| Case-Name: | Peace River Hydro Partners v Petrowest Corp |
| Full-Case-Name: | Peace River Hydro Partners, Acciona Infrastructure Canada Inc, Samsung C&T Canada Ltd, Acciona Infraestructuras SA and Samsung C&T Corporation 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 |
| Heard-Date: | 19 January 2022 |
| Decided-Date: | 10 November 2022 |
| Citations: | 2022 SCC 41 |
| Docket: | 39547 |
| History: | APPEAL from Petrowest Corporation v. Peace River Hydro Partners. 2020. bcca. 339. 43 BCLR (6th) 8. 2020-11-30., affirming Petrowest Corporation v Peace River Hydro Partners. 2019. bcsc. 2221. 2019-12-20. . Leave to appeal granted, Peace River Hydro Partners, et al v Petrowest Corporation, et al. 2021. scc-l. 49685. canlii. 2021-06-10. |
| Ruling: | Appeal dismissed |
| Ratio: | The Arbitration Agreements are inoperative. The multiple arbitral processes contemplated in them would compromise the orderly and efficient resolution of the receivership, contrary to the objectives of the BIA. |
| Scc: | 2021-2022 |
| Majority: | Côté J |
| Joinmajority: | Wagner CJ and Moldaver, Rowe and Kasirer JJ |
| Concurrence: | Jamal J |
| Joinconcurrence: | Karakatsanis, Brown and Martin JJ |
| Lawsapplied: |
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Peace River Hydro Partners v Petrowest Corp. 2022. scc. 41. 2022-11-10. is a case of the Supreme Court of Canada on the applicability of arbitration laws on the authority of a receiver appointed under the Bankruptcy and Insolvency Act.
Petrowest Corporation, together with Acciona and Samsung, formed Peace River Hydro Partners in 2015 as a partnership to perform work for BC Hydro on its Site C project site in northeastern British Columbia.[1] At the time, Petrowest was reported to be experiencing difficulties in meeting its debt covenants.[2] In 2017, Petrowest was ousted from the partnership, and its lenders subsequently obtained permission from the Court of Queen's Bench of Alberta to place it and all its affiliates into receivership.[3] Ernst & Young was appointed as Receiver, and it also became the trustee in bankruptcy of the affiliates in 2018.[4]
The Receiver sued PRHP in the Supreme Court of British Columbia for amounts allegedly owed under the partnership agreement (together with connected purchase orders and subcontracting agreement), as well as pursuing Acciona and Samsung for amounts said to be owed under related guarantee and cross-indemnity agreements.[5] The defendants argued that the agreements contained clauses that required disputes to be submitted to arbitration,[6] while the plaintiffs stated that, as a court-appointed officer, the Receiver was not bound by the debtor's contracts, and could seek the direction of the court in order to achieve the objectives of the Bankruptcy and Insolvency Act.[7]
At the BC Supreme Court, Iyer J held that the province's Arbitration Act was engaged in the current case,[8] but current insolvency jurisprudence stated that the Bankruptcy and Insolvency Act allowed the court to exercise its "inherent jurisdiction to control its own processes in order to promote the objectives of the BIA".[9] Accordingly, the BC Act does not prevent a court from exercising its discretion,[10] such discretion was appropriate in this case,[11] and the defendants' application to stay proceedings was therefore refused.
At the British Columbia Court of Appeal, the appeal was dismissed for different reasons than were given in the Supreme Court. In a unanimous ruling, Grauer JA held:[12]
In June 2021, the Supreme Court of Canada granted leave to appeal.[17]
The appeal was dismissed, with costs throughout.[18] The BC Court of Appeal erred in holding that the Receiver was not a party to the arbitration agreements. However, the judge at first instance was entitled to refuse to grant a stay, and in the circumstances she correctly dismissed the stay application.[19]
Côté J noted that the result was "context‑specific", as "arbitration law and insolvency law ... have much in common, including an emphasis on efficiency and expediency, procedural flexibility, and expert decision‑making."[20] While arbitration is generally to be favoured, insolvency law may require it to be displaced to ensure a more timely resolution.[21] She gave guidance as to which course is preferable in given circumstances.
Stays of proceedings in favour of arbitration are preferred where:[22]
A stay may be refused where an arbitration agreement is "void, inoperative or incapable of being performed":
The BIA gives a court jurisdiction to find an agreement "inoperative", having regard to the following factors:[26]
Applying these tests to the case at hand, a mandatory stay of proceedings was available under the Arbitration Act, as the Receiver was a party to the agreements, but enforcing them "would compromise the orderly and efficient resolution of the receivership, contrary to the purposes of the BIA." Accordingly, they were inoperative under the Act.[27]
While agreeing with the majority as to the outcome, Jamal J argued that the Receiver was operating under the terms granted by the underlying receivership order (which gave the Receiver the choice of pursuing either arbitration or court proceedings), and the arbitration agreements were accordingly disclaimed by his choosing to sue in court for the disputed amounts.[28] If his action is challenged, it is up to the court to determine whether he was acting within the scope of the order.[29]
The test outlined by Côté J is relevant to suits or proceedings brought by a debtor, as those against a debtor are normally stayed in insolvency cases.[30] In view of the SCC's preference for "efficiency and expediency, procedural flexibility, and expert decision‑making",[20] legal observers suggest that arbitration agreements be as simple, efficient and cost-effective as possible, in order to survive after a party goes into bankruptcy or insolvency.[30]