In QSL Canada Inc. v. Canpotex Terminals Limited, 2025 FC 1012, the Court dismissed the Defendant’s motion to stay the action in favour of arbitration and granted the Plaintiff’s motion for summary judgment. In so doing, the motion judge analyzed contractual and legal issues that were plainly subject to the parties’ arbitration agreement. This is permitted by the statutory exceptions to stay motions found in the arbitration legislation across the country demonstrating that the policy behind courts respecting parties’ agreement to arbitrate is not absolute. One of the limited exceptions applies to cases where it is found that summary judgment is appropriate. Interestingly, the Defendant also brought the stay motion under the Federal Court general stay provision.
Background – The Plaintiff, QSL Canada Inc., is a maritime terminal operator. The Defendant, Canpotex Terminals Limited, specializes in the production and supply of Canadian potash products. Further to a Terminal Handling Agreement between the parties, QSL invoiced Canpotex for certain labour costs and expenses related to supplies and materials. Pursuant to Article 16 of the Agreement, any disagreement was subject to arbitration and the provisions of the New Brunswick Arbitration Act applied to any arbitration proceedings.
Canpotex did not pay QSL’s invoices. Instead, it issued a notice of arbitration alleging that it suffered losses arising from QSL’s negligent performance of its services and/or breach of its service obligations.
Shortly after that, QSL commenced a court action for the payment of the invoices. Thereafter, Canpotex issued a further notice demanding that QSL’s claim be arbitrated. In its defence in the court action, Canpotex pleaded that the Agreement contained an arbitration clause and that it had exercised its right to arbitration by giving a notice of arbitration to QSL. Canpotex also counterclaimed against QSL in the action for damages for breach of contract for disclosing commercially sensitive documents and information, and for breach of the arbitration clause. It also pleaded set-off.
QSL brought a motion for summary judgment for its damages. In response, Canpotex brought a motion asking the Court to dismiss QSL’s motion for summary judgment and to grant a stay of the proceeding in favour of arbitration pursuant to the general stay provision s. 50(1) of the Federal Courts Act, R.S.C. 1985, c. F-7, which provides that the Federal Court may, in its discretion, stay proceedings in any cause or matter (a) on the ground that the claim is being proceeded with in another court or jurisdiction; or (b) where for any other reason it is in the interest of justice that the proceedings be stayed. Canpotex also relied on s. 7 of the Arbitration Act, RSNB 2014, c 100 to support its stay motion.
Motion Judge’s Decision –The court granted QSL’s summary judgment motion and dismissed Canpotex’s stay motion.
The motion judge framed the issues before her as follows: (a) is there a genuine issue for trial with respect to QSL’s claim? (b) If there is no genuine issue for trial, should the Court decline to grant the summary judgment and stay the proceeding in favour of arbitration?
With respect to issue (a), the motion judge found there was no genuine issue for trial with respect to QSL’s claim for unpaid invoices. Canpotex did not dispute that QSL incurred the costs and expenses claimed or the quantum, but took the position that the claim should be referred to arbitration, since it had commenced an arbitration for damages allegedly caused by QSL’s negligent performance and breach of the Agreement. Canpotex argued that its set-off defence in the action was a live issue in the arbitration. (Its counterclaim was not raised in this section of the decision.)
The motion judge reviewed the legal principles regarding the availability of the defence of set-off and found that, “Canpotex provide[d] no evidence to the Court to establish its set-off claim” or to meet the required legal test (para. 40). As a result, the motion judge found that there was no genuine issue requiring trial with respect to QSL’s contractual claim to entitlement to payment of the invoices.
With respect to issue (b), whether the proceeding should be stayed in favour of arbitration, the motion judge set out the two-step framework established by the Supreme Court of Canada in Peace River Hydro Partners v Petrowest Corp., 2022 SCC 41, which provides that the first step in the application of the stay provisions in provincial arbitration legislation across the country is that the applicant must establish the technical prerequisites for a mandatory stay of court proceedings. If that burden is discharged, then under the second step, the party seeking to avoid arbitration must show that one of the statutory exceptions applies such that a stay should be refused.
In answering that question, the motion judge first asked whether the statutory exception under subsection 7(2)(e) of the Arbitration Act, RSNB 2014, c 100 applied and if so, whether she should refuse to stay the proceeding on that basis. Subsection 7(2)(e) provides that the court may refuse to stay the proceeding where “the matter is a proper one for default or summary judgment.”
