Québec – court determines legislated arbitration procedure is mandatory only for commercial party to contract – #026

The Court of Québec refused to dismiss litigation between parties who had already undertaken arbitration of some of their differences and sent the parties on to trial so that a trial judge could determine the overlap, if any, between the prior arbitral award and the court litigation.  The court in Gagnon v. Développement Hamavi inc., 2017 QCCQ 5269  also determined that the arbitration procedure set out in legislation for new residential constructions was mandatory for the builder and not by the buyer and concerned rights granted in supplement to the Civil Code of Québec, CQLR c CCQ-1991.

The underlying dispute between Plaintiffs and Développement Hamavi Inc.  involved the construction and sale of a new residential building.  Plaintiffs filed court litigation in December 2012 against the builder claiming compensatory damages related to alleged defects and deficiencies.   On November 10, 2016, the court file went to trial.  The trial judge stayed the trial, requiring the parties to determine if the Court of Québec had jurisdiction over the dispute.   

In an initial phase of dispute resolution, the parties undertook arbitration as provided for in Québec’s Regulation respecting the guarantee plan for new residential buildings, CQLR c B-1.1, r 8  (“Regulation”) which issued under Québec’s Building Act, CQLR c B-1.1.  The Regulation sets out a detailed path through the arbitration process set out in articles 106 – 126.  The arbitration resulted in a November 12, 2012 award. 

Hamavi as Defendant argued that the Court of Québec had no jurisdiction because the parties has submitted to arbitration, that the Regulation is of public order and that article 642 of the Code of Civil Procedure, CQLR c C-25.01 stipulates the “arbitration award is binding on the parties“.  

Plaintiffs replied that the arbitration provided by the Regulation is supplementary to recourses in the Civil Code,  the arbitrator’s jurisdiction in that Regulation is not exclusive,  the arbitral award did not cover all its claims and the arbitrator had declined jurisdiction over some of the claims.  

Mr. Justice Luc Poirier noted that a motion to dismiss requires that he assume all the facts alleged are true and he heard no witnesses.  

Poirier J.’s review of the case law disclosed that the buyer is not bound by the Regulation, only the builder.  As well, he found that the Regulation, even if of public order, was not exclusive such that buyers could apply to the courts to pursue their claims. The case law demonstrated that the provisions of the Regulation for the builder’s guarantee did not replace claims under the Civil Code.  The courts had ruled that the Regulation was superimposed on to and complementary to those existing in the Civil Code.  

Regarding the arbitration which had already taken place and which resulted in an award, Poirier J. declared that those claims which had already been resolved by the arbitration could not be subject to a further, new decision.  Rather, the court decided a trial judge would be best placed to decide the overlap, if any, of claims resolved in the completed arbitration and those still left for the court.  As well, the pleadings in court contained allegations of fact which occurred after the arbitral award was rendered. 

Poirier J. dismissed the motion to dismiss and ordered that the parties’ litigation be sent to the role for a new trial date for determination on the merits, costs to follow suit.