In Césario v Régnoux, 2021 QCCS 3009, Justice Johanne Mainville granted Defendants’ application to the Court to decline jurisdiction and refer the parties to arbitration (declinatory exception). Justice Mainville held that the record did not allow her to rule on the Court’s jurisdiction because of unanswered questions regarding the relationship between the parties and their conduct prior to executing the arbitration agreement. The arbitrator must therefore first rule on its own jurisdiction, even though Justice Mainville noted that some parties and some claims were possibly not covered by the arbitration agreement.
Defendants applied under article 622 of the Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”) to refer the parties to arbitration regarding the originating application for a permanent injunction and damages filed by Plaintiffs on March 7, 2021, relying on the shareholder agreement between one of the Plaintiffs and one of the Defendants (“Shareholder Agreement”). (The other parties were related to those who signed the Shareholder Agreement, but did not sign it.) Article 622 C.C.P. requires the Court, on a party’s application, to refer the parties to arbitration if another party brings before the Court issues in respect of which the parties have an arbitration agreement.
The parties did not dispute that section 24 of the Shareholder Agreement constituted an undertaking to arbitrate: [informal translation] “ARBITRATION 24. (…) The shareholders undertake to resort exclusively to arbitration regarding any dispute or disagreement that may oppose them and notably with respect to the interpretation and the application of the present agreement, the whole in accordance with the applicable provisions of the Code of Civil Procedure (CQLR c C-25.01)”.
The case opposed two businessmen (Césario and Régnoux) involved in the audiovisual and multimedia industry, in addition to their respective creative agency and production companies (a numbered company, 9226, on the one hand, and Gala Média and Gala Productions on the other). 9226 and Gala Média were shareholders of a third company (2Dads on Duty) operating in the production of audiovisual and televisual content and, as such, formed a Shareholder Agreement. Régnoux was the president of 2Dads and Césario its vice-president. Plaintiffs (Césario and 9226) made several claims in their originating application seeking a) the transfer of intellectual property and of funds generated by its use, b) the withholding of salary and fees owed to one of the Plaintiffs, and c) moral damages.
Plaintiffs opposed the referral to arbitration because 1) one Plaintiff and two Defendants did not sign the Shareholder Agreement, and 2) some of Plaintiffs’ claims did not fall within the purview of the parties’ undertaking to arbitrate.
Role of the Court – At para. 35, Justice Mainville outlined the role of the Court seized with an application for declinatory exception in reference to the 2015 Court of Appeal decision in Ferreira v Tavares, 2015 QCCA 844, applying principles set out by the Supreme Court in Dell Computer Corp. v Union des consommateurs, 2007 SCC 34. It held that the Court should refer all challenges to an arbitrator’s jurisdiction to the arbitrator unless they raise pure questions of law, or questions of mixed fact and law that require only superficial consideration of the evidence in the record. At para. 36, Justice Mainville held that Plaintiffs’ challenges raised questions of mixed fact and law.
Interpretation of the Arbitration Agreement – Justice Mainville interpreted the arbitration agreement as required by the Supreme Court in Desputeaux v Éditions Chouette (1987) inc., 2003 SCC 17. The scope of arbitration agreements must be interpreted liberally, based on identification of the objectives of the agreement, including everything that is closely connected with that agreement.
At para. 37, Justice Mainville noted that the arbitration agreement was drafted in very broad terms not limited to disagreements or disputes arising from the Shareholder Agreement and that in doing so, the parties agreed that the arbitrator’s jurisdiction would go beyond the interpretation and the application of the Shareholder Agreement. Justice Mainville also referred to the general objectives of the Shareholder Agreement, as stated by the parties.
Consideration of Evidence in Record –At paras. 43, 50 and 54, Justice Mainville concluded that superficial consideration of the evidence in the record did not allow the Court to pronounce itself conclusively on its jurisdiction, noting that the parties did not adduce most exhibits alleged in the originating application.
First, the Court could not determine whether the intellectual property and the funds claimed by Plaintiffs were held by the Defendant who signed the Shareholder Agreement, or another Defendant. Second, the Court lacked details regarding the conditions of a verbal agreement in force before the Shareholder Agreement was signed. Third, the record did not allow the Court to determine the role played by parties who did not sign the Shareholder Agreement regarding the facts in dispute. As a result, Justice Mainville held that a superficial consideration of the evidence in the record did not allow for an understanding of all contractual relationships between the parties.
Interpretation Tending to Favour Arbitration to be Preferred – At par. 53, Justice Mainville adopted the approach prescribed by the Supreme Court in GreCon Dimter inc. v. J. R. Normand inc., 2005 SCC 46, and stated that where there is doubt, the interpretation that tends to ensure that arbitration agreements are binding should be favoured. Since a superficial consideration of the evidence in the record was inconclusive regarding the jurisdiction of the Court, the parties were referred to arbitration pursuant to section 24 of the Shareholder Agreement.
Justice Mainville arrived at that conclusion despite noting (at para. 52) that one of the claims made in the originating application might not fall within the purview of the arbitration agreement. Indeed, that claim was made by one of the Plaintiffs who did not sign the arbitration agreement and was based on agreements formed before the arbitration agreement was signed. Yet, Justice Mainville stated that [informal translation] “nothing precludes the arbitrator from enforcing those agreements for the sake of an efficient process or if the parties consent. In any event, the Court is of the view that this part of the claim is insufficient in itself to conclude to the jurisdiction of the Superior Court at this stage of the proceedings and to empty the arbitration agreement of meaning”.
First, without naming them, Justice Mainville clearly affirmed the doctrine of compétence-compétence and the public policy favouring the enforcement of binding arbitration agreement.
Second, for a recent discussion of what a “superficial” review of the record means, see earlier Arbitration Matters Case Note Supreme Court – courts should not refer jurisdiction challenge to arbitrator if real prospect that challenge might never be resolved – #344 regarding Uber Technologies Inc. v. Heller, 2020 SCC 16. Essentially, a “superficial” consideration of the evidence is limited to drawing conclusions from facts that are either evident on the face of the record or undisputed by the parties.
Third, this case underscores the importance of the record provided to the Court when seized of an application for declinatory exception and referral to arbitration. While Justice Mainville repeatedly stated that the Court’s role is limited to a superficial consideration of the evidence in the record, the Court’s conclusion might have differed if it had been provided with more exhibits to review, even if only superficially, for instance with respect to the [informal translation] “close business relationship” between all parties (at para. 12) or as to which parties held the intellectual property and related fund at the time (at paras. 43 and 44).
Fourth, the approach taken by Justice Mainville is to be distinguished from the one addressed in Québec – attempt dismissed to limit arbitral jurisdiction by presumption statutory recourse excluded unless expressly included – #476 regarding Valiquette c. PL Nouvelle France inc., 2021 QCCS 1096. In that case, rather than referring the parties to the arbitrator for a ruling on its own jurisdiction, Justice Florence Lucas affirmatively concluded that the arbitrator had jurisdiction.