The motion judge concluded that QSL had established on a balance of probabilities that the statutory exception applied. She rejected Canpotex’s argument that, pursuant to the competence-competence principle, the issues in QSL’s motion were, on their face, covered by the arbitration clause and should be dealt with by an arbitrator. She held (I think correctly) that once one of the exceptions in Section 7(2) arises, there is no need to go to the arbitrator to make any findings.
The motion judge concluded that, applying the two-step approach set out in Peace River, because QSL showed on a balance of probabilities that one of the statutory exceptions under the Arbitration Act applied to its claim, it was no longer mandatory for the Court to stay the proceeding regarding QSL’s claim in favour of arbitration.
The motion judge then decided whether, under subsection 50.1 of the Federal Courts Act, she should still exercise her discretion to stay the action on the ground that the that the claim was proceeding elsewhere, or it was in the interest of justice to do so. She found there was nothing left to arbitrate with respect to the question of the payment of QSL’s invoices. She noted this did not impact Canpotex’s counterclaim against QSL for damages, which remained subject to the ongoing arbitration between the parties.
The motion judge applied first the New Brunswick Arbitration Act and then the Federal Courts Act, but said nothing about why the Defendant was permitted to seek relief under both acts.
Contributor’s Notes:
This is a case in which my opinion when I first started reading changed by the time I finished. The result that seemed instinctively right to me as an arbitration practitioner (that the Court should not weigh into issues that are, or potentially are, subject to arbitration) is not consistent with the language of the applicable legislation. It is ultimately the language of the legislation that governs. My criticism of this outcome therefore rests with the statutory exception in the legislation that allows the court to decline a stay when the dispute is an appropriate one for summary judgment; the motion judge properly applied the law to reach the right outcome based on the current legislative scheme. Let me elaborate.
The parties referred all matters under their agreement to arbitration. The substance of the issue raised in the court case (whether Canpotex was required to pay QSL’s invoices and whether a set-off right was available) seems to fall squarely within the four corners of that arbitration agreement. The motion judge’s analysis begins with assessing the merits of that issue to decide whether there is a genuine issue for trial: she finds Campotex was required to pay the invoices and that no set-off defence is available legally or equitably. She also notes that Canpotex had filed no evidence in support of its set-off claim—I presume that is because Canpotex was protecting its position that this was all arbitrable and could have been found to have waived its rights if it participated in the court proceeding. What a dilemma! As I read this portion of the decision, this is where I had my instinctive reaction as an arbitration practitioner, specifically that the court cannot be correct in wading squarely into the merits of a contractual dispute that is subject to the arbitration agreement.
But, as the motion judge ultimately found when she applied the two-step framework from Petrowest, the question is whether the statutory exception applies and if it does, the matter does not need to be referred to arbitration, pursuant to competence-competence or otherwise. As put by the Ontario Court of Appeal in MDG Kingston Inc. v. MDG Computers Canada Inc., 2008 ONCA 656at para. 36, s. 7(2) of the Arbitration Act provides five limited circumstances where the court has the discretion to stay an action in favour of arbitration and they are all cases where it would be either unfair or impractical to do so. One of those circumstances is where the case is properly one for summary judgment and further adjudication is unnecessary. Thus, if the court finds—as the motion judge did here—that there are no genuine issues requiring trial, then there is no need to stay the court proceeding, as arbitration would be an impractical alternative, and the court may grant summary judgment.
The legislature has therefore permitted the Court to step in and adjudicate issues that seem on their face to be arbitrable in the context where it decides summary judgment is appropriate. It is the legislature that has granted this exception as overriding the otherwise governing principle that parties’ agreements to arbitrate should be respected.
The premise for this exception seems to be that if there is no genuine issue for trial, then it is appropriate for the court to decide it because arbitration would be an impractical alternative (see, e.g., Jencel 407 Yonge Street Inc. v. Bright Immigration Inc. and Ramroop, 2021 ONSC 6030, para. 34). But is that necessarily true? A stay motion is typically brought early in a proceeding. What if a summary judgment motion has not yet been commenced? For example, in the Jencel case, the stay motion was dismissed because the case was a proper one for summary judgment, but no summary judgment had been brought in parallel. The parties therefore still had to bring, brief and argue that motion. It is no more practical to bring that motion to the courts than to arbitration. The latter option would respect party autonomy and indeed would likely be more efficient than our back-logged courts. (See further Lisa Munro’s views on the Jencel case in an Arbitration Matters case summary, Ontario – Stay motion denied: case was a proper one for summary judgment, but summary judgment not sought – #538).
Nevertheless, my concerns are directed towards the policy reasons behind having the statutory exception for summary judgment cases, and not to the motion judge’s analysis in the present case. The motion judge properly followed the framework set out by the legislation and applicable case law.