pietrasz vs eminata group

7/21/2019 Pietrasz vs Eminata Group

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IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation: Pietrasz v. Eminata Group,2014 BCSC 479

Date: 20140321Docket: S135724

Registry: Vancouver

Between:

Josef Pietrasz

Plaintiff

And

Eminata Group and

Vancouver Career College (Burnaby) Inc.Defendants

Before: The Honourable Madam Justice M. Koenigsberg

Reasons for Judgment

(In Chambers)

Counsel for the Plaintiff: F.G. Wynne

Counsel for the Defendants: A.D. Mitchell

Place and Date of Hearing: Vancouver, B.C.January 31, 2014

Place and Date of Judgment: Vancouver, B.C.March 21, 2014


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Pietrasz v. Eminata Group Page 2

[1] This is an application by the defendants Eminata Group and Vancouver

Career College (Burnaby) Inc., for an order for a stay of proceedings pursuant to

s. 15(1) of theArbitration Act, R.S.B.C. 1996, c. 55.

[2] The plaintiff Josef Pietrasz filed a notice of civil claim following his termination

from employment with the defendants.

[3] The basis for this application is that the plaintiff, Josef Pietrasz was employed

by the defendants pursuant to two employment contracts, November 2009 and

August 2011. The employment contracts each contained an arbitration clause

providing that all disputes arising out of or in connection with the Agreement shall

be resolved by binding arbitration pursuant to the Commercial Arbitration Act,

R.S.B.C. 1996, c. 55.

[4] The defendants say the matter is covered by the Arbitration Clause (the

Clause) and this Court lacks the jurisdiction to hear this claim or should decline to

exercise any jurisdiction it may have.

[5] The plaintiff says the Clause is void, inoperable or incapable of being

performed because the Clause is in conflict with the Choice of Law and Jurisdiction

Clause. In addition, he says the claim for a finding of bad faith and resulting punitive

damages places this claim outside the scope of the Clause.

Factual Overview

[6] The plaintiff was first employed as Vice President Student Recruitment for

University Canada West and the Vancouver College of Art and Design, a salaried

position pursuant to an employment contract dated November 2009. He was laterally

transferred to a new position as Vice President Strategic Campus Admissions andsigned a new employment contract on or about August 2011. Both contracts contain

the same Arbitration Clause.

[7] The plaintiff was terminated without cause on or about July 5, 2012 . He

commenced an action against the defendants for that termination which termination


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it is claimed was in breach of several terms express or implied in the employment

contract of 2009. I set out paras. 14-22 of the defendants written submissions which

are a summary of the plaintiffs notice of civil claim as there is no dispute about their

accuracy:

14. On July 30, 2013, the Plaintiff filed a Notice of Civil Claim in theSupreme Court of British Columbia.

15. In paragraph 7 of the Notice of Civil Claim the Plaintiff alleges that theoriginal terms of the Plaintiffs employment with the Defendants were se t outin the 2009 Agreement. In paragraph 8 of the Notice of Civil Claim thePlaintiff alleges that on or about August 8, 2011 he was laterally transferredto the Vice President Strategic Campus Admissions position but received novalue from this lateral transfer and no consideration passed between thePlaintiff and the Defendants. the Plaintiff does not plead or rely on the2011 Agreement in his Notice of Civil Claim.

16. In paragraph 9 of the Notice of Civil Claim, the Plaintiff alleges that hewas terminated without cause and without adequate compensation in lieu ofnotice.

17. In paragraphs 10 to 12 of the Notice of Civil Claim the Plaintiff allegesthat the Defendants breached express or, alternatively, implied terms of the2009 Agreement in respect of the compensation in lieu of notice that wasprovided to him following the termination of his employment. In particular, thePlaintiff cites paragraph 17(f) of the 2009 Agreement:

After the probation period, the Company may terminate youremployment, without just cause, by providing you with onemonths notice for each three month period or portion thereof

of employment up to a maximum of one year notice.18. This severance provision is significantly more generous than theseverance provision (paragraphs 16(e) and (f)) in the 2011 Agreement)applicable in circumstances where the Defendants terminated the Plaintiffwithout cause.

19. In paragraph 13 of the Notice of Civil Claim the Plaintiff describes theremuneration package he alleged he should have received at the time of histermination, including compensation; incentive compensation; benefits; andpaid annual vacation.

20. The compensation and incentive compensation that the Plaintiff wasentitled to pursuant to the 2009 Agreement is addressed at paragraph 8 of

the 2009 Agreement; his benefit entitlement is addressed at paragraph 9 ofthe 2009 Agreement; and his entitlement to annual vacation is addressed atparagraph 10 of the 2009 Agreement.

