Executive Summary: Key Legal and Evidentiary Issues

• Dispute over whether a 1993 participation agreement between two municipalities remains enforceable after an updated Environmental Compliance Approval (AECA)

• Central legal issue of whether the arbitration clause in the agreement mandates resolution outside of court

• Application of the mandatory stay provision under section 7(1) of Ontario’s Arbitration Act, 1991

• Consideration of whether any exceptions under section 7(2) apply, such as undue delay or suitability for summary judgment

• Interpretation of the Supreme Court of Canada’s Peace River framework for evaluating arbitration clauses

• Determination of whether the parties’ actions invalidated the arbitration agreement through conduct or new terms

Facts and background of the dispute

The Town of Mattawa has operated a landfill located in the Township of Papineau-Cameron since the early 1970s. The two municipalities entered into a formal participation agreement in 1993 that governed the use and operation of the landfill, including a binding arbitration clause for dispute resolution. In 2014, Mattawa sought to expand the landfill site, and in 2019, it obtained an amended Environmental Compliance Approval (AECA) from the Ministry of the Environment.

Following the AECA, Mattawa took the position that the 1993 agreement was rendered null and void. In 2021, Mattawa proposed a new participation agreement, which included a clause explicitly terminating the prior one. When Papineau-Cameron did not agree to the new terms, Mattawa initiated a court application seeking a declaration that the arbitration clause no longer applied. Papineau-Cameron responded with a motion to stay the court proceeding in favour of arbitration.

Legal framework and analysis

The court analyzed the dispute under section 7 of Ontario’s Arbitration Act, 1991. Section 7(1) provides that where an arbitration agreement exists, the court shall stay court proceedings in respect of a matter covered by the agreement, unless one of the limited exceptions under section 7(2) applies.

The judge followed the two-part framework laid out in the Supreme Court of Canada’s decision in Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41. The first part assesses whether the technical prerequisites for a mandatory stay are met: existence of an arbitration agreement, commencement of court proceedings, and whether the matter falls within the scope of the arbitration agreement. The final technical requirement is that the moving party has not taken a substantive step in the litigation. The court found all of these elements satisfied. Papineau-Cameron had only minimally participated in the litigation to preserve its rights and had not filed substantive materials.

In the second part of the analysis, the court considered whether any of the statutory exceptions under section 7(2) applied. Mattawa argued undue delay in bringing the motion and that the matter was appropriate for summary judgment. The court rejected both arguments. It held that the delay was mostly due to the parties’ efforts to settle, and even if some delay existed, it was not undue on a balance of probabilities. On the summary judgment issue, the court concluded that while some issues might be resolved in part, most required substantive evidence and detailed argument that made arbitration the more appropriate forum.

Outcome of the motion

The Ontario Superior Court granted Papineau-Cameron’s motion and ordered a stay of Mattawa’s application. It ruled that the dispute must proceed to arbitration as per the 1993 agreement. The court emphasized the mandatory nature of the stay provisions and the deference owed to parties’ agreements to arbitrate. Papineau-Cameron was also awarded costs for the motion, with directions for submitting written cost materials within specified deadlines.