In the Court of Appeal of Alberta
Citation: Acciona Infrastructure Canada Inc v Posco Daewoo Corporation, 2019 ABCA 241
Date: 20190612
Docket: 1701-0354-AC
Registry: Calgary
Between:
Acciona Infrastructure Canada Inc. and Mastec Canada Inc.,
operating as Acciona/Pacer Joint Venture
Respondents
Plaintiffs/Respondents
– and –
Posco Daewoo Corporation
Appellant
Defendant/Applicant
_______________________________________________________
The Court:
The Honourable Mr. Justice Frans Slatter
The Honourable Madam Justice Myra Bielby
The Honourable Mr. Justice Thomas W. Wakeling
_______________________________________________________
Memorandum of Judgment of the Honourable Mr. Justice Slatter
and the Honourable Madam Justice Bielby
Memorandum of Judgment of the Honourable Mr. Justice Wakeling
Concurring in the Result
Appeal from the Order by
The Honourable Mr. Justice A.D. Macleod
Dated the 20th day of November, 2017
Filed on the 2nd day of January, 2018
(2017 ABQB 707 (CanLII), Docket: 1701-07216)
_______________________________________________________
Memorandum of Judgment
_______________________________________________________
The Majority:
[1] There are disputes between the parties arising out of the construction of the Walterdale Bridge in Edmonton. Both parties have submitted those disputes to arbitration. The present appeal concerns collateral disputes about service of legal process, and how the arbitrations should be conducted.
[2] The respondent Joint Venture became frustrated with the slow pace of the arbitrations, so it issued an Originating Application and obtained ex parte orders for the appointment of arbitrators, an order validating service, and the consolidation of the two arbitrations. The appellant Daewoo unsuccessfully applied to set aside those orders: Acciona Infrastructure Canada Inc. v Posco Daewoo Corp., 2017 ABQB 707 (CanLII). This appeal followed.
Facts
[3] The respondent Acciona/Pacer Joint Venture contracted with the City of Edmonton to replace the Walterdale Bridge. The Joint Venture subcontracted the supply of the structural steel to Posco Daewoo Corporation, which is based in the Republic of Korea. The subcontract provides:
General Conditions of This Subcontract Agreement
GC 8.2 Negotiation, Mediation And Arbitration
8.2.4 In circumstances other than that provided for in GC 8.2.3 in the case of any dispute between the Contactor and the Subcontractor as to their respective rights and obligations under this Subcontract, either Party, may subject to GC 12.2, at any time prior to six (6) months after completion of the Subcontract Work or cancellation or termination of this Subcontract, give the other Party written notice requesting that the dispute be mediated or arbitrated. The decision to proceed to mediation or arbitration shall be subject to the agreement of both Parties and shall be in accordance with the procedures agreed upon by the Parties, failing which the dispute shall be addressed pursuant to such judicial processes as the circumstances require.
Appendix A – Special Conditions
- Dispute Resolution:Further to GC Clause 8.2.4 the Parties shall agree that all disputes or disagreements relating to or arising out of this Subcontract shall be addressed by arbitration conducted in the English language in Calgary, Alberta, in accordance with the Arbitration Act of Alberta. The arbitration award shall be final and binding upon the parties.
GC 10.2 Laws, Notices, Permits, And Fees
10.2.1 This Subcontract shall for all intents and purposes be considered to have been entered into and shall be interpreted in accordance with the laws of Province of Alberta, including the federal laws of Canada applicable therein.
10.2.2 The laws of the Province of Alberta and the federal laws of Canada applicable therein shall govern the Subcontract Work.
The underlying dispute between the parties arises from the words “in accordance with the Arbitration Act of Alberta”, and the procedure to be followed in the arbitration.
[4] The Notice to Submit Disputes to Arbitration served by the Joint Venture on November 17, 2016 sets out the specific matters in dispute, and states:
- All of the conditions toarbitrate under the Subcontract Agreement have been met by APJV. APJV hereby demands that this matter be referred to arbitration pursuant to General Condition 8.2 and Special Condition 11 of the Subcontract Agreement and Section 23(1) of the Arbitration Act.
The Joint Venture identified Gowling WLG (Canada LLP) as its counsel for the arbitration. Bae, Kim & Lee LLC, a Korean firm, subsequently indicated that it was Daewoo’s legal representative, and later advised that Rose LLP of Calgary had been retained.
[5] The Joint Venture nominated a possible candidate as a single arbitrator, but Daewoo took the position that the Joint Venture’s arbitration notice was invalid because it purported to commence a domestic arbitration under the Arbitration Act, RSA 2000, c. A-43 whereas under s. 2(1) of that Act the arbitration should be held under the International Commercial Arbitration Act, RSA 2000, c. I-5.
[6] On June 6, 2017 (about seven months after the Joint Venture served notice to arbitrate), Daewoo issued its own notice to arbitrate. The Daewoo notice to arbitrate specifically recited that even though the subcontract refers to the Alberta Arbitration Act, by operation of law the arbitration would actually be conducted under the International Commercial Arbitration Act.
[7] The Joint Venture was prepared to acquiesce in using the international arbitration procedure, and so nominated its arbitrator. It invited Daewoo to do the same, with a view to those two nominees selecting the third arbitrator, in accordance with international arbitration procedure. Daewoo refused to participate in what it called a defective arbitration. Daewoo took the position that the Joint Venture had only commenced a “domestic arbitration”, and had never commenced an “international arbitration”, so there was no “valid” arbitration process underway.
[8] Faced with an apparent stalemate, the Joint Venture issued an Originating Application seeking the appointment of arbitrators. It subsequently obtained orders validating service of the Originating Application, and consolidating the two arbitrations. Those are the orders presently under appeal.
Service of the Originating Application
[9] In light of Daewoo’s position that it would not participate in the arbitration, on May 30, 2017 the Joint Venture issued the Originating Application seeking the appointment of arbitrators under the International Commercial Arbitration Act. Copies were sent to Bae, Kim & Lee LLC and Rose LLP, but those firms took the position that they were not authorized to accept service. The Joint Venture commenced the process for serving the Originating Application on Daewoo under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, but did not obtain an order for service ex juris under R. 11.25(2)(b).
[10] The Joint Venture received notice that on June 9, 2017 the Originating Application had been received by the Central Authority of Korea under the Hague Convention. However, prior to receiving confirmation of actual service on Daewoo in Korea, the Joint Venture applied for an order validating service, and an order appointing arbitrators.
[11] The first two applications were heard in chambers on July 5, 2017. Daewoo, Bae, Kim & Lee LLC and Rose LLP were all given notice of the application (EKE R279). However, given the position taken by Daewoo, no one appeared on its behalf, and the applications proceeded ex parte. The chambers judge granted an order validating service of the Originating Application and appointing three arbitrators. On July 20, 2017 another chambers judge granted an order consolidating the two arbitrations that had been commenced by the parties.