21. In paragraph 15 of the Notice of Civil Claim the Plaintiff allegesbreaches of provisions of the 2009 Agreement respecting annual raises andincentive compensation.


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22. In paragraphs 16-17 of the Notice of Civil Claim the Plaintiff allegesthat the Defendants conduct in wrongfully dismissing him by breaching the2009 Agreement and withholding wages earned by the Plaintiff entitles him toaggravated and punitive damages. Further, the Plaintiff alleges that he hassuffered mental distress as a result of the Defendants breach of the 2009Agreement and his wrongful dismissal and the manner in which the

Defendants carried out the breach of the 2009 Agreement and the wrongfuldismissal.

[8] The plaintiff says the 2009 contract governs the parties relationship and not

the August 2011 contract. For the purposes of this application that dispute is of no

relevance. The only issue is whether the Clause is binding in the circumstances.

[9] The Arbitration Clause and the Choice of Law and Jurisdiction Clause are set

out in full below:

18. Arbitration

Subject to the Companys right to seek injunctive relief in respect of theprotection of its Confidential Information, or enforcement of the non-solicitation provisions in this Agreement, all disputes arising out of or inconnection with this Agreement shall be resolved by binding arbitrationpursuant to the Commercial Arbitration Act, R.S.B.C. 1996, c. 55. Youacknowledge and agree that any action(s) commenced in contravention ofthis provision shall be stayed in favour of arbitration, whether already initiatedor not.

19. Choice of Law and Jurisdiction

You agree that this Agreement and your employment relationship shall beinterpreted and governed in accordance with the laws of the Province ofBritish Columbia, and the British Columbia courts shall have exclusivejurisdiction over any disputes arising from this Agreement.

Legal Analysis

[10] The core of the analysis in this case revolves around the Commercial

Arbitration Actreferenced in the Clause. Section 2(3) of that Actprovides:

Application of Act

2

(3) If an arbitration agreement contains a reference to theArbitration Act, R.S.B.C. 1979, c. 18, or the Commercial ArbitrationAct, R.S.B.C. 1996, c. 55, that reference is deemed to be a referenceto this Act.


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And ss. 15(1) and (2) provide:

Stay of proceedings

15 (1) If a party to an arbitration agreement commences legal

proceedings in a court against another party to the agreement in

respect of a matter agreed to be submitted to arbitration, a party to thelegal proceedings may apply, before filing a response to civil claim ora response to family claim or taking any other step in the proceedings,to that court to stay the legal proceedings.

(2) In an application under subsection (1), the court must make anorder staying the legal proceedings unless it determines that thearbitration agreement is void, inoperative or incapable of beingperformed.

[11] The law in this area is relatively recent and well understood. The parties to his

application do not dispute the law which applies. In particular both counsel cited the

same authorities and the principles which this Court should apply which I set out

here.

[12] This Court held in Cut & Run Holdings Ltd. v. Booze Bros. Holdings et al.,

2005 BCSC 167 at para.41, While arbitration clauses will generally be liberally and

broadly construed, care must still be taken to ensure that disputes which are outside

the scope of the parties agreement are not made the subject of arbitration .

[13] In determining whether to stay proceedings in favour of arbitration, our courts

have adopted the following approach, articulated by the British Columbia Court of

Appeal in St. Pierre v. Chriscan Enterprises Ltd., 2011 BCCA 97:

[24] Generally, the courts have taken a deferential approach to achallenge to an arbitrators jurisdiction, giving precedence to the agreementbetween the parties to arbitrate and allowing the arbitrator to determine atfirst instance, whether a particular dispute is arbitrabIe.

[14] In relation to the test applicable to s. 15(1) of theArbitrationAct both parties

relied on Prince George (City) v. McElhanney Engineering Services Ltd.(1995),

9 B.C.L.R. (3d) 368, [1995] 9 W.W.R. 503 (C.A.), in which the British Columbia Court

of Appeal held at para. 22 that the following three prerequisites must be met for an

applicant to establish entitlement to the granting of a stay under s. 15(1) of the

Arbitration Act:


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22

(a) the applicant must show that a party to an arbitrationagreement has commenced legal proceedings againstanother party to the agreement;

(b) the legal proceedings are in respect of a matter agreed

to be submitted to arbitration; and

(c) the application to stay has been brought in a timelymanner, i.e. before the applicant takes other steps inthe court proceeding.

[15] There is no doubt that the dispute as framed in the notice of civil claim

arise[s] out of or in connection with the agreement as provided for in the Clause.

The plaintiff relies on the parties 2009 employment contract. An essential issue

between the parties is whether it is the 2009 or the 2011 contract that governs the

terms of the plaintiffs termination. Further the issue of whether there are damages

as claimed also flows from the employment contract terms, including whether there

was bad faith on the part of the defendant and punitive damages should flow

therefrom. There is no issue that the application was brought in a timely manner.

