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<xTITLE>Canada - Court Refers Parties to Arbitration But Grants Adjournment Permitting Parties to Agree on Arbitrator</xTITLE>

Canada - Court Refers Parties to Arbitration But Grants Adjournment Permitting Parties to Agree on Arbitrator

by Daniel Urbas
December 2020 Daniel Urbas

This article first appeared in Urbas Arbitral, here.

In Proservin Inc. v. Investissements Toro Inc., 2020 QCCS 3561, Mr. Justice Stéphane Lacoste demonstrated the Québec courts’ ready support of arbitration and their practical approach to assisting parties to appoint their own arbitrators.  Citing the applicable legislative provisions in Code of Civil Procedure, CQLR c C-25.01 and principles issuing from key cases, Lacoste J. readily dismissed objections to the court referring the parties to arbitration. Having granted the application to nominate, Lacoste J. nonetheless granted the parties an adjournment to a specific date prior to which they were ordered to exchange on the nomination and informed that, failing agreement, he would resume the hearing and nominate an arbitrator from the competing choices.

Proservin Inc. (“Proservin”) and Investissements Toro Inc. (“Toro”) signed a fixed-price construction contract for an extension of a building belonging to Toro (“Contract”).  The Contract included a stepped dispute resolution clause providing for negotiation, mediation and, failing an agreement, arbitration.  The preamble to the clause, reproduced at para. 5 of the reasons, mentions the parties’ ‘goal’ of ensuring (i) confidentiality and (ii) limiting costs related to disputes between the parties.  The agreement identified its application to disputes involving application and interpretation of the Contract and excluded disputes involving deposit/progress payments.

The parties disputed work involving drainage and, despite negotiation and mediation, failed to resolve their dispute.  Proservin served a notice of arbitration but Toro refused to engage in the process.  Proservin applied to the court for an order nominating an arbitration. 

Toro resisted, raising five (5) grounds against proceeding in arbitration: (i) the agreement to arbitrate is not a complete undertaking to arbitrate; (ii) the agreement to arbitrate is abusive and null; (iii) the procedure set out in the agreement to arbitrate has not been followed; (iv) given that the work has been completed, the only remaining issue is the damages suffered by Toro and the compensation due to Proservin; and, (v) the arbitrate lacks jurisdiction over the entirety of the dispute between the parties and it is preferable to have the Superior Court remain seized of the ensemble of the parties’ disputes.

Lacoste J. held that it was unnecessary to address each of the five (5) grounds.  Lacoste J. identified articles 620-648 of the Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”) as the legislative provisions applicable to his decision and to key guidance given by the Supreme Court in Zodiak International v. Polish People’s Republic, 1983 CanLII 24 (SCC), [1983] 1 SCR 529 p. 543:

The Code of Civil Procedure contains no provision regarding the form of an undertaking to arbitrate. It will be sufficient if it contains the essential ingredients, namely that the parties have undertaken to execute a submission and that the arbitration award is final and binding on the parties”.

He added that article 622 C.C.P. authorized the parties to identify the type of disputes which they would agree to submit to arbitration, including the ability to restrict disputes to specific topics

Article 622 C.C.P. Unless otherwise provided by law, the issues on which the parties have an arbitration agreement cannot be brought before a court even though it would have jurisdiction to decide the subject matter of the dispute.

A court seized of a dispute on such an issue is required, on a party’s application, to refer the parties back to arbitration, unless the court finds the arbitration agreement to be null. The application for referral to arbitration must be made within 45 days after the originating application or within 90 days when the dispute involves a foreign element. Arbitration proceedings may be commenced or continued and an award made for so long as the court has not made its ruling.

The parties cannot, through their agreement, depart from the provisions of this Title that determine the jurisdiction of the court or from those relating to the application of the adversarial principle or the principle of proportionality, to the right to receive notification of a document or to the homologation or the annulment of an arbitration award”.

He reminded that courts are to give a liberal interpretation of the agreement to arbitrate, referring to Desputeaux v. Éditions Chouette (1987) inc., 2003 SCC 17 (CanLII), [2003] 1 SCR 178.  See para. 35 for example, as well as Lahaye-Abenhaïm v. Association des copropriétaires du Lowney 1, 2018 QCCS 3215 para. 18.

As article 632 C.C.P. confirms arbitrators’ jurisdiction to rule on their own jurisdiction, Lacoste J. interpreted this as recommending restraint for the courts and to allow the arbitrator to decide ‘first’ the issue of jurisdiction.  See AXC Construction Inc. v. Bioénergie AE Côte-Nord Canada Inc., 2019 QCCS 3890, appeal and cross-appeal dismissed, Envergent Technologies v. Arbec, Bois d’oeuvre Inc., 2020 QCCA 919; and, Prof. Fabien Gélinas and Giacomo Marchisio, «L’arbitrage consensuel et le droit québécois : un survol», (2018) 48 R.G.D. 445

See also a similar affirmation of the same principle in Société en commandite Aires de service Québec (9192-6402 Québec Inc.) v. Québec (Procureur général) (Ministre des Transports), 2012 QCCS 4115 paras 54-57, in which the court dealt with an agreement which excluded disputes involving resiliation of the main contract and damage claims exceeding $2,000,000.00.