[12] On August 2, 2017 the Originating Application was served on Daewoo in Korea under the Hague Convention. On August 3, 2017, Daewoo applied to set aside the three orders previously granted: the order validating service, the order appointing arbitrators, and the order consolidating the two arbitrations. Daewoo points out that there are irregularities in the service of the Originating Application:
(a) the chambers judge was not advised of the status of service under the Hague Convention, and the order validating service was granted about one month before actual service of the Originating Application under the Hague Convention.
(b) an order for service ex juris had not been obtained.
[13] Service of commencement documents outside Alberta and outside Canada is governed by R. 11.25(2) and 11.26:
11.25(2) A commencement document may be served outside Canada only if
(a) a real and substantial connection exists between Alberta and the facts on which a claim in an action is based and the commencement document is accompanied with a document or affidavit that sets out the grounds for service of the document outside Canada,
(b) the Court, on application supported by an affidavit satisfactory to the Court, permits service outside Canada, and
(c) the person served with the commencement document is also served with a copy of the order permitting service outside Canada.
11.26(1) Unless the Court otherwise orders, if a document may be served outside Alberta under these rules, the document must be served
(a) by a method provided by these rules for service of the document in Alberta,
(b) in accordance with a method of service of documents under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters that is allowed by the jurisdiction in which the document is to be served, if the Convention applies, or
(c) in accordance with the law of the jurisdiction in which the person to be served is located.
Rule 11.25(3) provides further detail about what constitutes a “real and substantial connection” with Alberta. Rule 11.27 empowers the Court to validate irregular methods of service.
[14] As Daewoo points out, there is a jurisdictional component to R. 11.25(2), as it governs when an Alberta court will impose its jurisdiction over persons who are not served within the jurisdiction. The key requirement is that there must be a “real and substantial connection” to Alberta under R. 11.25(2)(a). Further, the applicant is generally expected to show a “good arguable case”: Scott & Associates Engineering Ltd. v Ghost Pine Windfarm, LP, 2011 ABQB 630 (CanLII), 520 AR 190, 61 Alta LR (5th) 357. There remains, however, an important distinction between jurisdiction and service. Any defendant may voluntarily attorn to the jurisdiction of the Alberta courts, regardless of the regularity of the service of process on it. However, when the defendant resists the jurisdiction of the Alberta courts, then proper service ex juris is the platform on which the court decides if it has and should exercise jurisdiction over the parties and the dispute.
[15] The chambers judge concluded at para. 14 that R. 11.25(2) does not apply when the court already has jurisdiction over the defendant, in which case an order for service ex juris is not required. While the question of “jurisdiction” might properly arise on an application to set aside service ex juris, attornment or consent to jurisdiction does not override R. 11.25(2). Obtaining an order for service ex juris is an ex parte process. The party issuing the commencement document is required to establish a threshold argument for “jurisdiction” (a “real and substantial connection” to Alberta) as a preliminary step. Once the plaintiff has obtained the order for service ex juris, it can then proceed to serve the defendant, who might then bring an application to set aside that service on the basis that the Alberta court does not have, or should not assume jurisdiction over the dispute. It is at this later stage that the court is best positioned to ensure that it does not “sanction service outside the jurisdiction without careful consideration”: Dreco Energy Services Ltd. v Wenzel Downhole Tools Ltd., 2008 ABCA 395 (CanLII) at para. 6, 440 AR 351, 2 Alta LR (5th) 120.
[16] On the application to set aside service the issue of whether the defendant had attorned to the jurisdiction of the court might arise. Allegations that the defendant has attorned, by contract or conduct, can be used as a response to any application to set aside service ex juris, or any application for a ruling that it is inconvenient for the Alberta court to assume jurisdiction. However, the plaintiff’s mere assertion that the court has jurisdiction over the defendant does not justify non-compliance with the threshold requirements in the Rules on service ex juris. In that respect, attornment is a shield not a sword.
Retroactive Validation
[17] The respondent Joint Venture argues that the failure to get an order for service ex juris is a mere irregularity that should be overlooked. It argues that Daewoo is raising procedural irregularities in order to delay the arbitration, and that at the end of the day nothing will be accomplished by setting aside the three orders. There is no doubt that Daewoo, Bae, Kim & Lee LLC and Rose LLP had actual notice of all the proceedings.
[18] The Joint Venture argues that this Court should retroactively grant an order for service ex juris. It says that one could easily have been obtained. There is clearly a real and substantial connection between the arbitration and Alberta, it has a strong case that arbitration has been commenced and Daewoo has refused to participate, and there is no prejudice to Daewoo. Daewoo argues that the Rules do not permit retroactive validation of service without an order for service ex juris, because R. 11.25(2)(c) requires service of the order with the commencement document.
[19] The applicant has a “good arguable case” to support service ex juris. As previously noted, Daewoo takes the position that the Joint Venture’s notice to arbitrate is fatally flawed because it only commences a “domestic arbitration”, whereas in law the Joint Venture should have commenced an “international arbitration”. As a result, Daewoo takes the position that it does not have to participate in the Joint Venture’s arbitration at all, because there is no valid arbitration process underway.
[20] The Joint Venture argues that the premise of Daewoo’s argument is faulty. The Joint Venture only had to commence an “arbitration under the subcontract”, which it did. It does not have to overtly commence either a “domestic arbitration” or an “international arbitration”. Clause 34 of the Joint Venture’s notice to arbitrate clearly put Daewoo on notice that a dispute under the subcontract was being put to arbitration. The law and procedure that applies is implicit in the process, and any dispute about it could have been resolved by the arbitrators. There is nothing in the Subcontract, the Arbitration Act, or the International Commercial Arbitration Act that requires a party to specify what “type” of arbitration is being triggered.
[21] In any event, the Joint Venture points out there is no authority presented for the proposition that a notice to arbitrate that recites the exact provisions of the Subcontract, including the reference to the Arbitration Act, can possibly be invalid for that reason.
[22] The parties debated whether the Court has jurisdiction to cure irregularities in service ex juris. In this case, however, the deficiencies in the service are substantive, and would preclude the exercise of any such discretion. No satisfactory explanation has been given for why the Joint Venture did not apply for an order for service ex juris. Another problem is that the order validating service should not have been granted without proof that service under the Hague Convention had either been accomplished, or frustrated within the meaning of article 15 of the Convention. Given all of the deficiencies in service, this is not an appropriate situation in which the Court might validate service despite the irregularities. The order validating service must be set aside. Absent service, the orders appointing arbitrators and consolidating the two arbitrations cannot stand.
