In Eggiman v. Martin, 2019 ONCA 974, Ontario’s Court of Appeal dismissed an attempt to appeal a motion judge’s decision refusing to stay an action under section 7(1) of Ontario’s Arbitration Act, 1991, SO 1991, c 17. The Court held that section 7(6) was “very clear” that there was no appeal from an order under section 7(1), whether that order grants or refuses the stay, if the arbitration agreement applies to the issue raised in the proceeding. The Court paused to mention that it was not to be seen as agreeing with the analysis engaged in by the motions judge. For the earlier Arbitration Matters note on the decision in first instance, Eggiman v. Martin, 2019 ONSC 1388, see “arbitrator appointment procedure in franchise agreement risks “absurd and likely unfair result””.
The parties had agreed to arbitrate their disputes arising out of their contracts governing the operation of two (2) franchises food outlets. The contracts contained a broadly worded agreement to arbitrate which the motions judge declined to apply. The court action included a defendant who was not party to the agreement to arbitrate.
“The motion judge dismissed their motion. In doing so, the motion judge recognized that the action could only be stayed against the appellants and not the other defendant, who was not subject to the arbitration clause. The motion judge held that a partial stay was not a reasonable result since it would lead to a multiplicity of proceedings. The motion judge also noted that the other defendant, TDL, actually had the authority, under the arbitration clause, to appoint the arbitrator. The motion judge held that this unique aspect of the case also led to the potential for unfairness in the arbitration process.”
At the hearing on appeal, Appellants argued the mandatory nature of section 7(1) required that a stay be granted.
“Section 7(1) If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.”
Respondent closed it own submissions arguing, for the first time, that the Court had no jurisdiction to hear the appeal because section 7(6) states that there is no appeal from the court’s decision.
Faced with Respondent’s submissions, the Court invited post-hearing written submissions which it received and reviewed. Relying on Brown v. Murphy, 2002 CanLII 41652 (ON CA) and Radewych v. Brookfield Homes (Ontario) Ltd., 2007 ONCA 721, the Court agreed with Respondent.
“[8] There is no appeal to this court from the order of the motion judge. Section 7(6) is very clear on this point. If it is determined that the arbitration provision applies to the issue that is raised in the proceeding, and thus s. 7 is invoked, then s. 7(6) precludes any appeal from the decision rendered respecting the motion to stay, whether that order grants or refuses the stay: Brown v. Murphy (2002), 2002 CanLII 41652 (ON CA), 59 O.R. (3d) 404 (C.A.), at para. 8.”
urbitral note –Brown v. Murphy draws a key distinction which the Court of Appeal in that case identified as preserving the Court’s jurisdiction to hear appeals. That jurisdiction remains untouched when the motions judge (a) decides that a matter is not subject to arbitration rather than (b) decides that a matter is subject but nonetheless, for reasons particular to the case, refuses to issue a stay. The distinction drawn in Brown v. Murphy appears at paras 8-9 of the 2002 reasons:
“[8] At the conclusion of the argument on the jurisdictional issue, we concluded, on the authority of [Huras v. Primerica Financial Services Ltd., 2000 CanLII 16892 (ON CA)], that the bar under s. 7(6) applied to any decision by the motions court under s. 7 to grant or refuse a stay of “a proceeding in respect of a matter to be submitted to arbitration under the agreement” within the meaning of s. 7(1). However, a decision by the motions court that a matter was not subject to arbitration under the terms of the arbitration agreement fell outside the scope of s. 7 and a right of appeal lay to this court from that decision.
[9] Although the motions judge’s reasons are somewhat unclear, we interpreted them to mean that the arbitration agreement, although extending to some of the matters in dispute in the action, did not extend to all matters. Hence, consonant with the principle in Huras, we held that the motions judge’s decision that the agreement did not extend to part of the dispute between the parties was the proper subject-matter of an appeal to this court. We therefore heard counsels’ argument on the merits on this narrow issue and reserved our decision.”
The Court retains jurisdiction to consider whether the arbitration agreement did or did not apply to the dispute.
In the 2007 decision in Radewych v. Brookfield Homes (Ontario) Ltd., the motions judge had dismissed the application for a stay based on section 7(5).
“Section 7(5) The court may stay the proceeding with respect to the matters dealt with in the arbitration agreement and allow it to continue with respect to other matters if it finds that,
(a) the agreement deals with only some of the matters in respect of which the proceeding was commenced; and
(b) it is reasonable to separate the matters dealt with in the agreement from the other matters.”
The litigation in Radewych v. Brookfield Homes (Ontario) Ltd. involved claims against parties not bound by the arbitration agreement and the Court of Appeal held that the motions judge was entitled to order that plaintiff’s entire claim proceed to trial for the reasons given by the motions judge in Radewych v. Brookfield Homes (Ontario) Limited, 2007 CanLII 23358 (ON SC) which are as follows:
“Since only part of the claim of the plaintiffs arises under the agreement, then, in my view, the matter is governed by subsection 7(5) of the Arbitration Act, 1991. That subsection reposes a discretion in the court to stay a proceeding with respect to matters dealt with in an arbitration agreement where some matters arise under the agreement and some do not. In my view, it would not be appropriate to grant a partial stay. To do so would potentially delay the resolution of the entire matter, and could produce a significant duplication of resources and potentially inconsistent findings. Such a course would be contrary to the policy reflected in section 138 of the Courts of Justice Act which, simply stated, provides that “as far as possible, multiplicity of legal proceedings shall be avoided”. It is preferable, in my view, that all of the various claims, against all of the defendants, be determined in one proceeding.”
In that case, the Court of Appeal expressed that it was “in substantial agreement” with the motions judge relating to the interpretation of the arbitration agreement and that judge’s application of section 7(5).