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ADMINISTRATION OF ESTATE - Receivers - Duties and powers

Tuesday, January 12, 2021 @ 7:22 AM  

Lexis Advance® Quicklaw®
Appeal by the defendants from an order dismissing their application for a stay of the action on the ground that the claims were subject to mandatory arbitration. The respondent receiver of Petrowest commenced the present action for payment of amounts allegedly owed by the appellants to Petrowest under various agreements that included mandatory arbitration clauses. The chambers judge found that s. 15 of the Arbitration Act was engaged and that the receiver was a party to the arbitration agreements. She held that s. 183 of the Bankruptcy and Insolvency Act empowered the court to exercise its inherent jurisdiction to control its own processes, including avoiding the operation of s. 15 of the Act in this case. The appellants argued the chambers judge erred in her interpretation of the Bankruptcy and Insolvency Act. The respondents argued that the judge erred in concluding that s. 15 of the Arbitration Act was engaged. 

HELD: Appeal dismissed. Section 15 was not engaged when a receiver was appointed and disclaimed the arbitration agreements. By exercising its power to commence these proceedings, the receiver had disclaimed the arbitration agreements between Petrowest and the appellants. The action was not commenced by a party to the arbitration agreements within the meaning of s. 15(1) of the Act, and, due to the receiver’s disclaimer, the arbitration agreements became void within the meaning of s. 15(2). A receiver owed a fiduciary duty to all stakeholders, including secured and unsecured creditors as well as the debtor, and was a trustee and fiduciary of all the realization proceeds for all stakeholders. A receiver was therefore not bound by the executory contracts of the debtor and could disclaim them. The receiver could sue on the contracts yet disclaim the arbitration clauses. The receiver acted not as agent of Petrowest, who was legally paralyzed from acting, but acted in fulfilment of its own court-authorized and fiduciary duties, owed to all stakeholders. It was open to the receiver to disclaim the arbitration agreements notwithstanding that it had adopted the containing contracts for suing on them. This flowed from the receiver’s powers and position, and the separability of the arbitration agreements.

Petrowest Corp. v. Peace River Hydro Partners, [2020] B.C.J. No. 1940, British Columbia Court of Appeal, E.A. Bennett, G. Dickson and J.C. Grauer JJ.A., November 30, 2020. Digest No. TLD-January112021003