[23] The Joint Venture’s arguments have practical merit. It is unclear what will be accomplished by these proceedings other than further delay. Nevertheless, the importance of compliance with the Hague Convention and the significance of the deficiencies in service preclude retroactive correction in this case, even if that is possible.
[24] In the absence of proper service, it is not open to this Court to express opinions on other issues such as the appointment of arbitrators, or consolidation of the arbitrations.
Conclusion
[25] In conclusion, the appeal is allowed, and the orders validating service, appointing arbitrators, and consolidating the two arbitrations are set aside. If Daewoo persists in refusing to respond to the notice to arbitrate issued by the Joint Venture, the Joint Venture will have to re-serve the Originating Application in accordance with the Rules of Court and the Hague Convention.
[26] The presumption is that the successful party is entitled to costs of the appeal: R. 14.88(1). There are, however, special circumstances at play.
[27] The Joint Venture argues that Daewoo has suffered no prejudice and is just delaying the arbitration with technical arguments. The chambers judge made findings of fact on that issue, advising Daewoo to “stop playing procedural tag and get to what is important”, and observing that Daewoo was not “interested in straightening anything out”. The chambers judge’s findings of fact are entitled to deference and will not be overturned absent palpable and overriding error. There is no reviewable error in these findings.
[28] Daewoo asserts that the Joint Venture’s arbitration is fatally flawed, yet has obstructed any effort to have that issue resolved. The Joint Venture’s notice to arbitrate is apparently effective to engage that process. While its notice to arbitrate might benefit from some amendment, there is no apparent reason for the Joint Venture to issue any further or different notice to arbitrate. The Joint Venture is prepared to proceed under the international regime. Any issues about the pleadings or the procedure can be resolved by the arbitrators. It is only a matter of time before the validity of the Joint Venture’s arbitration is decided, but instead of allowing the arbitrators to examine that issue Daewoo has obstructed the arbitration proceedings.
[29] The only reason the Originating Notice was issued in the first place was because of Daewoo’s refusal to put the validity of the Joint Venture’s arbitration notice before the arbitrators. Daewoo is entitled to insist on proper service under the Rules and the Hague Convention. But it cannot expect to receive costs if, in the absence of any prejudice, it raises technical arguments that only serve to delay proceedings that were commenced to prevent delay in other proceedings.
[30] As a result, neither party is entitled to costs of this appeal or the chambers proceedings that led up to it.
Appeal heard on May 7, 2019
Memorandum filed at Calgary, Alberta
this 12th day of June, 2019
Slatter J.A.
Bielby J.A.
Wakeling J.A. (concurring in the result):
I. Introduction
[31] The parties played key roles in the construction of Edmonton’s stunning Walterdale Bridge.
[32] The respondents, Canadian corporations, were the general contractor. The appellant, a Korean business, was a subcontractor. The subcontractor fabricated and supplied the structural steel components for the project.
[33] Some disputes arose from the subcontract that are the subject of two arbitrations – one submitted by the respondents and one by the appellant.
[34] The appellant challenges the validity of the respondents’ service of a commencement document and the consequential ex parte orders appointing arbitrators and consolidating the arbitrations.
[35] These orders must be set aside.
II. Questions Presented
[36] On November 17, 2016 the respondents forwarded a Notice to Submit Disputes to Arbitration to the appellant at its Korean headquarters. The arbitration notice stated that it was a demand for arbitration under the subcontract. It tracked the language of special condition 11 of the subcontract and referred to Alberta’s Arbitration Act.
[37] In a January 26, 2017 letter the appellant’s Korean counsel informed the respondents’ counsel that it may direct “all communication intended for Posco Daewoo in relation to the arbitration … to our attention”.
[38] On April 21, 2017 the respondents’ counsel notified the appellant’s Korean counsel that they appointed Stephen Morrison as an arbitrator and reminded Korean counsel that its client had thirty days to appoint a second arbitrator. Counsel stated that the respondents would “seek the court’s assistance” if the appellant failed to act.
[39] On May 1, 2017 the respondents’ counsel asked the appellant’s Korean counsel whether it or Canadian counsel would “accept service with respect to any required application to complete the arbitration panel in this matter”.
[40] Sixteen days later the appellant’s Koran counsel responded stating that neither firm was “in a position to accept … service”.
[41] Thirty days passed without the appellant appointing a second arbitrator.
[42] On May 30, 2017 the respondents, by way of an originating application returnable July 5, 2017, applied to the Court of Queen’s Bench for an order under the International Commercial Arbitration Act appointing two arbitrators to the arbitration panel.
[43] They emailed the originating application to appellant’s Canadian and Korean legal counsel. They did not mail or email it to the appellant.
[44] The respondents did not follow the procedure under r. 11.25(2) of the Alberta Rules of Court and secure judicial permission for the service of a commencement document outside Canada.
[45] On June 2, 2017 the respondents’ counsel submitted a request to the Republic of Korea’s National Court under the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters – the Hague Convention – to serve the originating application on the appellant in Korea.
[46] On June 6, 2017 the appellant emailed its own Notice to Arbitrate to the respondents. Like the respondents’ arbitration notice, the appellant claims it has a dispute arising under the subcontract and relies on special condition 11. Unlike the respondents’ arbitration notice, the appellant’s arbitration notice asserts that “the dispute shall be resolved pursuant to the International Commercial Arbitration Act … and not under the domestic Arbitration Act”.
[47] On June 23, 2017 the respondents applied for an order validating the service of the respondents’ originating application.
[48] On July 4, 2017 the respondents filed an application returnable July 14, 2017 seeking an order consolidating the arbitrations commenced by each of the respondents and the appellant and an order validating service of the July 4, 2017 application.
[49] On July 5, 2017 Justice Mahoney issued two ex parte orders. The first appointed two persons to the arbitration panel hearing the respondents’ arbitration notice.It gave the parties fourteen days to vary the panel’s composition by mutual agreement. The second order, under r. 11.27 of the Alberta Rules of Court, validated the respondents’ service of their originating application on the appellant.
[50] On July 20, 2017 Justice Hollins, under s. 8(1) of the International Commercial Arbitration Act, in an ex parte order, consolidated the arbitrations commenced by the respondents on November 17, 2016 and the appellant on June 6, 2017. The order also provided for the composition of the arbitration panel hearing the two arbitrations.
[51] On August 2, 2017 Korea’s central authority under the Hague Convention delivered the originating application to the appellant.
[52] The next day the appellant applied for an order setting aside the three ex parte orders.
[53] On November 20, 2017 Justice Macleod dismissed the appellant’s application and confirmed the challenged orders.
[54] This is the order the appellant challenges.
