Indexed As: Hopkins v. Ventura Custom Homes Ltd. Manitoba Court of Appeal Hamilton, Chartier, C.J.M., and Beard, JJ.A. July 5, 2013.

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1 William Eric Hopkins and Christa Leigh Hopkins (plaintiffs/respondents) v. Ventura Custom Homes Ltd. (defendant/appellant) (AI ; 2013 MBCA 67) Indexed As: Hopkins v. Ventura Custom Homes Ltd. Manitoba Court of Appeal Hamilton, Chartier, C.J.M., and Beard, JJ.A. July 5, Summary: The plaintiffs brought an action, alleging that, in violation of an implied term of an agreement between the parties, the materials used by and the workmanship of the defendant in the construction of the plaintiffs' new home, were not such that the finished product was fit for the purpose intended. The defendant applied for a stay of proceedings on the ground that, under the agreement, the dispute should be referred to arbitration. The Manitoba Court of Queen's Bench, in a decision reported at 272 Man.R.(2d) 122, dismissed the application. The defendant appealed. The Manitoba Court of Appeal allowed the appeal and stayed the court proceedings under s. 7(1) of the Arbitration Act. Arbitration - Topic 161 Agreement to arbitrate - General - The Manitoba Court of Appeal reviewed the principles of interpretation of an arbitration clause and stated that "[t]he court's role in the interpretation of private arbitration clauses (or any contract, for that matter) is to give effect to the intentions of the parties as reflected in the words they have used.... adopting a broad and liberal approach to the interpretation of arbitration agreements has resulted in the principle that, if an arbitration clause is capable of two meanings, one of which provides for arbitration of the disagreement, the court will generally adopt that interpretation.... In summary, while the court's role in the interpretation of private arbitration clauses is to give effect to the intentions of the parties as reflected in their words, policy considerations in encouraging arbitration, and a generally broad and liberal attitude by the courts in favour of arbitration, where that option has been chosen, will impact the interpretation in any given case." - See paragraphs 58 to 64. Arbitration - Topic 2504 Stay of proceedings - Arbitration clause - Enforcement of - The plaintiffs brought an action, alleging that, in violation of an implied term of an agreement between the parties, the materials used by and the workmanship of the defendant in the construction of the plaintiffs' new home, were not such that the finished product was fit for the purpose intended - The defendant applied for a stay of proceedings on the ground that, under the agreement, the dispute should be referred to arbitration - The motion judge dismissed the application, finding that the arbitration clause did not have application by interpreting clauses 10.1 and 10.2 to apply only to disputes that arose during the course of

2 construction, but not to disputes arising thereafter - The defendant appealed - The Manitoba Court of Appeal allowed the appeal and stayed the court proceedings under s. 7(1) of the Arbitration Act - While the motion judge applied the general principles of contractual interpretation, he did not consider or apply any of the principles related specifically to the interpretation of contractual arbitration clauses - The broader, more liberal, interpretation, and that which was equally, if not more, in keeping with the wording of clauses 10.1 and 10.2, would be to read the two clauses as separate provisions, rather than using the wording of clause 10.1 to limit the interpretation of clause As a result, he did not apply the correct legal principles - The failure to apply the correct legal principles was a question of law and was reviewable on a standard of correctness - The motion judge erred in law in his interpretation of the arbitration clauses of the Agreement by failing to consider the correct principles of contractual interpretation as they relate to the interpretation of the arbitration provisions of the Agreement - See paragraphs 68 to 84. Stay of proceedings - When available - The plaintiffs brought an action, alleging