On January 19, 2025, the Court of Appeal of Alberta released its decision, Sivitilli v PesoRama Inc., 2025 ABCA 56, in which the Court upheld an arbitration clause in an employment agreement despite ongoing litigation between the same parties.
In this decision, the Plaintiff, Edward Sivitilli (“Sivitilli”), was the CEO of PesoRama Inc. (“PesoRama”) until August 2021, when he was dismissed from his employment. Sivitilli’s employment contract with PesoRama included an arbitration clause for dealing with disputes arising from the employment relationship. After his dismissal, Sivitilli retained legal counsel and advised PesoRama that he intended to pursue arbitration, which was consistent with the employment agreement.
On November 2, 2021, Sivitilli filed a Statement of Claim in the form of an oppression action under the Alberta Business Corporations Act (RSA 2000, c B-9) (the “Oppression Claim”), which PesoRama filed a Statement of Defence and Counterclaim to on December 13, 2021. Notwithstanding this, on January 5, 2022, Sivitilli filed a Notice of Arbitration on January 5, 2022, and then applied to discontinue the Oppression Claim. In response, and on January 20, 2022, PesoRama filed an Application to stay the arbitration and continue the litigation of the Oppression Claim and the Counterclaim (the “Stay Application”).
With respect to Stay Application, PesoRama argued that:
Ultimately, the chambers justice dismissed the Stay Application, holding that the arbitration could proceed and that Sivitilli was entitled to discontinue the Oppression Claim. In doing so, the chambers justice stated that the question as to whether the employment agreement between Sivitilli and PesoRama was operative was a question of mixed fact and law that would have to be decided by the arbitrator and not the chambers justice.
PesoRama decided to appeal the decision of the chambers justice in whole but was refused leave to appeal the decision with respect to the declaration as to whether the employment agreement was invalid. However, PesoRama was granted leave to appeal the decision with respect to whether the arbitration process was duplicative and unnecessary given the Oppression Claim and the Counterclaim. Accordingly, the only issue before the Court of Appeal of Alberta was whether the arbitration process was duplicative and unnecessary.
At the Court of Appeal of Alberta, PesoRama argued that it was unfair to allow arbitration to proceed given the outstanding Oppression Claim and Counterclaim, as PesoRama would be defending the same claim in two forums, that the chambers justice did not properly consider Section 6(c) of the Arbitration Act, RSA 2000, c A-43 (the “Arbitration Act”), and that Sivitilli had repudiated his right to arbitration by starting the Oppression Claim.
To address the first argument raised by PesoRama that it was unfair to allow the arbitration to proceed given the Oppression Claim, the Court reviewed the Supreme Court of Canada’s decision in Telus Communications Inc v Wellman, 2019 SCC 19 (“Telus”). In Telus, the Court considered Ontario’s Arbitration Act 1991, SO 1991, c 17, which is virtually identical to the Arbitration Act, and the SCC described a shift towards a modern approach to arbitration, signalling that courts should generally take a “hands off” approach to matters governed by the Ontario arbitration legislation and respect the process as autonomous, self-contained, and self-sufficient.
In considering this, the Court adopted the SCC’s approach and identified that there were insufficient circumstances as listed under Section 7(2) of the Arbitration Act to justify a stay of proceedings of the arbitration. The Court also held that a duplication or multiplicity of proceedings was insufficient grounds alone to stay proceedings under Section 6(c) of the Arbitration Act. The Court found that, even if the Arbitration Act did allow a stay of proceedings if duplicative, the chambers judge already found that the proceedings were not duplicative, so they did not need to determine the state of the jurisprudence around the Arbitration Act.
To address the argument that Sivitilli repudiated his right to arbitration by virtue of commencing the Oppression Claim, the Court found that, because the chambers justice had already held that there was no duplication of proceedings, that it was not possible to find that Sivitilli had waived or abandoned his right to arbitrate by initiating the Oppression Claim.
Finally, while the chambers justice did not specifically refer to the Arbitration Act, the Court found that the chambers justice was owed deference in making the finding that the oppression claim and the employment dispute are not duplicative as they involve a dispute between PesoRama and Sivitilli in two different roles: that of the CEO and that of a shareholder.
Author:
Megan B. Harris, Partner