Arbitrations And Receiverships: Do They Need To Be Legally Distant? - Case Study: Petrowest Corporation V. Peace River Hydro Partner

• Published date: 23 June 2021
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: McCague Borlack LLP
• Author: Mr Howard Borlack and Anita Zamani

A receiver can sue on a contract yet disclaim the contract's arbitration clause, determined the BCCA in Petrowest Corporation v. Peace River Hydro Partners 2020 BCCA 339. The defendants applied for an order to stay an action brought against them by the receiver for Petrowest, pursuant to section 15 of the BC Arbitration Act ("the Act"). The defendants appealed the chambers judge's decision that despite section 15 of the Act being engaged, section 138 of the Bankruptcy and Insolvency Act ("BIA") empowered her with discretion to avoid operation of section 15 on the grounds that significant cost and delay would unfairly occur.

The Facts
The receiver was appointed with the task of collecting amounts allegedly owed to Petrowest by the appellants under various agreements that were subject to mandatory arbitration. Section 15 of the Act allows a party to apply to stay a legal proceeding on the basis that the agreement was subject to mandatory arbitration, and a court must make the order to stay unless the arbitration agreement is void, inoperative, or incapable of being performed.

The issue was whether the receiver could sue on the contract while disclaiming the same contract's mandatory arbitration agreement. "The question turns on the effect, if any, of the appointment of the receiver and assignments into bankruptcy pursuant to the provisions of the BIA, on the application of section 15 of the Act to the claims brought in this proceeding."

Held
The BCCA dismissed the appeal and upheld the chambers judge's decision, despite arriving to that final decision on different grounds.

The appeal court...