that, in violation of an implied term of an agreement between the parties, the materials used by and the workmanship of the defendant in the construction of the plaintiffs' new home, were not such that the finished product was fit for the purpose intended - The defendant applied for a stay of proceedings on the ground that, under the agreement, the dispute should be referred to arbitration - The motion judge dismissed the application, applying s. 6(c) of the Arbitration Act to find the court intervention was necessary to prevent unfair and unequal treatment of one party to the agreement - The defendant appealed - The Manitoba Court of Appeal allowed the appeal and stayed the court proceedings under s. 7(1) of the Act - The motion judge's invocation of s. 6 was premised on his finding that it would be unfair and absurd to have the area representative of the National Home Warranty Program appointed as the arbitrator of disputes arising after the plaintiffs took possession of the house, due to the potential for bias on the part of the area representative - The motion judge did not take into account the correct principles of contractual interpretation, the purpose of the Act, or the intention of the legislature in enacting the legislation - Thus, he failed to consider and apply the correct legal principles regarding the interpretation and application of the Act - As a result of this misdirection, no deference was owed to his decision to invoke s. 6(c) - The Act had provisions governing the appointment of arbitrators and its challenges - In this case, the dispute between the parties did not lead to the conclusion that proceeding with the arbitration would be fruitless or necessarily lead to an ineffective arbitration process - The motion judge erred in invoking s. 6 to refuse to grant a stay of the court proceedings - See paragraphs 85 to 89. Stay of proceedings - When available - The plaintiffs brought an action, alleging that, in violation of an implied term of an agreement between the parties, the materials used by and the workmanship of the defendant in the construction of the plaintiffs' new home, were not such that the finished product was fit for the purpose intended - The defendant applied for a stay of proceedings on the ground that, under the agreement, the dispute

3 should be referred to arbitration - The motion judge dismissed the application, finding that because the agreement had no application, the court could refuse the stay under s. 7(2)(b) of the Arbitration Act - The defendant appealed - The Manitoba Court of Appeal allowed the appeal and stayed the court proceedings under s. 7(1) of the Act - Despite the motion judge's ruling, he did not find "that at least one of the criteria listed in s. 7(2) is met", that is, he did not find that "the arbitration agreement [or clauses, in this case] is invalid", as was required by s. 7(2)(b) - In fact, he found that the agreement, including the arbitration clauses, was valid - He then proceeded to interpret the arbitration clauses to find that they did not apply - Given that the motion judge did not find that either the agreement, or the arbitration clauses, was invalid, he clearly misdirected himself as to the interpretation of s. 7(2)(b) of the Act and, thereby, committed an error of law - As a result, no deference was owed to his decision - There was no basis under s. 7(2) of the Act to refuse the stay of the court proceedings under s. 7(1) - See paragraphs 90 to 97. Stay of proceedings - When available - [See Arbitration - Topic 2504]. Arbitration - Topic 8704 Judicial review - Practice - Appeals - Jurisdiction - The plaintiffs brought an action, alleging that, in violation of an implied term of an agreement between the parties, the materials used by and the workmanship of the defendant in the construction of the plaintiffs' new home, were not such that the finished product was fit for the purpose intended - The defendant applied for a stay of proceedings on the ground that, under the agreement, the dispute should be referred to arbitration - The motion judge dismissed the application - The defendant appealed - At issue was, inter alia, whether the court had jurisdiction