Québec – court enforces parties’ requirement of post-dispute agreement to arbitrate – #092

In 9283-7459 Québec inc. v. Anfossi Tassé d’Avirro inc., 2018 QCCS 2548,  Madam Justice Suzanne Courchesne held that parties’ reference to arbitration in their contract was neither sufficient nor clear enough to eliminate recourse to the courts. By adding the mention of ‘by agreement of the parties’ in their undertaking to arbitrate, the parties had imposed a post-dispute requirement for fresh agreement to go to arbitration. Given that the responding party resisted arbitration, Courchesne J. held that the terms of the undertaking to arbitrate had not been met and she would not order the parties to do what they had not clearly undertaken to do.
9283-7459 Québec inc. (“9283”) and Anfossi Tassé D’Avirro inc. (“D’Avirro”) operate in the insurance brokerage industry. By November 8, 2017 contract, 9283 bought D’Avirro’s clientele and files. The next day, 9283 alleged that D’Avirro breached an important obligation and notified D’Avirro that 9283 would submit the dispute to arbitration. D’Avirro denied 9283’s allegations and resisted arbitration. By April 25, 2018 motion, 9283 applies for the nomination of an arbitrator.

D’Avirro resisted the application of the arbitration clause on four (4) grounds:

(1) the clause on which 9283 based its application was not a valid jurisdiction clause;
(2) the clause cannot be imposed on it without its agreement;
(3) the process provided in the clause to submit the dispute to arbitration had not been met; and,
(4) another clause in the contract provided expressly for the jurisdiction of the courts in case of a dispute relating to the contract.

Courchesne J. reproduced the full terms of the clause relied on by 9283. The clause contained two paragraphs. The first paragraph dealt with the price of sale, a holdback in trust of a portion of the sale price and a delay in which 9283 had to advise D’Avirro of its objection to payment of the holdback due to a significant breach of D’Avirro’s obligations. The second paragraph contained a stipulation for recourse to arbitration and provision that the holdback could not be dispersed, absent the parties’ agreement or the arbitrator’s opinion on whether the value of the breach was less than the holdback in which case the difference could be dispersed.

The stipulation for recourse to arbitration provided the following:

Le cas échéant, l’Acheteur devra indiquer précisément la nature du défaut. Le Vendeur aura alors dix (10) jours pour corriger le défaut ou s’entendre avec l’Acheteur pour une solution acceptable pour tous. À défaut d’entente, le différend devra être soumis, du commun accord des parties, à l’arbitrage selon les dispositions des articles 620ss du Code de procédure civile du Québec, dans les vingt (20) jours suivants, et la partie en défaut sera responsable des honoraires d’arbitrage et les honoraires légaux extrajudiciaires et déboursés de l’autre. Tout différend non soumis à l’arbitrage dans les délais sera considéré non-avenue et rejeté.

(unofficial translation) ‘In such case, the Buyer must indicate precisely the nature of the breach. The Seller will then have ten (10) days to remedy the breach or agree with the Buyer on a solution acceptable for all. Absent an agreement, the dispute must be submitted, by agreement of the parties, to arbitration according to articles 620 and following of Quebec’s Code of Civil Procedure in the following twenty (20) days and the party in default will be liable for the arbitration fees and the extrajudicial legal fees and expenses of the other. Any dispute not submitted to arbitration within the delay will be considered void and dismissed.

As framework to her analysis, Courchesne J. identified the key provisions in Québec’s Civil Code of Québec, CQLR c CCQ-1991, starting with article 2638 which stipulates the need for an agreement of the parties.

2638. An arbitration agreement is a contract by which the parties undertake to submit a present or future dispute to the decision of one or more arbitrators, to the exclusion of the courts.

Referring to Zodiak International v. Polish People’s Republic, [1983] 1 SCR 529, 1983 CanLII 24, Courchesne J. observed that a valid undertaking excludes access to the courts and is not optional. Because an undertaking to arbitrate is consensual, litigants cannot be forced to participate in an arbitration unless they have consented that their disagreement be submitted to that process, to the exclusion of the courts.

Courchesne J. also identified articles 1-6 and 19 of Québec’s Code of Civil Procedure, CQLR c C-25.0 (“C.C.P.”) which reflect litigants’ opportunity to access arbitration in lieu of the courts provided the parties agree to do so. Those C.C.P. provisions expressly mention consent as a condition precedent to arbitration. For example,

article 2 C.C.P. – litigants “who enter into a private dispute prevention and resolution process do so voluntarily”; and,

article 19 C.C.P. – litigants “may, at any stage of the proceeding, without necessarily stopping its progress, agree to settle their dispute through a private dispute prevention and resolution process”.

Acknowledging that an undertaking to arbitrate must receive a liberal interpretation, Courchesne J. also cautioned that the wording used must leave no ambiguity at to the obligation to submit to arbitration, citing Villeneuve v. Pelletier, 2010 QCCS 320 para. 47.

Turning to the actual wording contained in the parties’ own contract, Courchesne J. identified the parties’ choice to add the phrase “du commun accord des parties” or (unofficial translation) ‘by agreement of the parties’ as a step. That phrase rendered access to arbitration conditional to the consent of both parties expressed after their dispute arose.

The inclusion of that phrase would have no utility if it only served to confirm the parties’ consent at the time they signed their contract Courchesne J. reasoned. She held that there was no obligation to arbitrate unless both parties agreed which, she further held, was not the case.

In addition to the above, another clause of the parties’ contract provided recourse to the courts of Québec in the case of a dispute. Courchesne J. observed that the parties could have eliminated any confusion by clearly stipulating that arbitration would be undertaken to the exclusion of the courts, which they failed or refused to do.

In closing, Courchesne J. was unwilling to find that D’Avirro’s objection to undertake arbitration was abusive and dismissed 9283’s claim for its extrajudicial legal fees.

Prior to dismissing 9283’s motion to name an arbitrator, Courchesne J. encouraged the parties to pursue mediation or other alternative methods in order to resolve their dispute.