Québec – appeal court quashes otherwise valid stay order due to defendants’ subsequent acquiescence – #264

On the basis of Defendant’s acquiescence, the Québec Court of Appeal in Association des copropriétaires du 10355 Ave Bois-de-Boulogne v. Balabanian, 2019 QCCA 2165 agreed to quash the decision in first instance which referred the parties to arbitration.  Despite flagging, without deciding, whether a particular aspect of the claims sought could be granted in arbitration, the Court summarily agreed to annul that earlier decision and no argument was made that the decision suffered any flaws.

In first instance, the parties had debated a motion to be referred to arbitration. See Gestion George Kyritsis inc. v. Balabanian, 2019 QCCS 1020.  Plaintiff had resisted being referred before an arbitrator, arguing that the undivided co-ownership agreement should be annulled due to lack of consent and that certain provisions were abusive and contrary to public order and the Charter of Human Rights and Freedoms, CQLR c C-12.

In first instance, Mr. Justice François Toth disagreed with Plaintiff, pointing to article 2639 of Québec’s Civil Code of Québec, CQLR c CCQ-1991 (“C.C.Q.”) as a full answer to Plaintiff’s objections:

Article 2639 C.C.Q. Disputes over the status and capacity of persons, family matters or other matters of public order may not be submitted to arbitration.

An arbitration agreement may not be opposed on the ground that the rules applicable to settlement of the dispute are in the nature of rules of public order.

Toth J. illustrated his point by referring to Desputeaux v. Éditions Chouette (1987) inc., 2003 SCC 17 (CanLII), [2003] 1 SCR 178 which had applied the distinction made in article 2639 C.C.Q.  See also Citec Administration inc. v. Corporation du parc d’affaires La Rolland, 2010 QCCS 1059 para. 39 which held that the scope of what qualifies as public order should be interpreted narrowly.  

Toth J.  granted the motion under article 622 C.C.P. and issued an order referring the parties to arbitration.  

Subsequent to this result in Superior Court, the successful Defendant decided nonetheless to acquiesce to Plaintiff’s demand to proceed before the courts.  On the basis of that acquiescence, the Court of Appeal overturned the decision in first instance and referred the parties to the Superior Court to continue their dispute resolution.

The Court did observe that a remedy sought was improbation (“inscription en faux”).  This procedure involves contradicting the recital(s) in an “authentic act”.  Article 2813 C.C.Q. provides that an authentic act is one received or attested by a competent public officer in accordance with the laws of Québec or of Canada with the formalities required by law.  See Côté v. Côté, 2012 QCCS 2013.  Authentic acts have elevated effects.  Article 2820 C.C.Q. provides that an authentic copy of a document makes proof against all persons of its conformity to the original and substitutes for it.

Improbation as a remedy is required in specific instances.

Article 2821 C.C.Q. Improbation is necessary only to contradict the recital in an authentic act of the facts which the public officer had the task of observing.

Improbation is not required to contest the quality of the public officer or witnesses or the signature of the public officer.

The Court of Appeal mentioned the issue of improbaton but did not develop it or detail the submissions made any of the parties.  The Court did not rule on whether such a remedy was or was not within the jurisdiction of an arbitrator. Rather, the Court accepted as sufficient the acquiescence by Defendants who had prevailed in first instance.

urbas arbitral – The decision grants a rarely used application by which parties agree to reverse an order obtained in first instance after a contested motion. In so reversing that order, the parties agree to remain in court rather than apply the terms of their original agreement to arbitrate and the ensuing order of the court.  The decision to remain in court is not only against the terms of their original bargain but also the result of its enforcement by the courts.

Contrast that approach with a different situation which occurred in Serbcan Inc. v. National Trust Company, 2019 ONSC 1842.  In that case, the parties were involved in court litigation but had no arbitration agreement.  After having litigated for some time, the parties on their own consent sought an order to undertake arbitration.  The parties appeared to agree, post-dispute, by way of submission agreement to undertake arbitration and went further by having the court adopt that submission agreement into a court order. The court issued that order on consent of the parties but, as a different court later noted, “arbitration never occurred”.  

[10] This action was twice set down for trial, but never proceeded. On the second occasion, the parties agreed to resolve the matter by way of various orders on consent. Gauthier J. made an endorsement that contained the following orders:

a) The action/application as against Grant Thornton Limited shown as a party in the Notice of Application issued on May 28/99, in court file No. 8456 is dismissed, w/o costs;

b) The actions before me will be arbitrated, together with two other related proceedings: the outstanding National Trust Guarantee action and the power of sale proceeding regarding the LaSalle property;

c) The costs of the arbitration have been agreed to be borne “up front” ie in the first instance, by the Defendant National Trust;

d) The security for costs in the proceedings before me will remain in court and will stand as security in the arbitration;

e) There will be full rights of appeal;

f) The parties will select the arbitrator and will schedule the arbitration as soon as schedules permit;

g) The parties agree that this will constitute the submission to arbitration;

h) The proceedings before me (court files No.8456 and 4838) are struck from the list and will be finally adjudicated by way of the arbitration.

[11] The arbitration never occurred.

Instead of pursuing arbitration, the parties continued to negotiate resulting in a dispute over whether they had entered into a valid settlement. 

One party eventually seized the court with a dispute over whether a settlement had been negotiated.  The reasonsin Serbcan Inc. v. National Trust Company contain no mention of a limitation period or whether such period was interrupted by a notice of arbitration served but never pursued. 

On the facts, the court in Serbcan Inc. v. National Trust Company held that no valid and enforceable settlement had been reached because material issues remain in dispute and the party applying for recognition of the settlement failed to establish an agreement on the essential terms of the settlement it alleged.

As shown in Association des copropriétaires du 10355 Ave Bois-de-Boulogne v. Balabanian, 2019 QCCA 2165, some parties can be ordered to arbitration but, once having been ordered, agree to return to court.  Other parties, as in Serbcan Inc. v. National Trust Company, may start without an agreement to arbitrate, then consent to go to arbitration but, once having consented to go, never pursue that alternative form of resolution.  

Party autonomy” offers parties lots of autonomy.