to entertain the appeal - The motion judge's decision was made under s. 7 of the Arbitration Act - Under s. 7(6), there was no appeal from a court's decision under s. 7 - The Manitoba Court of Appeal held that it had jurisdiction to hear the appeal - Some decisions under s. 7 were subject to appeal, and it was important to determine the exact nature of both the question under appeal and the underlying dispute in order to determine the applicability of s. 7(6) and whether there was jurisdiction to entertain an appeal - Here, the motion judge concluded that the arbitration clauses were valid, but that their application was limited to disputes arising during the construction period and did not extend to disputes arising after that time - He found that the dispute arose after the construction was complete and the plaintiffs had taken possession; therefore, it was not subject to the arbitration clause - Having found that the dispute was not subject to arbitration, the result was that his decision fell outside the scope of s. 7 and an appeal from that decision was not barred by s. 7(6) - See paragraphs 43 to 49. Cases Noticed: Burlington Northern Railroad Co. v. Canadian National Railway Co. (1995), 59 B.C.A.C. 97; 98 W.A.C. 97 (C.A.), revd. [1997] 1 S.C.R. 5; 207 N.R. 243; 85 B.C.A.C. 161; 138 W.A.C. 161, refd to. [para. 15]. Ontario v. Ontario First Nations Limited Partnership (2004), 191 O.A.C. 269; 73 O.R. (3d) 439 (C.A.), refd to. [para. 16]. Bloomer Hotel Corp. et al. v. Boehm Hotel Corp. et al. (2009), 240 Man.R.(2d) 69; 456

4 W.A.C. 69; 2009 MBCA 68, refd to. [para. 16]. Ontario v. Imperial Tobacco Canada Ltd. et al. (2011), 281 O.A.C. 329; 2011 ONCA 525, refd to. [para. 16]. Heyman v. Darwins Ltd., [1942] A.C. 356 (H.L.), refd to. [para. 20]. Injector Wrap Corp. v. Agrico Canada Ltd. (1990), 67 Man.R.(2d) 158 (C.A.), refd to. [para. 20]. Hnatiuk et al. v. Court et al. (2010), 251 Man.R.(2d) 178; 478 W.A.C. 178; 2010 MBCA 20, refd to. [para. 20]. Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; 32 N.R. 488, refd to. [para. 22]. Moore (Geoffrey L.) Realty Inc. v. Manitoba Motor League (2003), 173 Man.R.(2d) 300; 293 W.A.C. 300; 2003 MBCA 71, refd to. [para. 22]. Manulife Bank of Canada v. Conlin et al., [1996] 3 S.C.R. 415; 203 N.R. 81; 94 O.A.C. 161, refd to. [para. 31]. Mantini v. Smith Lyons LLP et al. (2003), 174 O.A.C. 138; 64 O.R.(3d) 505 (C.A.), refd to. [para. 44]. SNC-SNAM, G.P. v. Opron Maritimes Construction Ltd. et al. (2011), 386 N.B.R.(2d) 1; 999 A.P.R. 1; 336 D.L.R.(4th) 129; 2011 NBCA 60, refd to. [para. 44]. Griffin v. Dell Canada Inc. (2010), 259 O.A.C. 108; 98 O.R.(3d) 481; 2010 ONCA 29, refd to. [para. 44]. Clark (A.G.) Holdings Ltd. et al. v. HOOPP Realty Inc. (2013), 544 A.R. 114; 567 W.A.C. 114 ; 2013 ABCA 101, refd to. [para. 45]. Huras v. Primerica Financial Services Ltd. (2000), 137 O.A.C. 79 (C.A.), refd to. [para. 53]. Nazarinia Holdings Inc. et al. v Ontario Inc. et al., [2010] O.T.C. Uned. 1766; 2010 ONSC 1766, affd. [2010] O.A.C. Uned. 590; 2010 ONCA 739, refd to. [para. 53]. MDG Kingston Inc. et al. v. MDG Computers Canada Inc. et al. (2008), 241 O.A.C. 84; 92 O.R.(3d) ONCA 656, leave to appeal refused [2010] S.C.C.A. No. 94, refd to. [para. 53]. Bell Mobility Inc. v. MTS Allstream Inc. (2009), 236 Man.R.(2d) 167; 448 W.A.C. 167; 2009 MBCA 28, refd to. [para. 58]. Huras v. Primerica Financial Services Ltd. (2001), 148 O.A.C. 396; 55 O.R.(3d) 449 (C.A.), refd to. [para. 58]. Canadian National Railway Co. v. Lovat Tunnel Equipment Inc. (1999), 122 O.A.C. 171 (C.A.), refd to. [para. 62]. Bolands Ltd. et al. v. Smith (Ivan) Holdings Ltd. (2002), 210 N.S.R.(2d) 215; 659 A.P.R. 215; 2002 NSCA 146, refd to. [para. 62]. Wright v. Nova Scotia Public Service Long Term Disability Plan Trust Fund (2006), 246 N.S.R.(2d) 308; 780 A.P.R. 308; 2006 NSCA 101, refd to. [para. 62]. Seidel v. Telus Communications Inc., [2011] 1 S.C.R. 531; 412 N.R. 195; 301 B.C.A.C. 1; 510 W.A.C. 1; 2011 SCC 15, refd to. [para. 63]. Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 65]. Prairie Petroleum Products Ltd. v. Husky Oil Ltd. et al. (2008), 231 Man.R.(2d) 1; 437 W.A.C. 1; 2008 MBCA 87, refd to. [para. 65].