[55] This appeal presents three principal issues
A. Service of the Commencement Document Outside Canada
[56] Rule 11.25(2)(b) of the Alberta Rules of Court declares that “[a] commencement document may be served outside Canada only if … the Court, on application … permits service outside Canada … .”
[57] Rule 11.26(1)(b) stipulates that if the Hague Convention applies the method of service for service outside Canada must be in accordance with the Hague Convention.
[58] Did the respondents comply with rr. 11.25(2) and 11.26(1) and effect service of their originating application on the appellant?
[59] Is r. 11.25(2) mandatory? Did the respondents have to comply with r. 11.25(2) and secure judicial permission for service outside Canada of their originating application before requesting Korea’s central authority to serve their originating application on the appellant under the Hague Convention?
[60] Did the respondents serve the appellant in a manner compliant with r. 11.26(1)(b) of the Alberta Rules of Court and the Hague Convention?
[61] What manner of service accords with the Hague Convention?
[62] Did the respondents serve the appellant in a manner contemplated by the Hague Convention?
[63] If not, may the Court validate the method of service the respondents say is good enough – emailing the commencement document to the appellant’s Korean and Canadian counsel?
[64] What validation rules have the potential to assist the respondents?
[65] Is it r. 1.5, the general curative provision?
[66] Or is it r. 11.27? This rule focuses on validating a manner of service not in compliance with the Alberta Rules of Court
[67] Is r. 11.27 available to validate service outside Canada that is not in accord with the Hague Convention only in exceptional circumstances?
[68] Did the respondents otherwise comply with r. 11.27(1)? Did they satisfy the Court that the method of service used brought or was likely to have brought the originating application to the attention of the appellant?
[69] If only r. 11.27 applies, did Justice Mahoney err in invoking it?
B. Appointment of Arbitrators
[70] Article 11(3) of the Model Law on International Commercial Arbitration authorizes a court to appoint a second arbitrator to the panel if a party to the arbitration fails to do so within thirty days of a request to do so from the other party. If the first and second arbitrators fail to agree on a third arbitrator within thirty days of their appointment, the court has the authority to appoint the third arbitrator.
[71] Did Justice Mahoney have the authority on July 5, 2017 to appoint a second arbitrator because the appellant had failed to appoint an arbitrator within the thirty-day window?
[72] Did Justice Mahoney have the authority on July 5, 2017 to appoint the third member of the arbitration panel? Should the third arbitrator have been appointed only after thirty days had elapsed since the appointment of the second arbitrator? Does article 11(3) of the Model Law not expressly state that a court may appoint only one arbitrator at a time?
[73] Was Justice Mahoney premature in his appointment of a third arbitrator?
C. Consolidation of Arbitrations
[74] Section 8(1) of the International Commercial Arbitration Act allows the Court of Queen’s Bench to consolidate two or more arbitration proceedings “on the application of the parties to 2 or more arbitration proceedings”.
[75] Does the phrase “the parties to 2 or more proceedings” mean all the parties involved in two or more arbitrations or is it enough if the party making the application is a party in all the arbitrations the party asks to be consolidated?
[76] It is necessary to examine the entire International Commercial Arbitration Act and its sister enactment, the Arbitration Act, in order to determine whether the enactments’ use of the singular and plural forms are consistent. When does the plural include the singular or the singular include the plural?
[77] Is there any policy reason that would justify the conclusion that “the parties” means only one party?
[78] Arbitration accords the disputants autonomy. Should the arbitrations they initiate be consolidated only if all participants agree?
[79] Did Justice Hollins have the power to order ex parte the consolidation of the arbitrations commenced by the respondents and the appellant?
D. Final Question
[80] If the respondents failed to effect valid service, or if they did, and neither of Justices Mahoney and Hollins had authority to make their orders, should Justice Macleod have set aside the ex parte orders as the appellant requested?
III. Brief Answers
A. Service of the Commencement Document Outside Canada
[81] The respondents failed to serve the appellant with their commencement document in compliance with rr. 11.25(2) and 11.26(1)(b) of the Alberta Rules of Court and the Hague Convention.
1. Rule 11.25(2)(b) of the Alberta Rules of Court
[82] Rule 11.25(2)(b) is a mandatory provision. A party that wishes to serve a commencement document outside Canada must secure judicial permission to do so.
[83] The respondents did not even apply for judicial permission to serve their commencement document on the appellant in Korea.
[84] The respondents have not complied with r. 11.25(2)(b).
2. Article 15(2) of the Hague Convention
[85] The Hague Convention obliges each contracting state to designate a central authority with responsibility for receiving requests for service from other contracting states and arranging for the service of those documents.
[86] Article 6 directs a central authority that has effected service to provide the applicant with a certificate of service.
[87] Article 15(2) recognizes that on some occasions, notwithstanding the failure of the central authority to deliver a certificate of service to the applicant and the failure of the other party to appear before the court in the forum state, the court in the forum state may give judgment against the absent defendant. This provision allows a contracting state to declare that a judge of the contracting state may give judgment against the absent defendant if the commencement document was properly submitted to the central authority, “a period of time not less than six months, considered adequate by the judge in the particular case, has elapsed since the date of transmission of the documents” and the applicant has made “every reasonable effort … to obtain … [a certificate of service] through the competent authorities of the state addressed”.
[88] The respondents cannot bring themselves within Article 15(2). They applied for a validation-of-service order twenty-one days after they transmitted their request for service assistance to Korea’s central authority. Justice Mahoney granted it a little more than one month after the respondents submitted their request for service to the Republic of Korea’s central authority. Article 15(2) expressly specifies that the period between the transmission of the service request and the effective validation date must be not less than six months and a judge must be satisfied the period is adequate.
[89] It is obvious that the respondents have not complied with Article 15(2) of the Hague Convention.
3. There Is No Curative Provision in the Alberta Rules of Court that Assists the Respondents
[90] Rule 1.5, the general curative provision, does not apply to noncompliance with r. 11.25(2)(b) and irregular methods or manners of service.
[91] Rule 11.27 does. It specifically focuses on noncompliant methods or manners of service.
[92] But r. 11.27 does not assist the respondents.
[93] This is so for two reasons.
[94] First, r. 11.27 does not empower a court to validate noncompliance with r. 11.25(2)(b). It authorizes a court “to make an order validating the service of a document served … outside Alberta in a manner that is not specified by these rules … .” An order under r. 11.25(2)(b) cannot be characterized as a manner-of-service order contemplated by r. 11.27(1).
[95] Second, a court acting under r. 11.27 may only validate a manner or method of service that is not compliant with Article 15 of the Hague Convention in extraordinary circumstances. An onerous standard is required to reflect the fact that sovereign states generally regard service not in accord with Article 15 as a trespass on their sovereign jurisdiction.
