Estate says arbitral clauses are void due to void nature of larger agreement
In a case where an estate resisted selling a deceased person’s shares in a family farm to his family members, the Alberta Court of King’s Bench granted the application to appoint an arbitrator to resolve the parties’ share valuation dispute.
For over a century, the family involved in Lutz v Lutz Estate, 2026 ABKB 198, owned and operated Egg Lake Farms, currently held in a family-owned corporation.
In August 2008, the corporation and the three voting shareholders – Andrew and sons John and Ken – executed an agreement to define and qualify their rights and obligations to one another, as well as the terms and conditions for their activities under the corporate structure. The agreement had two arbitration clauses.
Paragraph 4.01, which explained the manner of corporate share valuation every year, required the submission of a dispute to arbitration if the shareholders – or the surviving shareholders and a deceased shareholder’s personal representative – challenged the valuation.
More broadly, paragraph 6 required the referral of a dispute to a single arbitrator if the parties had any disagreement referring to the agreement or any matter arising under its terms.
John died in May 2016. The applicants – Ken and his son Brian, who held some shares formerly owned by Andrew – sought to purchase John’s shares under the 2008 agreement, which permitted the remaining shareholders to buy the shares of a deceased shareholder.
The applicants and John’s estate disputed the share valuation and the existence of any obligation on the estate’s part to sell the shares to the applicants.
In March 2025, the applicants sent the estate a notice to arbitrate. They then applied to appoint an arbitrator under s. 10 of Alberta’s Arbitration Act, 2000.
Via its personal representatives, the estate alleged that:
- The 2008 agreement was void – or voidable and declared void by the estate – which would render the arbitration clauses void
- The arbitration notice was untimely and subject to a bar under Alberta’s Limitations Act, 2000
Arbitration ordered
Granting the application and denying the estate’s cross-application, the Court of King’s Bench of Alberta appointed Robert Graesser, the parties’ mutual choice, as arbitrator.
One issue was the interpretation of s. 17(3) of the Arbitration Act, providing that: “If the arbitration agreement forms part of another agreement, it shall, for the purpose of a ruling on jurisdiction, be treated as an independent agreement that may survive even if the other agreement is found to be invalid.”
The estate asserted that s. 17(3) did not have the meaning suggested by a plain reading of its words. However, the court ruled that the estate’s cited cases did not support its argument.
According to the court, under the separability doctrine for arbitration, an arbitration clause was not necessarily invalid merely because the underlying agreement was invalid. The court pointed out that the estate’s arguments against the validity of the larger agreement did not challenge the validity of the arbitration clauses as separate agreements.
The court noted that the estate did not dispute that John had signed the agreement, and that there was no challenge against his capacity to enter into the agreement or his intention to be a party to arbitration agreements within the larger agreement.
Regarding the Limitations Act issue, the court held that the question of whether the delay operated as a bar to arbitration would require a factual inquiry beyond the limited or superficial consideration referred to in Dell Computer Corp v Union des consommateurs, 2007 SCC 34. Thus, the court said the arbitrator could resolve this matter.