5 King v. Operating Engineers Training Institute of Manitoba Inc. (2011), 270 Man.R.(2d) 63; 524 W.A.C. 63; 2011 MBCA 80, refd to. [para. 65]. Telecommunication Employees Association of Manitoba Inc. et al. v. Manitoba Telecom Services Inc. et al. (2012), 275 Man.R.(2d) 185; 538 W.A.C. 185; 2012 MBCA 13, refd to. [para. 65]. Pense v. Northern Life Assurance Co. (1907), 15 O.L.R. 131 (C.A.), refd to. [para. 68]. Dell Computer Corp. v. Union des consommateurs et al., [2007] 2 S.C.R. 801; 366 N.R. 1; 2007 SCC 34, refd to. [para. 99]. St. Pierre v. Chriscan Enterprises Ltd. et al. (2011), 302 B.C.A.C. 62; 511 W.A.C. 62; 2011 BCCA 97, refd to. [para. 99]. Manitoba v. Russell Inns Ltd. et al. (2013), 291 Man.R.(2d) 244; 570 W.A.C. 244; 2013 MBCA 46, refd to. [para. 99]. Statutes Noticed: Arbitration Act, C.C.S.M., c. A-120, sect. 6, sect. 7(1), sect. 7(2), sect. 7(6) [para. 17]. Authors and Works Noticed: Hall, Geoff R., Canadian Contractual Interpretation Law (2nd Ed. 2012), pp. 227, 228 [para. 59]. Hansard (Manitoba) - see Manitoba, Hansard, Legislative Assembly Debates and Proceedings. Manitoba Law Reform Commission, Arbitration (1994), Report No. 85, generally [para. 11]. Manitoba, Hansard, Legislative Assembly Debates and Proceedings (April 18, 1997), 36th Legislature, 3rd Sess, vol. XLVII, No. 29, pp. 1,647 [paras. 12, 14]; 1,648 [para. 14]. Counsel: A.E. Verhaeghe, for the appellant; G.G. Zazelenchuk, for the respondents. This appeal was heard on June 13, 2012, by Hamilton, Chartier, C.J.M., and Beard, JJ.A., of the Manitoba Court of Appeal. The following judgment of the Court of Appeal was delivered by Beard, J.A., on July 5, Editor: Anick Ouellette-Levesque Appeal allowed. Stay of proceedings - When available - The plaintiffs brought an action, alleging that, in violation of an implied term of an agreement between the parties, the materials used by

6 and the workmanship of the defendant in the construction of the plaintiffs' new home, were not such that the finished product was fit for the purpose intended - The defendant applied for a stay of proceedings on the ground that, under the agreement, the dispute should be referred to arbitration - The motion judge dismissed the application, finding that the arbitration clause did not have application by interpreting clauses 10.1 and 10.2 to apply only to disputes that arose during the course of construction, but not to disputes arising thereafter - The defendant appealed - The Manitoba Court of Appeal allowed the appeal and stayed the court proceedings under s. 7(1) of the Arbitration Act - While the motion judge applied the general principles of contractual interpretation, he did not consider or apply any of the principles related specifically to the interpretation of contractual arbitration clauses - The broader, more liberal, interpretation, and that which was equally, if not more, in keeping with the wording of clauses 10.1 and 10.2, would be to read the two clauses as separate provisions, rather than using the wording of clause 10.1 to limit the interpretation of clause As a result, he did not apply the correct legal principles - The failure to apply the correct legal principles was a question of law and was reviewable on a standard of correctness - The motion judge erred in law in his interpretation of the arbitration clauses of the Agreement by failing to consider the correct principles of contractual interpretation as they relate to the interpretation of the arbitration provisions of the Agreement - See paragraphs 68 to 84.