[96] The respondents have not identified any facts that may be characterized as an extraordinary circumstance. A delay of six or more months in establishing the arbitraltribunal, while regrettable, is not harmful to the respondents’ interests.
[97] As a result, Justice Mahoney erred in validating the respondents’ service.
B. Other Issues
[98] This determination makes it unnecessary to answer the other two queries.
C. Conclusion
[99] Justice Macleod should have set aside the challenged orders.
IV. Statement of Facts
[100] The City of Edmonton entered into a prime contract with the respondents for the construction of the new Walterdale Bridge.
[101] The respondents subsequently entered into a subcontract with the appellant for the fabrication and supply of the structural steel components for the project. Special condition 11 of the subcontract stated that “the Parties shall agree that all disputes or disagreements relating to or arising out of this Subcontract shall be addressed by arbitration, conducted in the English language in Calgary, Alberta, in accordance with the Arbitration Act of Alberta”.
[102] Disputes between the respondents and the appellant arose.
[103] On March 16, 2016 the appellant and the respondents entered into a standstill agreement with respect to the disputes under the subcontract. A term of the standstill agreement states that “[t]his Agreement is governed by the laws of Canada and Alberta, and each of the Parties irrevocably and unconditionally submits and attorns to the exclusive jurisdiction of the courts of the Province of Alberta to determine all issues … arising from this Agreement”.
[104] In an October 17, 2016 letter the respondents notified the appellant that they terminated the standstill agreement effective November 17, 2016.
[105] On November 17, 2016 the respondents emailed a Notice to Submit Disputes to Arbitration to the appellant at its Korean head office. Part of the notice reads as follows: “All of the conditions to arbitrate under the Subcontract Agreement have been met by … [the respondents. The respondents] hereby demand … that this matter be referred to arbitration pursuant to General Condition 8.2 and Special Condition 11 of the Subcontract Agreement and Section 23(1) of the Arbitration Act”.
[106] In a January 13, 2017 letter the respondents notified a Korean law firm that Gowling WLG (Canada) LLP were their legal counsel with respect to the arbitration and asked the Korean law firm to identify the appellant’s “designated legal representative”.
[107] The Korean law firm replied to Gowlings on January 26, 2017. It stated that it would be “acting as Posco Daewoo’s designated legal representative in this arbitration” and asked the respondents to direct “all communication intended for Posco Daewoo in relation to the arbitration to … [its] attention”.
[108] On March 23, 2017 counsel for the appellant and the respondents spoke by telephone. The appellant’s Korean counsel advised the respondents’ counsel that the appellant had retained Rose LLP as Canadian counsel. During this telephone conversation Korean counsel informed Gowlings that the appellant took the position that the respondents’ arbitration notice was improper because it referred to Alberta’s Arbitration Act and not the International Commercial Arbitration Act.
[109] In a March 30, 2017 letter Gowlings informed Rose LLP that the respondents were willing to proceed under the International Commercial Arbitration Act and were prepared to agree to having a single arbitrator hear the arbitration.
[110] On April 7, 2017 lawyers from Rose LLP and Gowlings spoke by telephone. Appellant’s counsel stated that his client wished to have a three-person arbitration panel. Respondents’ counsel agreed to a three-person panel.
[111] In an April 21, 2017 letter Gowlings informed the appellant’s Korean counsel that the respondents appointed Stephen Morrison as an arbitrator and “call[ed] upon … [the appellant] to appoint an arbitrator within 30 days, failing which … [the respondents] will seek the court’s assistance”.
[112] There was no response from either the appellant’s Canadian or Korean counsel.
[113] In a May 1, 2017 email letter to the appellant’s Korean counsel Gowlings asked whether “your firm or Rose LLP will accept service with respect to any required application to complete the arbitration panel in this matter”.
[114] Korean counsel replied on May 17, 2017: “neither our firm … nor Rose LLP is in a position to accept such service”.
[115] Nonetheless, on May 30, 2017, Gowlings emailed the respondents’ originating application to the appellant’s Canadian and Korean counsel. The law firm did not mail or email the originating application to the appellant at its Korean mailing address.
[116] On June 6, 2017 the appellant’s Korean counsel emailed to Gowlings the appellant’s Notice of Arbitration, paragraph 10 of which states that “Daewoo, by this Notice of Arbitration, commences arbitration proceedings against … [the respondents] pursuant to the International Act and General Condition 8.2 and Special Condition 11 of the Subcontract”.
[117] In subsequent correspondence the appellant’s Korean counsel again stated that “[w]e are not authorized to accept service on behalf of Daewoo of any court applications filed by … [the respondents] with the Alberta courts”.
[118] On July 4, 2017 the respondents applied for an order consolidating the arbitration notices submitted by each of the appellant and the respondents.
[119] The Court of Queen’s Bench, in orders issued July 5 and 20, 2017, validated service of the originating application, appointed two persons to the arbitration panel hearing the respondents’ arbitration and consolidated the two arbitrations.
[120] The appellant moved to have these orders set aside.
[121] Justice Macleod declined to do so. He concluded that the appellant had attorned to the jurisdiction of the Court of Queen’s Bench and that the respondents did not have to comply with r. 11.25 of the Alberta Rules of Court and secure prior judicial permission. He adjudged that “it was entirely appropriate for this Court to validate service under r 11.27”. In addition, he concluded that the appointment-of-two-arbitrators and consolidation orders were valid.
[122] Justice Macleod also concluded that the respondents had properly issued its arbitration notice. It tracked the language in special condition 11 of the subcontract agreement. He noted that the effect of s. 2(1)(b) of the Arbitration Act and the International Commercial Arbitration Act probably was that “the latter prevails”. But, he noted, this did not make the respondents’ notice to submit a nullity.
V. Applicable Court Rules and Statutory, Hague Convention and Subcontract Provisions
A. Alberta Rules of Court
[123] Parts of rr. 1.5, 11.16, 11.25, 11.26 and 11.27 of the Alberta Rules of Court are reproduced below:
1.5(1) If a person contravenes or does not comply with any procedural requirement, or if there is an irregularity in a commencement document, pleading, document, affidavit or prescribed form, a party may apply to the Court
(a) to cure the contravention, non-compliance or irregularity …
…
11.16(1) If a lawyer acts for a person in an action and the person must be served with a commencement document, the lawyer may, in writing, accept service on behalf of the person.
(2) Service is effected under this rule on the date service of the commencement document is accepted in writing by the lawyer.
