In Husky Food Importers v. JH Whittaker & Sons, 2022 ONSC 1679, Justice Conway granted a stay of proceedings in favour of arbitration despite an allegation that no underlying agreement was ever finalized and notwithstanding a clause stating that the courts of New Zealand had non-exclusive jurisdiction.
Whittaker is a chocolate manufacturing business incorporated in New Zealand. Husky imports and distributes in Canada consumer packaged goods, including confectionary and chocolate products. From 2014 to 2020, Husky distributed Whittaker’s products in Canada pursuant to a Distribution Agreement. The relationship was terminated in 2020, and Husky started a proceeding in the Ontario Superior Court of Justice alleging several torts and breach of contract (the “Action”).
Justice Conway summarized the relevant terms of the Distribution Agreement:
“Section 6.2: Unless otherwise agreed in this Distribution Agreement …Whittaker’s will sell and deliver its products on the terms and conditions set out in its standard purchase agreement order form, a copy of which is attached in Schedule “G”.
Section 8.4: The main body of the Alleged Distribution Agreement prevails over any schedule if there is any inconsistency between them, to the extent of such inconsistency only.
Section 8.7: New Zealand law is the governing law and the parties attorn to the non-exclusive jurisdiction of the New Zealand courts to hear and determine all disputes arising from or related to the Alleged Distribution Agreement or transactions contemplated therein.
Schedule “G” consists of a standard form order agreement and “Whittaker’s Standard Terms of Trade” (the “Terms”). The Terms include an arbitration clause for “Overseas Disputes” (the “Arbitration Clause”) that reads:
19.1 Where the Customer is located outside of New Zealand, any dispute, controversy or claim arising out of or in connection with these Terms, or any question regarding its existence, breach, termination or invalidity, will be referred to the New Zealand International Arbitration Centre for arbitration in accordance with the New Zealand Arbitration Act 1996. Such arbitration shall also be as follows:
(a) the number of arbitrators will be: one;
(b) the place of arbitration will be: Wellington, New Zealand; and
(c) the language of the arbitration will be: English.”
Whittaker relied on the Arbitration Clause and submitted that the Action must be referred to arbitration. Although its position on the motion was that the Arbitration Clause was enforceable, Justice Conway’s reasons indicate that on the merits of the dispute, Whittaker disputed that the parties ever finalized the Distribution Agreement. It is unclear as to whether that position was pleaded in the proceeding or simply indicated in correspondence or argument.
Husky argued that the Arbitration Clause was not an “arbitration agreement” on the basis that the Terms did not form part of the Distribution Agreement, which it argued had been agreed to, and that there was never a “meeting of the minds” between the parties that disputes would be arbitrated. Husky also argued that the Arbitration Clause did not apply because section 6.2 provides that the Terms would apply “unless otherwise agreed”; Husky argued that the parties had otherwise agreed in section 8.7 of the Distribution Agreement that they would attorn to the non-exclusive jurisdiction of the New Zealand courts.
Justice Conway noted that a stay should be granted where it is arguable that the dispute falls within the terms of an arbitration agreement or that a relevant party is party to an arbitration agreement. Further, she said that there is a low threshold to meet in answering the question of whether there is an arbitration agreement.
With respect to Whittaker’s position that a Distribution Agreement was never finalized, Justice Conway held that for the purposes of the stay motion, Whittaker was entitled to rely on Husky’s pleading that an agreement existed.
Justice Conway found that it was arguable that there was an arbitration agreement. Section 6.2 of the Distribution Agreement provided that the terms and conditions in the standard purchase order form in Schedule “G” would apply. The standard purchase order form itself did not contain any terms; however, the Terms were included in Schedule G, immediately behind the standard purchase order form. There was no suggestion that the Terms were surreptitiously included. Indeed, the evidence showed that Husky engaged with and made changes to the Terms but did not revise the Arbitration Clause.
With respect to the argument that the jurisdiction clause in section 8.7 would override the Arbitration Clause, Justice Conway found that the two clauses were not in conflict and were complementary for three reasons. First, New Zealand was the specified seat of the arbitration and as a result the courts of New Zealand retained supervisory jurisdiction to assist with the arbitration process. Second, the authorities have established that an arbitration clause is not necessarily in conflict with a choice of forum clause. Finally, the Arbitration Clause here was more specific and detailed than the non-exclusive jurisdiction clause. In any event, she found that the interpretation of the contract was a question of mixed fact and law that ought to be resolved by the arbitrator, given that it was arguable that the Arbitration Clause applied.
First, this is not the first case to find that a party is bound by its pleading on a stay application. A similar finding was made in the context of assessing whether an “arguable case” existed in Beck v. Vanbex Group Inc., 2021 BCSC 1619, See earlier Case Note: B.C. – Stay motion: pleadings sufficient for “arguable case” that arbitration clause applies, despite contrary evidence – #534.
Second, this case is also helpful to consider for those drafting arbitration agreements or clauses. Although in this case the arbitration clause and choice of forum clauses were complimentary, issues can sometimes arise where precedents are relied upon without consideration of the dispute resolution provisions, or how they may interact with other aspects of the agreement. Occasionally, a variety of dispute resolution procedures may exist in the same agreement, without clear language identifying what is included or excluded from each. This case is a reminder to review not just the arbitration provision itself, but the agreement as a whole, for cohesion and clarity.