Lacoste J. closed his review of the applicable rules and principles with a reference to Société québécoise des infrastructures v. WSP Canada Inc., 2016 QCCA 1756 and CIMA + v. HMI Construction Inc., 2018 QCCS 1516.  Those cases reiterated, respectively, that (i) the contract is the law between the parties and (ii) the risk of overlap is a consequence accepted by parties and the courts are not to substitute their opinion for the agreement of the parties and impose a different solution.

Lacoste J. then applied those rules and principles to the circumstances before him and, at paras 19-21, readily identified the agreement to arbitrate as a complete undertaking conferring exclusive jurisdiction to the arbitrator for the disputes covered not otherwise excluded by other sections of the Contract.  Lacoste J. held that it was up to the arbitrator to decide jurisdiction.

Lacoste J. dismissed Toro’s objection to the nomination of an arbitrator and granted Proservin’s application but, instead of naming an arbitrator, rescheduled the parties to a hearing before him at a specific date less than thirty (30) days away. He ordered the parties, in the interim, to exchange on the nomination of an arbitrator and, if disagreement persisted, he would resolve any remaining disagreement involving that nomination. He required that the parties return with sworn statements and evidence as well as a written confirmation of the mandate accepted by their respective proposed arbitrators.

urbitral notes – First, the exclusion of disputes involving deposit payments served to protect Toro’s right to pursue legislated recourse for liens registered against the property.

Second, regarding the scope of the questions which parties can submit to arbitration under article 622 C.C.P., see also Desputeaux v. Éditions Chouette (1987) inc., 2003 SCC 17 (CanLII), [2003] 1 SCR 178 para. 22:

[22] The parties to an arbitration agreement have virtually unfettered autonomy in identifying the disputes that may be the subject of the arbitration proceeding.  As we shall later see, that agreement comprises the arbitrator’s terms of reference and delineates the task he or she is to perform, subject to the applicable statutory provisions.  The primary source of an arbitrator’s competence is the content of the arbitration agreement (art. 2643 C.C.Q.).  If the arbitrator steps outside that agreement, a court may refuse to homologate, or may annul, the arbitration award (arts. 946.4, para. 4 and 947.2 C.C.P.).  In this case, the arbitrator’s terms of reference were not defined by a single document.  His task was delineated, and its content determined, by a judgment of the Superior Court, and by a lengthy exchange of correspondence and pleadings between the parties and Mr. Rémillard”.

 

Biography


Daniel Urbas is an experienced litigator, arbitrator and mediator with over 25 years of dispute resolution experience. He has earned a variety of repeat, annual peer recognitions including “Leading Lawyer” in “Commercial Arbitration” in the 2019 edition of the Lexpert ® / American Lawyer Guide to the Leading 500 Lawyers in Canada, “Most Frequently Recommended” in the 2019 edition of The Canadian Legal Lexpert® Directory for Commercial Arbitration, “Thought Leader” in 2019 edition of Who’s Who Legal – Litigation and AV® Preeminent™ by Martindale-Hubbell®.

Daniel focuses exclusively on serving as an arbitrator and mediator.  As arbitrator, Daniel serves as a sole arbitrator, as chair or as party-nominated member of three (3) member arbitration tribunals. His appointments have been made by individual parties, by the parties jointly on consent, by court orders and by various administering institutions including ICC, CCAC and IATA.

A Fellow of the Chartered Institute of Arbitrators (“CIArb”) based in London, UK, as well as a founding Director of the CIArb’s Canada Branch, Daniel is listed on various rosters including general commercial rosters organized by the ICDR, CIETAC and BCICAC and on more specialized, industry/activity specific rosters such as the Canada Transport Agency’s roster.

Daniel’s dispute resolution experience spans a variety of commercial and civil matters, intellectual property (including anti-piracy and anti-counterfeiting litigation) and information technologies, energy (wind, bio), natural resources (mining, forestry, fishing), shareholder disputes, real estate and lease disputes, product liability, construction, distribution and franchise, Aboriginal law matters including treaty and land claims litigation and dispute resolution of agreements relating to governance and natural resource development on native peoples’ territories.

He handled trial and appellate advocacy, as well as urgent and extraordinary applications. He has appeared before the provincial and federal courts, including the Supreme Court of Canada, as well as before arbitration tribunals and various administrative tribunals. Fluently bilingual in both English and French with degrees in both Common Law and Civil Law, Daniel is an active member of the Barreau du Québec, the Law Society of Ontario and the Law Society of British Columbia.  At his former national law firm, up until June 2017, Daniel served as Regional Leader of the International Trade Litigation and Arbitration group and Regional Leader of the Intellectual Property Litigation group. Formerly, Daniel was also Regional Leader of the Commercial Litigation group and National Leader of the Intellectual Property Litigation group.



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