…
11.25(2) A commencement document may be served outside Canada only if
(a) a real and substantial connection exists between Alberta and the facts on which a claim in an action is based and the commencement document is accompanied with a document or affidavit that sets out the grounds for service of the document outside Canada, and
(b) the Court, on application supported by an affidavit satisfactory to the Court, permits service outside Canada, and
(c) the person served with the commencement document is also served with a copy of the order permitting service outside Canada.
…
11.26(1) Unless the Court otherwise orders, if a document may be served outside Alberta under these rules, the document must be served
(a) by a method provided by these rules for service of the document in Alberta,
(b) in accordance with a method of service of documents under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters that is allowed by the jurisdiction in which the document is to be served, if the Convention applies, or
(c) in accordance with the law of the jurisdiction in which the person to be served is located.
(2) Service is effected under this rule,
…
(d) if the document is served under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, on the date service is effected under the Convention … .
…
11.27(1) On application, the Court may make an order validating the service of a document served inside or outside Alberta in a manner that is not specified by these rules if the Court is satisfied that the method of service used brought or was likely to have brought the document to the attention of the person to be served.
…
(3) If service is validated by the Court under this rule, service is effected on the date specified in the order.
(4) Subrules (1) to (3) apply despite
…
(b) the fact that the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters applies to service of the document.
B. Alberta Legislation
1. Arbitration Act
[124] Parts of ss. 1, 2, 3 and 6 of the Arbitration Act are as follows:
1(1) In this Act,
(a) ‘arbitration agreement’ means, subject to subsections (2) and (3), an agreement or part of an agreement by which 2 or more persons agree to submit a matter in dispute to arbitration … .
(2) If the parties to an arbitration agreement make a further agreement in connection with the arbitration, it is deemed to form part of the arbitration agreement.
…
2(1) This Act applies to an arbitration conducted under an arbitration agreement … unless
…
(b) Part 2 of the International Commercial Arbitration Act applies to the arbitration.
…
- The parties to anarbitration agreement may agree, expressly or by implication, to vary or exclude any provision of this Act except sections 5(2), 19, 39, 44(2), 45, 47 and 49.
…
- No court may intervene in matters governed by this Act, except for the following purposes as provided by this Act:
(a) to assist the arbitration process;
(b) to ensure that an arbitration is carried on in accordance with the arbitration agreement … .
2. International Commercial Arbitration Act
[125] The important segments of the International Commercial Arbitration Act are reproduced below:
1(1) In this Act,
…
(b) ‘International Law’ means the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on June 21, 1985, as set out in Schedule 2.
…
4(1) Subject to this Act, the International Law applies in the Province.
…
8(1) The Court of Queen’s Bench, on application of the parties to 2 or more arbitration proceedings, may order
(a) the arbitration proceedings to be consolidated, on terms it considers just,
(b) the arbitration proceedings to be heard at the same time, or one immediately after another, or
(c) any of the arbitration proceedings to be stayed until after the determination of any other of them.
(2) Where the Court orders arbitration proceedings to be consolidated pursuant to subsection (1)(a) and all the parties to the consolidated arbitration proceedings are in agreement as to the choice of the arbitral tribunal for that arbitration proceeding, the arbitral tribunal shall be appointed by the Court, but if all the parties cannot agree, the Court may appoint the arbitral tribunal for that arbitration proceeding.
…
9(1) The functions referred to in article 6 of the International Law shall be performed by the Court of Queen’s Bench.
…
Schedule 2
UNCITRAL MODEL LAW ON INTERNATIONAL
COMMERCIAL ARBITRATION
…
Article 1. Scope of application
(1) This Law applies to international commercial arbitration … .
…
(3) An arbitration is international if:
(a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States.
…
Article 7. Definition and form of arbitration agreement
(1) ‘Arbitration agreement’ is an agreement by the parties to submit to arbitration all or certain disputes which have arisen … between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(2) The arbitration agreement shall be in writing. …
…
Article 11. Appointment of arbitrators
…
(2) The parties are free to agree on a procedure of appointing the arbitrator or arbitrators, subject to the provisions of paragraphs (4) and (5) of this article.
(3) Failing such agreement,
(a) in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two arbitrators thus appointed shall appoint the third arbitrator; if a party fails to appoint the arbitrator within thirty days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within thirty days of their appointment, the appointment shall be made, upon request of a party, by the court or other authority specified in article 6.
C. Hague Convention Terms
[126] Parts of Articles 1 and 15 of the Hague Convention are as follows:
Article 1
The present Convention shall apply in all cases, in civil or commercial matters, where there is occasion to transmit a judicial … document for service abroad.
…
Article 15
…
(2) Each Contracting State shall be free to declare that the judge, notwithstanding the provisions of the first paragraph of this Article, may give judgment even if no certificate of service or delivery has been received, if all the following conditions are fulfilled –
(a) the document was transmitted by one of the methods provided for in this Convention,
(b) a period of time of not less than six months, considered adequate by the judge in the particular case, has elapsed since the date of transmission of the document,
(c) no certificate of any kind has been received, even though every reasonable effort has been made to obtain it through the competent authorities of the State addressed.
(3) Notwithstanding the provisions of the preceding paragraphs the judge may order, in case of urgency, any provisional or protective measures.
D. Subcontract Terms
[127] General conditions 8.2.4, 10.2.1 and 10.2.2 of the subcontract are as follows:
8.2.4 … [I]n the case of any dispute between the Contractor and the Subcontractor as to their respective rights and obligations under this Subcontract, either Part may, subject to GC 12.2, at any time prior to six … months after completion of the Subcontract Work or cancellation or termination of this Subcontract, give the other Party written notice requesting that the dispute be mediated or arbitrated. The decision to proceed to mediation or arbitration shall be subject to the agreement of both parties and shall be in accordance with the procedures agreed upon by the Parties, failing which the dispute shall be addressed pursuant to such judicial processes as the circumstances require.
…
10.2.1 This Subcontract shall for all intents and purposes be considered to have been entered into and shall be interpreted in accordance with the laws of the Province of Alberta, including the federal laws of Canada applicable therein.
10.2.2 The laws of the Province of Alberta and the federal laws of Canada applicable therein shall govern the contract work.
[128] Special condition 11 of the subcontract is in this form:
- Dispute Resolution: Further to GC Clause 8.2.4, the Parties shall agree that all disputes or disagreements relating to or arising out of this Subcontract shall be addressed byarbitrationconducted in the English language in Calgary, Alberta, in accordance with the Arbitration Act of Alberta. The arbitration award shall be final and binding upon the parties.
VI. Analysis
A. The Respondents Failed To Properly Serve Their Originating Application on the Appellant
[129] The fact that the appellant and the respondents have agreed to submit to the jurisdiction of the Court of Queen’s Bench of Alberta for the limited purpose of assisting the arbitration process in which they are both engaged does not relieve either side of the obligation to comply with the service segments of the Alberta Rules of Court if they choose to invoke the court’s assistance.
