In Investissements Cleary inc. v. 9324-4465 Québec inc., 2026 QCCQ 1321, the Court of Québec granted the Plaintiff’s application to appoint an arbitrator in a case involving a claim for unpaid rent under a commercial lease. Following service of the notice of arbitration, the Defendants refused to participate in the process, including in appointing the arbitrator, because their position was that the lease containing the arbitration clause was a nullity. Instead, they initiated an action in the Superior Court of Québec, in which they sought to have the lease declared null and void. The Defendants argued before the Court of Québec that: it had no jurisdiction to make the appointment in light of its action; that there should be priority given to court proceedings over arbitrations to avoid multiplicity of proceedings; and that making the appointment could give rise to inconsistent orders because the issues in the two actions overlapped. The Court dismissed these arguments and made the arbitrator appointment, finding that the arbitrator should be the first to rule on his own jurisdiction in light of the challenge to the arbitration agreement, in conformity with competence-competence. The other court proceeding was not relevant.
Background to dispute – The Plaintiff purchased the property leased by the Defendants when they were already tenants. After that, the Plaintiff served a notice of termination of the lease and entered into a new lease with the Defendants. It contained an arbitration clause. Later, the Defendants failed to make certain rent payments but consistently expressed their intention to reach an agreement for repayment. The Plaintiff served a notice of arbitration seeking an order requiring the Defendants to pay. Thereafter, the Defendants took the position for the first time that the notice of termination of lease sent three years earlier was illegal because of an alleged stipulation for the benefit of a third party included in the deed of sale by which the Plaintiff acquired the property. The Defendants argued that if they had been aware of this, they would have contested the notice of termination of the lease and refused to negotiate a new lease. Consequently, they claimed that the new lease, including the arbitration clause, was null and void.
The Defendants refused to appoint an arbitrator. Therefore, the Plaintiff filed an application in the Court of Québec for the appointment of an arbitrator in accordance with the arbitration agreement in the lease. The Defendants then brought proceedings in the Superior Court of Québec in which they asked for a declaration that the lease was null and void. The Plaintiff responded with an application to stay that court proceeding in favour of arbitration. On the Plaintiff’s application to appoint the arbitrator, the Defendants argued that the Court of Québec had no jurisdiction to make the appointment because of their outstanding proceeding before the Superior Court, which should take precedence over arbitration because courts are the usual forum for resolution of disputes. They also argued that the Plaintiff’s application should not proceed because it created a multiplicity of proceedings.
The Court of Québec’s decision – The Court addressed both the jurisdiction and multiplicity of proceedings arguments.
(i) Jurisdiction – The Court emphasized that an arbitrator has all the powers necessary to exercise their jurisdiction, including the power to rule on their own jurisdiction (sec. 632 CCP). The Court also referred to the principle of separability and stated that the arbitration agreement was a contract separate from the contract in which it was included for this purpose (sec. 2642 CCQ). In determining whether it had jurisdiction to appoint the arbitrator, the Court was required to limit itself to a summary review of the evidence before it and systematically refer the parties to arbitration unless it were to find that the challenge as to the validity of the arbitration agreement was based exclusively on a point of law. Therefore, the question was whether the Defendants’ challenge to the validity of the arbitration agreement could be decided by the Court or was required to be referred to the arbitrator to decide jurisdiction.
In applying these principles, the Court rejected the Defendants’ argument that, because of the alleged nullity of the lease, the arbitration agreement was also null and void and that the arbitrator should not be appointed. The question of the nullity of both the lease and the arbitration agreement required comprehensive factual evidence, the examination of which falls within an arbitrator’s jurisdiction. The arbitrator must first rule on theirs own jurisdiction under the competence-competence principle.
The Court also rejected the Defendants’ argument that it lacked jurisdiction to appoint an arbitrator in this proceeding due to the uncertainty caused by their action filed in the Superior Court and the Plaintiff’s application to refer the matter to arbitration filed in response to that action. Citing article 39 CCP, the Court concluded that it had jurisdiction to appoint an arbitrator in this proceeding, considering that the dispute arising from the notice of arbitration fell within the monetary limits of the jurisdiction of the Court of Québec. The uncertainty created by another dispute in another Court did not interfere with the Court of Québec’s jurisdiction to grant the Plaintiff’s application to appoint an arbitrator.
(ii) Multiplicity of proceedings – The Defendants argued that the appointment of the arbitrator created a risk of conflicting judgments as a result of a multiplicity of proceedings dealing with the same issue. From the Defendants’ perspective, the Court should give priority to judicial proceedings over arbitration proceedings, thereby establishing a hierarchy between the two forums. The Court rejected this argument, noting that the only matter before it concerned the Plaintiff’s request for the appointment of an arbitrator whom the Defendants refused to appoint. The Court referred to article 1 CCP , which requires the parties to consider alternative dispute resolution methods before initiating any legal proceedings. Given that it was the Defendants who brought a separate court proceeding and refused to appoint the arbitrator, the Court of Québec appointed the Plaintiff’s choice of arbitrator.
Arbitration Matters case summary to follow – Recently, the Defendants filed a demand for judicial review of this judgment. This case is therefore one to watch…
Commentary:
In this case, it is noteworthy that the Court of Québec did not allow itself to be distracted by potential overlapping issues in another proceeding pending before the Superior Court involving the same issues (and others). It found that it was up to the arbitrator to manage this situation and issues relating to their jurisdiction. The Court’s jurisdiction, in the context of a request for the appointment of an arbitrator under article 625 CCP, is limited to taking the necessary measures to ensure the appointment of the arbitrator when the Parties encounter difficulties in this regard. To have reached a different conclusion would have allowed the Court to interfere with the arbitral tribunal and perpetuate the false perception that courts have precedence over or are superior to arbitral tribunals. This would also have served to justify the Defendants’ strategy of multiplying the forums in an effort to discredit or avoid the arbitral tribunal.
On the contrary, the Court reiterated the importance of alternative dispute resolution methods, including arbitration, based on article 1 CCP. It requires that the Parties consider alternative dispute resolution methods prior to any legal proceedings. This case shows that Québec courts are continuing to resist the temptation to limit the jurisdiction of arbitration in favor of that of the courts and to expand the role of arbitration tribunals. This position is consistent with the principles first established in the Supreme Court of Canada’s leading decision of Desputeaux v. Éditions Chouette (1987) inc., 2003 CSC 17, which led to amendments made to the Code of Civil Procedure in 2016 and the evolution of case law since then. See discussion about this supportive stance toward arbitration in different circumstances in our previous case note: Marie-Claude’s 2022 Hot Topic: Binding non-signatories – A new trend arising in Québec? – #697, Québec – Annulment: no review of the merits, even if award wrong – #603 and Québec – No stay of arbitration without exceptional circumstances – #826.
Finally, this decision reaffirms the criteria for appointing an arbitrator in cases where the validity of the arbitration agreement is disputed. Here the factual context was novel, but the principles are the same. The Court logically relied on the applicable standard developed for applications seeking referral to arbitration to determine the scope of the review it was required to conduct to decide whether to grant the request for appointment of an arbitrator. The Court of Québec relied on the Supreme Court of Canada’s decisions in both Dell Computer Corp. v. Union des consommateurs, 2007 CSC 34 and Rogers Sans-fil inc. v. Muroff, 2007 CSC 35 to justify its summary analysis of the situation and its deference to the arbitrator regarding the determination of his own jurisdiction based on competence-competence.