[16] It is unnecessary to analyze further the facts in relation to these three

elements. It is obvious the parties meet this initial test for a s. 15(1) stay of

proceedings. The real issue here is in relation to s. 15(2). There is an issue related

to prerequisite (b) above which I will deal with later in these reasons when

discussing punitive damages.

[17] Invoking s. 15(2) the plaintiff raises an issue as to whether the Clause is valid

at all.

[18] The essential nature of that submission, which was not strongly pressed by

the plaintiff at the hearing, is that the Arbitration Clause and the Choice of Law and

Jurisdiction Clause are in conflict, rendering the Arbitration Clause too vague,

duplicative, in conflict, or to be interpreted against the defendants by the doctrine

contra preferendum. Thus, says the plaintiff one cannot rely on an arbitration clause

as the exclusive means of dispute resolution when the jurisdiction clause provides

that the British Columbia courts have exclusive jurisdiction.


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[19] This submission has little merit. The interpretation of the plaintiff of clear

conflict is one possible interpretation of the words but not the most probable or

reasonable. When asking the necessary question of contract interpretation, what

was the intention of the parties, it most probably is that those two clauses -- one

specific, the Arbitration Clause and one general, the Choice of Law and Jurisdiction

Clause are intended to live together. Hoban Construction Ltd. v. Alexander, 2012

BCCA 75, sets out the British Columbia Court of Appeals most recent expositi on on

this subject. Where at para. 47 of that decision the court quotes from Marquest

Industries Ltd.:

[47] the inquiry is not whether the contracts were competently drafted,but rather whether they disclose the parties intentions as to the substance oftheir agreement. In Marquest Industries Ltd. v. Willows Poultry Farms Ltd.

(1968), 1 D.L.R. (3d) 513 (B.C.C.A.), the majority outlined the role of the courtat 517-18:

In the first place, consideration must be given to the duty of aCourt and the rules it should apply, where a claim is made thata portion of a commercial agreement between two contractingparties is void for uncertainty or, to put it another way, ismeaningless. The primary rule of construction has beenexpressed by the maxim, ut res magis valeat quam pereatoras paraphrased in English, a deed shall never be void wherethe words may be applied to any extent to make it good. Themaxim has been basic to such authoritative decisions as

Scammell v. Ouston, [1941] 1 All. E.R. 14; Wells v. Blain,[1927] 1 D.L.R. 687, [1927] 1 W.W.R. 223; Ottawa Electric Co.v. St. Jacques(1902), 31 S.C.R. 636, as well as many others,which establish that every effort should be made by a Court tofind a meaning, looking at substance and not mere form, andthat difficulties in interpretation do not make a clause bad asnot being capable of interpretation, so long as a definitemeaning can properly be extracted. In other words, everyclause in a contract must, if possible, be given effect to. Also,as stated as early as 1868 in Gwyn v. Neath Canal NavigationCo.(1868), L.R. 3 Ex. 209, that if the real intentions of theparties can be collected from the language within the four

corners of the instrument, the Court must give effect to suchintentions by supplying anything necessarily to be inferred andrejecting whatever is repugnant to such real intentions soascertained.

[Emphasis added]


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[20] Here, finding a reasonable meaning is not unduly effortful. The general

Choice of Law and Jurisdiction Clause embraces the specific Arbitration Clause.

Further, parts of disputes in relation to the employment contract are specifically

exempted from arbitration and indeed it is open to a court or arbitrator to sever parts

of a dispute such that part of the dispute is arbitrated and part can be determined in

a court (seeABOP LLC v. Qtrade Canada Inc., 2007 BCCA 290). In other words,

there is no necessary conflict between these two clauses.

Punitive Damages

[21] The main submission of the plaintiff as pressed at the hearing is that the

plaintiffs claims of bad faith and the resulting claim for punitive damages places this

matter outside the jurisdiction of an arbitrator. The plaintiff relies in large part, but not

exclusively, on Joe Martin & Sons Ltd. v. Carrier Lumber Ltd., 2006 BCSC 237.

[22] In that case, based on an arbitration pursuant to the Timber Harvesting

Contract and Subcontract Regulation,s. 25 under the Forest Act, R.S.B.C. 1996,

c. 157 -- the court found that under the circumstances of the dispute the jurisdiction

to award punitive damages could not be within the exclusive jurisdiction of the

arbitrator. The 2006 decision quoted from a 2003 decision of this Court between the

same parties and pursuant to the same Regulationthat found at para. 68 of that

decision the arbitration tribunals in these two disputes are without jurisdiction to

award punitive damages (Carrier Lumber Ltd. v. Joe Martin & Sons Ltd., 2003

BCSC 1038).