[130] The respondents failed to properly serve their originating application on the appellant.
[131] Rule 11.26(1) of the Alberta Rules of Court provides that there are three methods of effecting service.
1. There Is No Mode-of-Service Term in the Subcontract and the Appellant’s Counsel Did Not Agree To Accept Service of the Originating Application
[132] The first is “a method provided by these rules for service of the document in Alberta”.
[133] Two rules merit mention.
[134] Rule 11.3(1) of the Alberta Rules of Court allows contracting parties to agree on the mode of service. The subcontract does not contain a mode-of-service term. This rule does not assist the respondents.
[135] Rule 11.16 of the Alberta Rules of Court allows for service on the other side’s lawyer if the lawyer agrees in writing to accept service of a commencement document on behalf of a client.
[136] Arguably, the appellant’s Korean counsel had agreed to do so in its January 26, 2017 letter to Gowlings: “all communications intended for Posco Daewoo in relation to the arbitration should be directed to our attention”.
[137] Whatever the legal effect of this January 26, 2017 letter was, subsequent correspondence between the lawyers made it clear that neither the appellant’s Korean nor Canadian counsel were in a “position to accept such service”.
[138] The respondents’ delivery of their originating application to the appellant’s Korean and Canadian lawyers was not good service under rr. 11.16 and 11.26(1)(a) of the Alberta Rules of Court.
2. The Respondents Did Not Secure Prior Judicial Approval for Service Ex Juris Under Rule 11.25(2)(b)
[139] Rule 11.25(2)(b) of the Alberta Rules of Court unequivocally declares that a party seeking to serve a commencement document outside Canada must have prior judicial permission. The case law could not be clearer.
[140] The respondents did not even apply for a service ex juris order.
[141] The respondents should have applied for judicial permission to serve the appellant in Korea and forwarded to Korea’s central authority under the Hague Convention the appropriate documents with a request that it serve them on the appellant. In deciding what the return date should be, counsel may wish to take into account information provided by the Korean National Court Administration. Korea’s central authority reports that in 2012 it received 604 requests for service and that approximately one-third were served in less than two months and approximately two-thirds were executed in less than four months. This necessitates delay. But service of the respondents’ originating application was not an urgent matter.
3. The Respondents Did Not Attempt To Serve the Appellant in Accordance with Korean Law
[142] Rule 11.26(1)(c) provides a third option. A party may serve a commencement document “in accordance with the law of the jurisdiction in which the person to be served is located”.
[143] The respondents did not attempt to serve the appellant in accordance with Korean law.
4. The Respondents Cannot Short-Circuit Rule 11.25(2) by Relying on Rule 11.27
[144] There is a fourth option outside r. 11.26(1) that merits consideration.
[145] Rule 11.27 of the Alberta Rules of Court reads, in part, as follows:
11.27(1) On application, the Court may make an order validating the service of a document served inside or outside Alberta in a manner that is not specified by these rules if the Court is satisfied that the method of service used brought or was likely to have brought the document to the attention of the person to be served.
…
(4) Subrules (1) to (3) apply despite
…
(b) the fact that the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters applies to service of the document.
[146] These parts of r. 11.27 incorporate two important principles.
[147] First, r. 11.27(1) declares that the court may validate a method or manner of service other than the methods of service specified in the Alberta Rules of Court if the Court is satisfied that “the method of service used brought or was likely to have brought the document to the attention of the person to be served”.
[148] Second, r. 11.27(4) states that a court may validate a method or manner for service outside Canada other than the methods for service catalogued in the Hague Convention.
[149] Neither of these principles allows a court to dispense with the need for the moving party to comply with r. 11.25(2)(b) of the Alberta Rules of Court and secure judicial permission to serve the nonmoving party outside Canada. The requirement for prior judicial approval is not a method or manner of service. A court may validate a noncompliant method of service only for a moving party that has a service ex juris order in its back pocket.
[150] In order to appreciate what a noncompliant method of service under the Hague Convention is one must understand what a compliant method of service under the Hague Convention is.
[151] Given that r. 11.26(1)(b) of the Alberta Rules of Court provides that service outside Canada must be “in accordance with the method of service of documents under the Hague Convention … that is allowed by the jurisdiction in which the document is to be served”, it is essential to read the Hague Convention to extract permissible methods of service.
[152] Before undertaking that task, it is important to observe that r. 11.26(1)(b) reflects a central aspect of the Hague Convention. While it is the forum state that determines when service ex juris is required, once that determination has been made service ex juris must be effected in accordance with the Hague Convention.
[153] The Hague Convention obliges a contracting state to designate a central authority with a mandate to accept requests for service from other contracting states, serve the judicial document requested and provide the applicant with a certificate of service.
[154] Article 15(2) of the Hague Convention allows a judge in a contracting state to give judgment against an absent defendant if the central authority does not provide a certificate of service within “a period of time of not less than six months, considered adequate by the judge in the particular case, … since the date of transmission of the document” and the applicant has made “every reasonable effort to obtain it through the competent authorities of the State addressed”.
[155] This authority is not available to courts in a contracting state unless a contracting state declares its intention to authorize a judge to give judgment under the terms set out in article 15(2).
[156] Canada has made this declaration.
[157] As a result, the Court of Queen’s Bench may give judgment – in effect validate service outside Canada – if a central authority fails to provide a certificate of service within a period of not less than six months to be determined by it – the judge of the forum state – and the applicant has made “every reasonable effort … to obtain it”.
[158] Article 15(3) provides that a “judge [of the forum state] may order, in case of urgency, any provisional or protective measures”. This may be another road to service ex juris validation.
[159] To summarize, service outside Canada is compliant with the Hague Convention if the central authority provides a certificate of service or does not in a period not less than six months to be approved by a judge in the forum state in spite of the reasonable best efforts of the applicant. As well, a judge may allow service outside Canada for urgent protective or provisional measures.
[160] Metcalfe Estate v. Yamaha Motor Canada provides an example of noncompliant service. The plaintiff secured prior judicial approval for service ex juris under the Hague Convention. Instead of sending the commencement documents to the Japanese central authority for service under the Hague Convention the plaintiff retained Japanese counsel. Japanese counsel forwarded the commencement documents by registered mail to the Japanese businesses at their Japanese addresses with a request that they accept service. They declined to do so.
[161] Rules 11.27(1) allows a court to validate a noncompliant method or manner of service outside Canada under the Hague Convention. This would capture service that is not recorded in a certificate of service and does not comply with the terms of article 15(2) or 15(3) of the Hague Convention.
[162] But it should do so only in extraordinary circumstances.
