 6(c) [of the Arbitration Act] allows the court to act to “prevent
manifestly unfair or unequal treatment of a party to an arbitration agreement. This
subsection was not part of the Institute’s draft legislation and it was added to the
proposed amendments at the same time as subsections 7(4) and 7(5). It is worth
noting, as well, that by including the power to cure unfairness or inequality in
section 6, the Legislature rejected section 5 of the Institute’s proposed legislation
which would have restricted court intervention to only those matters described
specifically in the legislation.
I take all of these factors to mean that the Legislature intended that the courts use
subsection 6(c) to provide a remedy to cure unfairness arising from matters not
covered by the specific language of the legislation. In my view, it would be
manifestly unfair to deny the remedy contemplated by section 7 which is designed
to protect against the dangers inherent in duplicitous [sic] proceedings. It is an
uncommon situation where a party seeks to both sue and arbitrate. Frequently the
dangers inherent in duplicitous [sic] actions arise when some parties are covered
by an arbitration clause and others are not. I am satisfied that subsection 6(c)
allows a party, faced with both a statement of claim and a notice to arbitrate, to
apply to stay the arbitration on the basis that the matters in the two proceedings
overlap and cannot be reasonably separated. ...
[41] Husky, however, points out that New Era has been both distinguished and criticized in a
number of subsequent decisions. In particular, it points to the oral decision of Strekaf J, as she
then was, in UCANU Manufacturing Corp v Graham Construction and Engineering Inc, 2013
CarswellAlta 2979 at paras 39-40:
Page: 13

I will first consider section 7(5). With the greatest of respect to those who have
interpreted section 7(5) in a different fashion, I am of the view that the plain
language of this section is limited to providing the Court with the discretion to
grant a partial stay of a proceeding in the circumstances prescribed in the section,
that is, where an arbitration agreement deals with only some matters in the dispute
in the proceeding and it is reasonable to separate the matters dealt with in the

2017 ABQB 489 (CanLII)


arbitration agreement from the other matters. The language used in the section
does not give the Court the discretion to override the mandatory language in
section 7(1) and to permit the proceeding to continue because the matters cannot
reasonably be separated and permitting the arbitration and action to proceed
would result in an inefficient multiplicity of proceedings. I acknowledge that this
view of the legislation may differ from some of the comments of the Alberta
Court of Appeal in New Era and I fully recognize that decisions of that court are,
of course, binding upon me. However, New Era was decided pursuant to section
6(c) of the Arbitration Act as no application was brought pursuant to section 7 in
that case and, therefore, the Court’s comments on section 7(4) and 7(5) in the
context of an application brought under 7(1) are to some extent obiter.
I further note that the Supreme Court of Canada decided [Seidel] since the New
Era decision was decided. In that case the majority of the Supreme Court of
Canada recognized that bifurcated proceedings may be consistent with the
legislative choice in British Columbia in that case, which favoured enforcement of
arbitration provisions except to the extent expressly overridden by the consumer
protection legislation. While the BC legislation does not contain the equivalent of
section 7(5), the case nonetheless recognizes that bifurcated proceedings may be
the result of legislation that requires a Court to respect the parties’ prior choice of
arbitration as the mechanism to resolve their disputes.
[42] Husky argues that there is, at most, superficial overlap in the issues contemplated by the
Arbitration and by the Saipem and Husky Actions. It states that, unlike New Era, this is not a
case of multiple proceedings with different parties respecting the same claims. Further, it asserts
that the issues raised by Saipem in this application are matters of mixed fact and law and that
Husky should not be deprived of its contractual right to arbitration.
[43] I find that Saipem has not demonstrated the “manifestly unfair or unequal treatment”
necessary for this Court to intervene in the Arbitration. In my view, there is nothing inherently
unfair in parallel arbitration and litigation proceedings where that is what was agreed to by the
parties to the contract. As discussed above, the issues raised by Saipem are questions of mixed
fact and law that will require a more detailed review of the factual record than can be achieved
on the evidence before me. As such, it is appropriate for those issues to be addressed at the
Arbitration.
[44] As noted above, Saipem also argues that there are parties to the Actions who would not
be bound by the results of the Arbitration. Husky, however, states in its reply brief that Saipem
plead in the Saipem Action that these parties either were partners with Husky or that Husky acted
as their agent. Husky asserts that it was the operator of the Sunrise Project and that all of the
other defendants in the Saipem Action are, as a matter of law, bound by the Arbitration.
Page: 14

[45] I am not satisfied that there is manifest unfairness in the fact that there are parties to the
Saipem Action who are not parties to the Arbitration. It seems to me that this, too, is inherent in
the agreement to send specified disputes to arbitration while others remain to be litigated. If the
Disputed Changes are within the arbitrator’s jurisdiction, which question is to be determined by
the arbitrator, Saipem must be held to its bargain.
6. Should a stay of all or part of the Saipem Action be granted?

2017 ABQB 489 (CanLII)


[46] Husky’s position, as set out in its brief, is that “only if the court concludes that action and
arbitration overlap, the overlapping litigation must be stayed on Husky’s application under the
Arbitration Act.” As I have found no merit in Saipem’s arguments in support of a stay of the
Arbitration, I need not consider Husky’s cross-application to stay all or part of the Saipem
Action.

VI. Conclusion
[47] In the result, both Saipem’s application for a stay of the Arbitration and Husky’s cross-
application for a stay of the Saipem Action are dismissed.
[48] As Husky has been successful on this application, it shall have its costs on column 5.

Heard on the 4th day of July, 2016.


Dated at the City of Calgary, Alberta this 3rd day of August, 2017.

K.M. Horner
J.C.Q.B.A.

Appearances:

Karen J. Wyke and J. Alex Kotkas


Fasken Martineau DuMoulin LLP
for the Applicant/Cross Respondent

Lowell Westersund, Q.C. and Josh Fraese


Rose LLP
for the Respondent/Cross Applicants