Ontario – court enforces competence-competence principle in complex employment dispute – #047

Despite disputes over the existence and the applicability of an arbitration agreement contained in their initial agreement following amendments, the parties involved in Kocur v. FirstService Corporation, 2017 ONSC 6114 were referred to arbitration by application of the competence-competence dispute because Plaintiff failed to establish a clear case that the arbitration agreement was invalid. 

Plaintiff instituted court litigation against FirstService Corporation (“FirstService”) for wrongful dismissal, alleging termination without cause, and claiming compensatory, punitive and moral damages.  FirstService responded by a motion to stay of the action, relying on an arbitration agreement contained in the parties’ initial written employment agreement.

Plaintiff resisted a stay of the court proceedings, arguing:

the employment agreement including the arbitration clause was void for a lack of consideration;

many of Plaintiff’s claims were expressly excluded from the scope of the arbitration agreement or by one of the three amendments to the employment agreement; and,

staying only a portion of the action would allow for a multiplicity of proceedings, increasing costs and the risk of contradictory decisions.

Madam Justice Andra Pollak observed that the parties agreed to the five-step analytical framework recognized in Haas v. Gunasekaram, 2016 ONCA 744 at para. 17.

(1)      Is there an arbitration agreement?

(2)      What is the subject matter of the dispute?

(3)      What is the scope of the arbitration agreement?

(4)      Does the dispute arguably fall within the scope of the arbitration agreement?

(5)      Are there grounds on which the court should refuse to stay the action?

Before applying that framework, Pollak J. reiterated the guidance contained in paras 22-22 from the Ontario Court of Appeal decision in Dalimpex Ltd. v. Janicki, 2003 CanLII 34234.  Those paragraphs cautioned against reaching a final determination as to the scope of an arbitration agreement on an application for a stay.  The excerpt closed, urging restraint, holding that a court should only make such a determination when it is “clear”.

In addition to this caution, Pollak J. noted that the Supreme Court of Canada in Dell Computer Corp. v. Union des consommateurs, [2007] 2 SCR 801, 2007 SCC 34 provided the ‘general rule’ that courts must defer such questions to the arbitration panel to be decided by it first, notably when the challenge requires the production and review of factual evidence.

The reasons for judgment sketch out credible and substantial disagreements over both the factual give and take of amendments to the parties’ agreements and their effects on the parties’ rights and obligations.   That said, FirstService’s resistance channeled itself into a single argument identified by Pollak J., namely the high onus presented by the competence-competence principle.  FirstService referred to Nazarinia Holdings Inc. v. 2049080 Ontario Inc., 2010 ONSC 1766 wherein the Ontario Court of Appeal discouraged courts from relying on mere allegations of invalidity as sufficient to resist a stay.  Pollak J. noted that guidance and summed up the parties’ situation as follows:

[20]  FirstService submits that on this preliminary motion for a stay of proceedings, conclusive findings of fact on the validity of the arbitration clause would be inappropriate. Rather, FirstService argues that Mr. Kocur has not established a clear case of invalidity on only a superficial consideration of the record, and that his is therefore not one of the clear cases where this court should exercise its discretion to refuse a stay of proceedings. I agree.

 [21]   Although Mr. Kocur has advanced many persuasive arguments on the possible interpretations of the employment agreement, I also find that all of these arguments are dependent on the court’s interpretation of the employment agreement. I therefore find that “it is arguable” that Mr. Kocur’s claims fall within the scope of the arbitration clause.

For the above reasons, Pollak J. stayed the proceedings.

In Québec, the same dispute would have resulted in a quite different result due to the application of article 3149 of the Civil Code of Québec, CQLR c CCQ-1991  which effectively prevents parties from agreeing to or imposing arbitration in employment contracts.

3149. Québec authorities also have jurisdiction to hear an action based on a consumer contract or a contract of employment if the consumer or worker has his domicile or residence in Québec; the waiver of such jurisdiction by the consumer or worker may not be set up against him.

On an application of this article, see Johnson v. Kensington Capital Partners Ltd., 2009 QCCS 1861 para. 28.