[163] Under international and common law a state’s law is without force beyond its territorial boundaries. The territorial principle also applies to a court’s process.
[164] A Canadian court must exercise its service ex juris function “with caution and a bias against invading the sovereignty of a foreign state”.
[165] Rule 11.27 does not assist the respondents because they never secured prior judicial permission to serve the appellant in Korea.
[166] Even if the respondents had prior judicial permission, r. 11.27 would not help them. Extraordinary circumstances do not exist here. Expedition was not needed here to protect the respondents’ interests.
[167] The respondents have another problem.
[168] They have not satisfied me that they have brought or likely have brought their originating application to the appellant’s attention.
[169] They have brought the originating application to the attention of the appellant’s Korean and Canadian lawyers. But that is not good enough.
[170] The respondents did not forward the originating application to the appellant’s head office in Seoul.
[171] Neither the appellant’s Korean nor Canadian attorneys stated that they forwarded the respondents’ originating application they received by email or registered mail or both to their client. Korean and Canadian counsel simply acknowledged receipt of the email from the respondents’ lawyers.
[172] Given that Korean and Canadian counsel stated that they were not in a position to accept service, I believe that the likelihood the lawyers forwarded the originating application to their client having been instructed by the client not to accept service is very low.
5. Rule 1.5 Does Not Assist the Respondents
[173] Rule 1.5 of the Alberta Rules of Court is the general curative provision. It allows a court to cure noncompliance with a procedural requirement set out in the rules of court.
[174] Unlike r. 1.5, r. 11.27 focuses specifically on noncompliant methods or manners of service.
[175] Rule 11.27 is the exclusive statement of the circumstances under which a noncompliant method of service outside Canada may be validated. In other words, even though the text of both rr. 1.5 and 11.27 is broad enough to apply to applications to validate a noncompliant method of service outside Canada, only r. 11.27 applies because its scope is restricted to noncompliant methods of service ex juris and it constitutes an exhaustive standard for assessment of a validation application relating to methods of service. Rule 1.5, in spite of its broad terms, does not apply to noncompliant methods or manners of service outside Canada.
[176] It makes no sense to apply a general rule as opposed to a specific rule to a fact pattern expressly dealt with by the specific rule. Suppose that parents of a fifteen-year-old daughter, at the start of her grade nine school year, impose a midnight curfew for Friday and Saturday nights and a 11 pm curfew for school nights. The parents, at the request of the teenager, impose a 1 am curfew for the December break. It is obvious that the family understands that the general curfew rule does not apply to the period covered by the special curfew rule.
B. Justice Macleod Should Have Set Aside the Challenged Ex Parte Orders
[177] The determination that the respondents did not effect valid service of their originating application means that Justices Mahoney and Hollins had no jurisdiction to appoint arbitrators and consolidate the two arbitrations and that Justice Macleod should have set aside the challenged ex parte orders.
[178] For this reason, the appeal must be allowed and there is no need to resolve the two other questions posed above.
C. Next Steps
[179] The appellant may wish to reconsider the best way to proceed.
[180] It is obvious to me that the disputes arising under the subcontract, the subject of the two arbitration notices, should be resolved by one arbitration panel. They both relate to the same subcontract. Not only will this save the appellant the costs associated with the need to have its witnesses testify before two different tribunals – and prepare twice, for counsel to present two separate cases and to pay the fees of additional arbitrators, it will reduce the likelihood of inconsistent awards. The appellant will not derive an advantage from this.
[181] The appellant has stated that it intends to take the position before the arbitration panel hearing the respondents’ claim that the respondents’ arbitration notice is invalid because it makes reference to Alberta’s domestic Arbitration Act and not the provisions of the International Commercial Arbitration Act.
[182] I recognize that the fate of this argument will be ultimately determined by the arbitration panel that is eventually convened to hear the respondents’ claim. Nonetheless, I offer my evaluation of its merits with the hope that it will cause the appellant to refocus on the plain and obvious meaning of special condition 11 and the considerable commercial value arbitration represents to the appellant. The appellant no doubt agreed to arbitrate its differences with the respondents arising from the subcontract because it wanted a “quick and efficient adjudication and [did] … not want to take the risks of delay and, in too many cases, partiality, in proceedings before a national jurisdiction”.
[183] Special condition 11 of the subcontract expressly states that any arbitration commenced to resolve differences arising under the subcontract will be governed by Alberta’s Arbitration Act. It makes no reference to the International Commercial Arbitration Act.
[184] It probably would have been the best course for the respondents in their arbitration notice to have referred to both the Arbitration Act and the International Commercial Arbitration Act and explain why the dual reference was necessary.
[185] But I fail to see how the respondents’ arbitration notice is deficient in any respect because it tracks the special condition 11 language and refers only to the Arbitration Act. Special condition 11 expressly incorporates the Arbitration Act.
[186] And s. 3 of the Arbitration Act unequivocally states that “[t]he parties to an arbitration agreement may agree, expressly or by implication, to vary or exclude any provision of this Act except sections 5(2), 19, 39, 44(2), 45, 47 and 59.” It is s. 2(1)(b) that states that the International Commercial Arbitration Act applies to international commercial arbitrations. This is a provision the parties may exclude. They may have been able to adapt to the process under the Arbitration Act.
[187] Arbitration tribunals do not respond favorably to overly technical arguments that abridge their authority to hear and resolve disputes arising from the disputants’ contractual relationship.
[188] In any event, the respondents’ arbitration notice is consistent with special condition 11 and makes clear to the appellant the nature of the dispute it invokes special condition 11 to address. The fact that the respondents are prepared to proceed under the International Commercial Arbitration Act, the position that the appellant has adopted, should pave the way for a special condition 11 arbitration proceeding under the aegis of the International Commercial Arbitration Act without further delay.
[189] If the appellant does not change course and insists that the respondents comply with r. 11.25(2) and apply for service ex juris, the respondents may derive a long-term advantage. Justice O’Connor noted in Volkswagenwerk Aktiengesellschaft v. Schlunk that “parties that comply with the [Hague] Convention ultimately may find it easier to enforce their judgments abroad. … For these reasons, we anticipate that parties may resort to the Convention voluntarily, even in cases that fall outside the scope of its mandatory application”.
VII. Conclusion
[190] The appeal is allowed.
[191] I agree with my colleagues that the appellant and the respondents should bear their own costs in this Court and in the Court of Queen’s Bench.
[192] I acknowledge counsel’s excellent oral and written submissions.
Appeal heard on May 7, 2019
Memorandum filed at Calgary, Alberta
this 12th day of June, 2019
Wakeling J.A.
Appearances:
W.P. Foley/N. Tams
for the Respondents
P.J. Scheibel/J.D. Fraese
for Appellant