[23] Justice Chamberlists analysis leading to the conclusion quoted above bears

repeating as a guide to any analysis of a claim that an arbitrator does or does not

have jurisdiction to award punitive damages:

[57] in Lee v. Gao,the procedure undertaken by the judges on reviewwas to look at the empowering legislation. Langston, J. had the benefit of theSupreme Court of Canada decision in Ont ario v. 97649 On tario Inc. decidedyears after Mr. Justice Thackray's decision. He went through a meaningfuldiscussion and analysis of whether or not the powers assumed by theProvincial Court Judge were necessarily required, utilizing the function andstructure approach recommended by the Supreme Court of Canada decision.


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[58] That, in my view, is the correct process to be followed.

[59] The respondents in these proceedings, and the arbitrators in thedecisions they made, have relied heavily on the fact that there is norestriction in the Act, and have relied heavily on the particular wording of s. 5of the Regulationand what they see to be the incorporation of the

Comm ercial Arb i t rat ion Actinto the Regulat ion.[60] In so doing, they embarked, in my respectful opinion, on the wronganalysis. The analysis ought to have been centered on the express powersgiven under the legislation. The arbitrators ought not to have gone further ifthe power was not expressly given in the enabling legislation or regulation. Ifind the arbitrators confused incidental power necessary for the conduct ofthe proceedings with substantive powers. This was the same error thatprompted them to read the inclusion of the provisions of the Commercia lArbi t ration A ctin s. 6 as being something substantive rather thanprocedural. In my view, the application of the Hayesdecision and thedecision of Thackray, J. (as he then was) in Lee v . Gaocan only lead to oneconclusion and that is that the reference to the Commercia l Arbi t rat ion Act

is only to incorporate the procedural aspects of that Act into the Regulation.Rather than set out detailed procedural rules in the Regulation, I find that theclear intention of the Legislature was to merely incorporate the proceduralrules found in the Comm ercial Arbi t rat ion Actto the Regulation. I find s. 6of the Regulationto merely address the issue of procedure and therefore isnot substantive in nature as are ss. 5 and 25 of the Regulation. Mr. JusticeThackray, in his concluding paragraphs in Lee v. Gao(set out in paras. 47and 48 hereof) commented that if parties to an arbitration wished to havepunishment there was a forum for such a procedure and that forum wouldbe the Supreme Court of British Columbia, a court of inherent jurisdiction.This is consistent with the comments of McLachlin, J. (as she then was) inWeberat para. 57 (set out in full at para. 40 hereof) where she stated:

It might occur that remedy is required which the arbitrator isnot empowered to grant. In such a case, the courts of inherentjurisdiction in each Province may take jurisdiction.

[24] I agree with the thoughtful and thorough submissions on this issue by the

defendants, particularly in relation to their extensive reliance on the reasoning in

Carrier Lumber Ltd. I quote from their written submissions at paras. 15 and 16:

15. The Defendants submit that the Courts finding in Carr ier Lum berthat the substantive powers of arbitrators appointed under the Arbitration Act

were notincorporated in the Regulationwas decisive to its determination thatsuch arbitrators did not have the power to award punitive damages.

16. The Defendants submit that the clear inference from the Courtsanalysis in paras 59-60 is that if the substantive powers of theArbitration Actwere incorporated into the Regulation, arbitrators appointed pursuant to theRegulationwould have the statutory authority to award punitive damages.The underlying arbitration award relied upon sections 23(1) of theArbitration


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Actin justifying its conclusion that the arbitrator had the power to awardpunitive damages.

[25] There are several decisions across Canadian jurisdictions in which the

powers under the Arbitration Act(previously the Commercial Arbitration Act) have

been considered to be consistent with the jurisdiction to award punitive damages,

see Westcoast Transmission Co. v. Majestic Wiley Contractors Ltd.(1982), 139

D.L.R. (3d) 97 (B.C.C.A.); Mussche v. Voortman Cookies Limited, 2012 BCSC 953

and in Ontario, Kanitz et al. v. Rogers Cable Inc.(2002), 58 O.R. (3d) 299.

[26] In my view, this is a clear case where all of the relief sought by the plaintiff

relies on an interpretation of the employment relationship and the parties two

employment contracts. The allegation of bad faith and resulting claim for punitivedamages flows from the viability of the second employment contract and thus

nothing alleged falls outside the scope of the Arbitration Clause.

[27] In the result, there will be a stay of proceedings of the claim.

[28] Costs awarded to the defendants.

Koenigsberg J.

pietrasz vs eminata group

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