In Dr. Catherine Morin-Houde Dentist Inc. v. Dr. Marie-Ève Costisella Inc., 2021 QCCS 4109, Justice Faullem of the Québec Superior Court reviewed the applicability of an arbitration clause and in doing so set out a number of principles relevant to an understanding of the scope of arbitration clauses and the assessment of arbitral jurisdiction.
The plaintiff and defendant were companies that Dr. Catherine Morin-Houde and Dr. Marie-Eve Costisella incorporated in respect of their dental businesses. In September 2012, they began operating a dental clinic together.
The terms and conditions of the parties’ participation in their dental clinic were set out in a written agreement signed by the parties on September 13, 2012, titled “Indivision and Expense Sharing Contract”. The agreement was set to expire at the end of the commercial lease for the clinic’s premises (February 28, 2020). In September 2018, a tornado caused significant damage to the clinic’s premises and affected the clinic’s operations. An insurance claim was submitted. Shortly after that, the plaintiff informed the defendant that she planned to terminate their contract.
A number of disputes arose from the dissolution of their business relationship. The parties were unable to reach an amicable solution and the plaintiff served the defendant with a notice of arbitration dated April 6, 2020.
The defendant refused to proceed with the arbitration. Accordingly, the plaintiff filed an application with the court to have an arbitrator appointed. The defendant did not participate in the hearing. (The judgment also deals with a separate issue regarding default judgment, which is not of interest from an arbitration perspective.) Ultimately, the application to appoint an arbitrator was granted. The defendant appealed on the ground that the arbitration clause in the parties’ agreement did not apply for various reasons
The relevant arbitration clause provided as follows:
20. ARBITRATION
20.1 In the event of failure or impasse in the mediation process, the parties acknowledge that any dispute arising from this Contract, any dispute concerning the performance thereof, including its cancellation, as well as any dispute arising from a problem of interpretation of this Contract shall be submitted to arbitration, and this, excluding the ordinary courts, in accordance with the procedure provided for in the Code of Civil Procedure of Québec.
The defendant argued that the arbitration clause did not apply for four reasons:
- No mediation process had been initiated, which was a prerequisite;
- The contract had expired and the arbitration clause was not stated to survive the agreement;
- The disputes were not within the scope of the agreement;
- The arbitration clause contradicted another clause in the agreement that provided that “any dispute arising hereby shall be compulsorily brought before the court having jurisdiction in the judicial district of Hull” (clause 29.1).
With respect to the first point raised by the defendant, that the prerequisite mediation had not occurred, the court found that the plaintiff had offered to submit the dispute to mediation, but that offer was refused by the defendant. In these circumstances, the court held that the defendant could not use the absence of mediation as an argument that the parties could not move to arbitration.
With respect to the expiry of the contract, the court held that the parties specifically intended the clause to apply with respect to termination matters. Further, elsewhere in the judgment the court affirmed the concept of severability: an arbitration clause is an autonomous contract that is distinct from the contract in which it is included for the purpose of determining a challenge to the arbitrator’s jurisdiction.
In addition, in response to the argument that the contract had expired, and with respect to scope, the court noted that the arbitrator must first rule on their own jurisdiction under the Code of Civil Procedure of Québec. Only once the arbitrator has ruled on their own jurisdiction may the court intervene.
Furthermore, the disputes appeared to be within the scope of the clause and there was no argument made that the clause itself was invalid.
In terms of the alleged contradiction with clause 29.1, the court held that there was no incompatibility. There were powers reserved to the courts even in the context of an arbitration such as provisional measures.
Contributor’s Notes:
The last point addressed by the court, with respect to contradicting the clause providing the courts of Québec with jurisdiction, is one that arises regularly when parties are drafting contracts. Parties often want to ensure that the courts retain jurisdiction for situations such as emergency injunctive relief. However, it is generally not necessary to specify that jurisdiction for arbitrations seated in Canada. In any event, parties should be encouraged to consider the various options offered by institutional rules for quick and efficient interim measures applications if this is a concern. Most arbitral institutions can have an emergency arbitrator appointed in a matter of days, which allows the parties to utilize the benefits of arbitration throughout their dispute resolution process. Where specific scope is carved out and reserved to the courts, it should be done very specifically and carefully – ideally with reference to specific provisions of the contract.