Editor’s Note: This post was written as a preview of an upcoming Supreme Court of Canada decision for the Fantasy Courts website and newsletter.

Hi, here’s what you need to know about the Supreme Court of Canada this week in 5 minutes.

Latest Cases

  1. On Thursday, Nov. 10, 2022, the SCC is releasing its decision in Peace River Hydro Partners, et al. v. Petrowest Corporation, et al. At issue is whether a receiver in bankruptcy is bound by mandatory arbitration clauses.
  2. R. v. Sharma, 2022 SCC 39 was released on Nov. 4, 2022. In a 5:4 split (been a lot of those lately), the Court allowed the Crown’s appeal and restored the carceral sentence imposed by the sentencing judge on an Indigenous offender. Restricting conditional sentences for certain offences is constitutional.

Head over to Fantasy Courts to lock in your predictions for this week’s decisions or read more about the cases below.

Enforcing Mandatory Arbitration Clauses in Bankruptcy

Appeal by leave from Petrowest Corporation v. Peace River Hydro Partners, 2020 BCCA 339

View the SCC webcast & read the factums

What Happened?

At trial: The parties entered into a partnership agreement. The respondents Petrowest Corporation and its affiliates became insolvent. Ernst and Young was appointed as their receiver. Ernst & Young assigned Petrowest Corporations’ affiliates into bankruptcy and acted as both a trustee in bankruptcy and a receiver. Petrowest Corporation and its affiliates commenced a civil claim alleging amounts are owed to them under a general partnership agreement, guarantee and cross-indemnity agreement, purchase orders, and subcontract agreement. These agreements contained arbitration clauses. The appellants Peace River Hydro Partners et al. applied under s. 15 of the Arbitration Act, RSBC 1996, c. 55, to stay the proceedings so that the matters could be referred to arbitration. The Supreme Court of British Columbia dismissed the application.

At the Court of Appeal: The Court of Appeal dismissed an appeal. The judge erred in finding that section 15 of the Arbitration Act was engaged and that an assessment of inherent jurisdiction was necessary. However, the appeal was dismissed because the receiver was not a party to the arbitration agreements, and the arbitration clauses became inoperable.  Section 15 of the Arbitration Act was therefore not engaged, and the judge’s refusal to order the stay was proper.

What Was Argued at the SCC?

Appellant: The receiver here brought an action to hold the parties to promises in agreements they made, but then wants to disregard parts of those agreements (i.e. binding arbitration clause). A receiver should not be able to unilaterally force a dispute into litigation and disregard a binding arbitration clause that was agreed to by the parties. Party autonomy and certainty are the necessary hallmarks of arbitration. Any exceptions to enforcing arbitration agreements should only be created through legislation, not by the courts.

Respondent: A court-appointed receiver should not be required to participate in and fund multiple arbitrations out of the proceeds of the estates of insolvent debtors, at the expense of creditors, when the same disputes can be resolved in a single court action. A court-ordered receivership is intended to preserve and realize on an insolvent person’s assets for the benefit of its creditors. Allowing the respondents’ claim against the appellants to proceed in one court action rather than arbitration avoids an inefficient and inequitable result.

What Else Should You Know Before Making a Prediction?

This feels like one of those appeals where there are a number of issues to sort out in the law, but it won’t necessarily result in the appeal being allowed – same result, different reasons. Authors have pointed out a number of problems with the BCCA decision, but at the end of the day, the receiver wasn’t party to the original agreements and enforcing mandatory arbitration clauses in this context may undermine the benefits you normally get from arbitration.

Last SCC Decisions

R. v. Sharma

On Nov. 4, 2022, the SCC released R. v. Sharma, 2022 SCC 39. In a 5:4 split, the Court allowed the Crown’s appeal and restored the carceral sentence imposed by the sentencing judge.

Held: Provisions restricting conditional sentences for certain offences are constitutional.

Key Points:

  • The two‑step test for assessing a s. 15(1) claim requires the claimant to demonstrate that the impugned law or state action a) creates a distinction based on enumerated or analogous grounds, on its face or in its impact; and b) imposes a burden or denies a benefit in a manner that has the effect of reinforcing, perpetuating, or exacerbating disadvantage. These two steps shouldn’t be collapsed into a single step. If either step is not met, there’s no s. 15 infringement.
  • The respondent did not satisfy her burden at the first step. The impugned provisions do not create or contribute to a disproportionate impact on her as an Indigenous offender. While the crisis of Indigenous incarceration is undeniable, she adduced no statistical information to demonstrate that the impugned provisions create or contribute to increased imprisonment of Indigenous offenders, relative to non‑Indigenous offenders.
  • The provisions don’t limit s. 7 Charter rights. Their purpose is to enhance consistency in the conditional sentencing regime by making imprisonment the typical punishment for certain serious offences and categories of offences, and that is what they do.
  • Only 31% correctly predicted the outcome of this appeal. With the retirement of Justice Moldaver, who was in the majority on this decision, it is likely that the result would have been different had this case been heard later.
  • Lots of criticism of this decision on Twitter from the defence bar, Aboriginal law bar, and others. Caroline Mandell had an interesting tweet highlighting the contrasting description of the offender by the majority and dissent.

-Tom Slade

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